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By the same token, is the following correct? df (t0,t3) = df (t0,t1) df (t1,t2) df (t2,t3) OR is it like below? df (t0,t3) = df (t0,t2) df (t2,t3) Thanks in advance.


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Sorry I am bit late to the party. Just saw your post while trying to write my own black model. I am going to the mistake is a typo in dplus d_plus = ((math.log(F_0 / y) + 0.5 * vol * vol * expiry)/ vol / math.sqrt(expiry)) Should be: d_plus = ((math.log(F_0 / y) + 0.5 * vol * vol * expiry)/( vol * math.sqrt(expiry))) Warm Regards, Varun


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Usually, zero curves, that is curves of zero rates are constructed from market instruments having corresponding market rates. For example, a 3M curve will be constructed from 3M instruments. The SIMM simply states that when computing the DV01 wrt to a given curve, one should shift the market rates (meaninf rates of instruments used to construct the curve) ...


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Within the SIMM model and particularly for Interest rate and credit, a sensitivity is defined as the following : S = 𝑉(𝑥 + 1bp) − 𝑉(𝑥) Where V(x) is the value of the instrument, given the value of the risk factor x (risk factor is particular yield, ex: 3 month LIBOR). So by sensitivity SIMM is asking you to bump the underlying by 1bp and re-price your ...


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The first method assumes that the value of a floating leg at libor flat is 100. This contains an inbuilt assumption that the discount rate is Libor flat, which is an assumption that used to be made. Nowadays , we discount cash flows at Fed Funds (or Eonia in Europe), so the second method is better: first replace the floating rates by their forward rates, ...


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To put it in simplest terms, take the current effective overnight fed funds rate. Lets Say today its 2.38, and lets say the market is projecting that at next months FOMC meeting in 30 days the fed is going to cut rates .25 bp and then leave rates unchanged there after. That leaves the projected fed funds rate over the next 90 days to be roughly 30 days ...


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Hey I think you might be overcomplicating things slightly. With an IRS you have the fixed leg and its cashflow. (Is there a broker premium added to the fixed coupon rate?) Simply discount each of these cashflows with the appropriate zero curve rate. I see you are using OIS. The 1YR rate on the OIS zero curve is used to discount the fixed payment due after ...


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PAI is the interest paid on the VM. Assuming perfect collateralization (i.e. collateral always reset to the derivative NPV) it is shown (see Piterbarg "funding beyond discounting") that funding is entirely done trough the collateral and therefore the derivative should be valued by each party with discounting at the collateral rate rather than at its own ...


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The key inputs to this calculation are two yield curves obtained from market data: $\{v_i\}$ the discounting factors (value today of \$1 received at time i) and $\{r_i\}$ the forecasting curve (forward semiannual rates for period i to i+1). The calculation itself proceeds as follows. There are two legs to a fixed/floating interest rate swap. The fixed leg,...


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Please read the Interest Rates Instruments and Market Conventions paper from OpenGamma (https://developers.opengamma.com/quantitative-research/Interest-Rate-Instruments-and-Market-Conventions.pdf). The conventions are implied but it is also worth checking with the counter party/vendor when in doubt.


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