Hot answers tagged

5

You use the curve that describes the floating rate index to estimate the floating rate cashflows, a swap against floating 3M uses a 3M curve to forecast the cashflows. And then you use a discounting curve to discount the future cashflows that aligns with the funding/collateralisation of the derivative. For example almost all cleared swaps will use the OIS ...


4

I’ll do my best. 1) the start date for a standard currency basis swap is I believe 2 business days after the trade date. This allows time for the banks to set up the payment instructions for the initial exchange of notionals. 2) long the basis means you make money if the -41 becomes -40 in the market. This basis essentially measures the demand for ...


3

I notice you mention GBP. This effect is particularly apparent there since a large number of insurance, pension and asset management companies like to trade ZCS. They do this because the forward risk profile of a ZCS more accurately reflects the increasing notional of their portfolio and avoids them having to deal with interim coupon payments. They almost ...


2

First, we will write down the payoff of the mark to market basis cross currency swap. Second, we will do some exploring. Third, we hope that our exploration will be fruitful so that we can understand where we need to calculate the convexity adjustment. The forward curves required are: Domestic LIBOR curve $L^\text{d}$, e.g., if the domestic currency is ...


2

General fact: From a mathematical standpoint, we can write the PV of a flow to be received at $T$ as the value of its expectation under the $T$-forward measure (which is also the value of the forward at $t$: $F(t, T)$) discounted using the zero-coupon bond. We can show this by changing measures from the risk-neutral measure $\mathbb{Q}$ to the $T$-forward ...


1

You can find examples in the open source QuantLib library easily enough, that can be found here: https://www.quantlib.org/ For the book reference I think a good example of a modern text is: https://www.palgrave.com/gp/book/9781137374653


1

In addition to @dm63's answer maybe two references that are useful: I am not a FI/rates expert, but this book really helped me understand the basics of how things work in practice (not just in theory). And a nice introductory paper specifically on cross currency swaps.


Only top voted, non community-wiki answers of a minimum length are eligible