Could someone help me please?
I have calculated the Carry + Roll Down of holding IRS of several countries. My Carry and Roll Down is about 5y IRS, holding it for 3 months: 5y3M.
So, I have the "expected" return, in case of the curves and prices keep constant over the time (in the next three months).
I'would like to verify if that return in fact become like the expected (calculated by the Carry + Roll Down.
I am using that paper: http://www.sr-sv.com/interest-rate-swaps-returns-empirical-lessons/
Could someone explain me how could I verify that? I mean, how I calculate the "real return"?
Extracted from the site:
"The total return of an IRS consists of three components, namely, return from actual market price changes, return from ‘rolldown’ of the curve, i.e. the shortening of maturity) and return from differential between fixed and floating leg yield. The composite of price and roll returns return is calculated as the change in the fixed-leg yield times the swap’s modified duration."
Thank you!
