Quantitative Finance Stack Exchange
Quantitative Finance Stack Exchange

Questions tagged [interest-rate-swap]

An interest rate swap is a financial derivative where two parties exchange interest payments on a specified notional principal over a set period. One party pays a fixed rate, while the other pays a floating rate tied to a reference rate (e.g., LIBOR). These swaps help manage interest rate risk, hedge against rate fluctuations, and enable speculation on future rate changes.

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interest rate swap: PV01 vs DV01

Bloomberg defines PV01 as PV of adding 1 bps on a fixed coupon , while 'DV01' as (down - up principal) / 2 * bps shift. The resulting PVs are generally very close but could there be a case where they are significantly different? Also, with the…
gregV
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Market Convention to Price Interest Rate Swaps (post LIBOR transition)

Prior to the onset of the Global Financial Crisis in 2008, interest rate swaps were priced using a so-called "single curve framework". Under this framework, the LIBOR curve was used to estimate forward rates and to discount cash flows. When the…
equanimity
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Swap Schedule Question

Suppose we are seeking to value two swaps, with tenors of 2Y and 3Y with start dates on 30 Aug 2021 and semi-annual payments. I want to calculate the schedule of payments on the fixed leg. Consider the 2Y swap. The termination date is start+2Y so 30…
Dom
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What is the relation between the USD Swaps Rates and US treasuries?

I asked this question HERE and redirected to https://quant.stackexchange.com I understand a swap rate is the fixed leg on a IRS (source), and a swap spread is the difference between a swap rate and the interest rate of a US treasury of the…
user3181821
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Two questions on Interest-Rate Basis Swap compounding

I have 2 questions on Basis Swap compounding and market conventions. These obviously apply where the reset period is shorter than the payment period Where both fixings have shorter reset period than payment period and there is a spread, and it is…
CashCow
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In Arrears Swap - what accrual period applies?

In Arrears Swap, the floating rate is reset and paid on the same date. What accrual period is applied to compute the payment - If the dates are t1, t2, t3 ...tn. (assume overlapping date schedules for reset, accrual start, accrual-end and payments)…
bhutes
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Basic question on LIBOR-OIS swap

I'm just starting a pricing class and am a little confused by a statement in a class reading (a fed report). It goes something like this: "A bank borrowing at the 3-month LIBOR rate of 2.10 percent that enters into a swap to receive at the 3-month…
Vol_Smile
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interest rate swap schedules

Is there a source describing how the schedules(start, end, dcf, payment) involved in a basic IRS are computed? Depending on when the dates are adjusted, the schedules can be different. Thanks
stackoverflower
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What do you think of 50y swap at -0.58%?

To start an exchange of ideas, what do you think of the 50y eur swap at -0.58%? At this moment, the carry for paying 50y fixed is positive and the low liquidity of long tenors is shaping the curve in a way we have never seen before. This is the…
David Duarte
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How to calculate Interest Rate Swap returns

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…
Gustavo Escudeiro
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Swaps: Why is this approximation of carry valid?

I decided to split the first part of my original question into this separate one as they are somewhat unrelated. The definition of carry of a (spot) starting swap I know is $$\frac{S(0, T) - F(0,\tau)}{DV01(Swap(\tau, T-\tau))}\tag{1}$$ where…
swissy
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Interest Rate Swap Question

I am new to IRS. Pay 2Y HKD-USD IRS spread. It is a trade idea recommendation. Can someone explain what this trade entails? Does it mean paying fixed and receiving 3m USD LIBOR over 2 years? Please advise. Thanks. Zach
Zacharyk
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How determine swap rate with binomial tree

The risk free rate is $0,01$ while the risky rate follows a $2$ period binomial model and the risky rate at time $t=0$ is $1$, where $u= 1.5$ and $d=0.6$. How can I determine a swap rate of IRS with maturity 2 years whose floating leg is…
David
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Bootstrapping zero coupon rates

How do we obtain discount rates to obtain zero coupon rates given only swap rates? what is the procedure? Also what exactly is curve calibration?
Susan
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Basic question on USD Interest Rate Swap

I am just starting out as a rates and derivatives trader. Can someone please recommend some books for trading USD interest rate swaps (including risk management)? Any additional guidance would be deeply appreciated!
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