Valuation of plain-vanilla interest rate swap (T3-32)

Рет қаралды 34,186

5 жыл бұрын

[here is my XLS trtl.bz/2Q4XFCh] I breakdown the valuation of an interest rate swap into three steps: 1. The assumptions, which includes understanding the TIMELINE; e.g., we are valuing the stop at some point after origination and it has some remaining life (in this case 15 months); 2. Extracting the implied semi-annual forward rates from the LIBOR zero rate curve; and 3. Modeling the cash flows, in the first part as a series of forward rate agreements (FRAs). Discuss this video here in our FRM forum: trtl.bz/2JQ41G1.

Пікірлер: 28

@cmmaier 4 жыл бұрын

Your contents are amazing! Thank you for sharing these!

@NarutoGuitar2011 Жыл бұрын

Hi Bionic Turtle, just wanted to let you know that I'm a derivatives trader and first thing they made me do was trying to valuate a IRS on my own without Bloomberg or any calculator and this has come super handy. Thanks for all your effort.

@kaj3052 3 жыл бұрын

Thanks for the awesome video... really helped!

@vladanr74 5 жыл бұрын

Excellent video.

@bionicturtle 5 жыл бұрын

Thank you for watching!

@enriquemignoni9609 10 ай бұрын

great stuff! thank you

@lucasarzberger8941 Жыл бұрын

thats very helpful but what rates do i use in reality? i am working on a loan that has been swapped with 3m euribor payments. it runs until september 2024... there are no libor or euribor spot rates for that maturity. pls help

@claytonmckenna8655 Жыл бұрын

Hi, can you link the video or explain how to get the future rates from the spot rates??

@ratulbanerjee8456 23 күн бұрын

THE EXCEL SHEET IS NOT AVAILABLE , can you provide that, thanks a lot for this great effort

@KL-db1sx 4 жыл бұрын

Thanks a lot for the amazing content! In row 14, I think you are calculating the forward rates p.a not s.a. That's why you are again dividing them by 2 when computing the floating CFs. So the "s.a" written in brackets in row 14 are confusing.

@lzra8111 Жыл бұрын

Hi, great stuff thank you very much. One thing i always wondered how it worked in practice as opposed to in theory is the yield curve and interest rates to use. How a swap works in theory is completely clear to me (i got my CFA charter in February so that helps haha). I work in real estate and i was given the task to value a swap that is hedging a variable rate loan on a property. the floating payer pays 3M EURIBOR, while the fixed payer pays 0,208% with a maturity to 30th Sept 2024. And that is where it gets unclear to me. EURIBOR curve does not extend until that maturity, since max maturity is 12M. so i got 1M, 3M, 6M and 12M EURIBOR. So the EURIBOR forward curve determines the future floating payments, so far so good. but what rate do i use to discount those future payments? i cant use forward rates to discount and i have no spot rates above 12M. pls help and sorry for the long message! cheers all the best

@zj7396 Жыл бұрын

could you rollover at the end of 12 M?

@En3my0fTheState 5 жыл бұрын

Hello. I need some help on basic swap problems. Is there a way for you to take a glimpse at those?

@bionicturtle 5 жыл бұрын

we have a support forum at www.bionicturtle.com/forum where you can probably get some help (including I monitor it daily). Specifically, in the free forum, swaps are discussed in P1.T3 Financial Markets & Products at www.bionicturtle.com/forum/forums/p1-t3-financial-markets-products-30.6/

@TuanYen-xz4jb 3 ай бұрын

Why dont use boostraping for calculating forward rates?

@PedroJardo 2 жыл бұрын

Were did you get the Libor curve, and how much interest rate was at prior 6mo? My bloomberg searches leads me to a curve with max 1y rate, could I get the GOVT bonds yield curve for that? Thanks a lot

@bionicturtle 2 жыл бұрын

this is illustrates Hull example 7-1 (see label) so the libor curve is entirely fictional-illustrative

@PedroJardo 2 жыл бұрын

@@bionicturtle Ah ok. But if I would get the real rates, could I get the govt Yield curve?

@bionicturtle 2 жыл бұрын

@@PedroJardo yes of course, you could really use any rates (it's a function of the swap obviously)

@noahcahill339 5 жыл бұрын

Is the second method in this video a zero coupon valuation method?

@bionicturtle 5 жыл бұрын

Hull calls it "valuation in terms of bond prices." I don't think it would be called a zero-coupon method because you are treating the swap as two coupon-bearing bonds (one fixed and one floating) where the coupons are netted at each cash flow settlement date

@noahcahill339 5 жыл бұрын

If you had this swap but had to value it using a 'zero coupon valuation method' how would you go about doing this?@@bionicturtle