<t>QuoteOriginally posted by: prodiptag]if you quote fwd premium (and all agree on vol/strike/fwd) then everyone is at the same page - irrespective of the csa status among them. [...]So, it does not mean you make same spot price regardless of there collateral, but you DO make same forward price, reg...

<t>Hi,This probably belongs in the student forum. Yes the expected value will be the forward rate, which is what you wrote (with the reservation that the drift in the BGM diffusion is an instantaneous rate so you should really be integrating, which will end up being a continuously compounded rate, n...

<t>Hi Brinner,QuoteTaking my example of 3Y USD IRS 150m rec 6mth Libor and pay fixed I should have the following sensitivities:dv01-7.5k from 6month reset risk and 45k from 3y risk to give net dv01 of 37.5kThe problem I am having is in the buckets there is no 6m bucket in the 3m curve so the risk ge...

Hi mathmarc,Yes, agreed.Hi jschnaz,Yes agreed with these cases + maybe NOK (similar to AUD).

<t>Hi,You just compute the risk on the 6m curve by bumping its instruments or computing analytically if you can, while keeping the 3m swap rates constant (as well as futures etc.), and then the risk on the 3m curve by bumping its instruments while keeping the 6m swap rates constant. Every time you b...

<t>Yes there are cases where you have to use the global solver, whether it is a rule is debatable. Agreed about AUD, but USD/JPY and similar cases are subject to your modelling choices. You can build single currency JPY projection curves (3m, 6m...) independently as long as the JPY discounting curve...

<t>The parallel/non-parallel shift of the yield curve depends on how you compute the risk, not really on the curve instruments.You can probably hedge the short end risk with swaps (called short swaps) if they are liquid enough; they are used in the 1m space. But regardless, even if you hedge with fu...

<t>QuoteOriginally posted by: tw813I wonder what are the PRACTICAL reasons for enforcing continuity of the instantaneous forward rate curve in yield curve construction?As far as I know, smoothness is desirable for the sake of better price stability of both options (in particular) and cash products, ...

<t>Depends on your calculation methodology. I would personally bump Curve C, as there is exposure to Curve C rates. By bumping curve C, you will effectively change forward rates projected from curve A. You can then bump curve A separately to compute DV01 on curve A.In this case, we have the followin...

Hi TheBridge,For an out of the money or in the money cross currency basis swap it does matter. For an ATM one the answer depends on your curve build (the simple answer is - no, it does not)Cheers!

<t>There are 2 new swaption settlement methods described in supplement [28] to the 2006 ISDA definition published on Sept 30 2011: cleared physical settlement and collateralised cash price. The collateralised cash price method is different to the old cash settlement in that it uses a proper discount...

<t>Hi all,My understanding of the FF/LIBOR swap conventions is as follows:- quarterly exchange of flows with a netting agreement in place, which means that the flows pay on the same days- ACT 360 basis on both legs- the rate on the FF side is arithmetically averaged. The averaging is weighted, i.e. ...

<t>Regarding the adjustment discussed above.While I agree that theoretically it should be done (which would raise issues of its own related to the volatilities and correlations), it seems that it is not commonly done at present. One way of addressing it is along the following lines. Fujii et al in "...