<t>Geist, your argument is assuming there is an exchange of notionals on the fixed leg. Applying the same reasoning to the notional payment on the floating leg will cancel the rate risk. In most plain vanilla swaps notional is not exchanged. Consider the two legs of the swap separately. The fixed le...

more buyers than sellers

<t>the short end of the curve is an extremely technical and specialised area. there are many liquidity and monetary supply issues that exert significant influence that may not be captured in the highly idealized scenarios required by most mathematical models. the usual "bootstrapping" and "interpola...

<t>Djigunfortunately you cannot blindly apply a theoretical model to the yc in order to simplify your risk. Ultimately you have to use your reduced delta vector to calculate end of day p&l and compare to the full "50 bucket" vector p&l (which is of course already an approximation of the full...

a swap, maybe?

<t>generally a new issue will be quoted as a spread over (under) mid swaps. this will allow the syndicate manager to build the book prior to pricing. while this may not be exactly the y/y asw level, it is close enough. on the day of the pricing the reference swap rate will usually be decided on a pr...

<t>QuoteOriginally posted by: ASbityakovin IR, there's no default risk - libor/swap rates are the risk-free benchmark rates everybody uses (i'm not considering counterparty risk here, which is negligible anyway). so in other words, rates portfolio p/l is less likely to gap than a credit portfolio ev...

QuoteOriginally posted by: mutley Although I'm not a great fan of duration as a measure of riskWhat would you suggest as a more appropriate measure of risk for a bond?with regards beta of a bond relative to an index, you should regress chages in yields as opposed to changes in prices

another alternative sometimes employed is to reserve the overstated positive p&l every day to release against the "hit" which the contract expires.

surely this isn't a real p&l event as this money would have dripped in/out of the book over the previous 3 months as carry/rolldown?

while its easier to measure daily traded volume of futures, the swaps market is by far the most liquid rates market.

what exactly are you interested in doing? are you trying to express the delta risk of your swaps book in terms of the tradeable points on the curve?

i am open to correction but isn't the DAX a total return index so you would expect it to outperform the eurostoxx which is a price return index? ignoring that, you are unlikely to be able to replicate the payout so it is a question of how much you charge for the correlation.

<t>1. this is generally a one way market. there are only buyers of these options so there is significant skew no matter how you price it so generally these do not trade very often2. i price using the spread as the random variable. rationale being that 10/30s is liquid enough to observe a vol and you...

i would use the par swap curve in both cases. although risk can be expressed in terms of zero rates it is more usual to use par rates. when traders talk about dv01 they are speaking about risk to the par curve as this is the traded instrument.