Appreciate your quick response. My current desk is in the bank ALM capacity and has a portfolio of swaps of various tenors. For example we will have a lot of non standard terms given rolling (5Y-> 4.6Y etc). We typically think a lot about the aggregated risk of the portfolio by various fixings. As ...

Thanks for your response. I do like the fact that you are asking the question of definition of risk in the discussion. Essentially, the fixed leg is the same as a fixed coupon bond and the floating leg is FRN. Therefore, all the risk lies in the fixed leg. I am considering the following though: Let'...

On a plain vallia pay fixed rec float SOFR swap, the question is where the risk lies. Floating leg or fixed leg? My answer is the floating leg but the interviewer kept insisting it was the fixed leg. Makes me wonder and hope someone could help clarify. I have two thoughts on my answer assuming upwar...

First of all, hope everyone is safe and sound. I would like to describe the following scenario and my thinking Welcome any comments on my thought process!!! 3 swaps outstanding 1. Pay fixed 100mln, maturing Dec 2025, old swap entered back in 2015 with high coupon (~4%) 2. Rec fixed 100mln, maturing ...

I am trying to understand how repo traders are being measured(pnl/risk). I understand the amount of repo that can be done is limited by regulation but want to dig deeper on how the performance is measured. For long term repo of 1 week to 3 months, I understand there is market risk and pnl. What inst...

Feels like a silly question:

The LCH cleared swaps market is discounted by OIS curve based on daily FF.
This is because of the collateral can be invested at the FF rate.
Why wouldn't it be discounted at SOFR(assuming such curve exist)?
Isn't it closer to the risk free rate?

Many Thanks,
Fish

Our trader just bought some CNZ7s and sold some CNH8s. CNZ7 - dec 17 10 year gov bond CNH7 - mar 18 10 year gov bond Could someone help to explain the trade in terms of: 1. what is the bet? 2. what are the risks? If there are any papers I should read, please help to point me in the right direction. ...

Buy 10 year treasury financed by simultaneous repo Swap 10 year treasury bond based on 10 year swap rate and receive 3 month float. Since 10 year treasury was higher than 10 year swap rate, you have a positive carry on the whole. As the 10 year gov/swap narrow in recent month, I think the trade abov...

Why we are looking at 5y5y breakeven rate for the most part?
Why not just the 10y breakeven rate?

If you have any papers to share, it will be great as well.

Thanks,
KFC

zhengchenji18 @ gmail.comThank you Sir

<t>Hi, I understand that in the case of a par/par swap you will receive/pay a premium on trade date. For yield/yield swap, you don't have to pay anything. For par/par swap you are matching the coupon payment. For yield/yield swap you have a bigger spread (fixed payment) that is not swapped off. ques...

I got your point.For DV01 calculation,swap curve isn't so bad.Of course, for pricing, it is way off.Thanks,Fish

<t>Well, I am not sure what traders are using.I know insurance software and ALM software are using swap curve to calculate.Even if I keep my spread constant, how can I be self-consistent?The DV01 number is going to be different when I choose different curve to discount.I don't think I can even use s...

I agree, but as far as I know, all the models are base on swap curve.That means everyone is overestimating the price of securities and underestimating risk?This sounds a bit scary.

<t>OK guys, I have look over some of the posts earlier.I have a different perspective on this problem given that I work in ALM at a bank.What would be the correct discount curve to use?Everywhere I see, the swap curve is the discounted curve with some bootstrap.Let's say to price a 10 year treasury ...