Serving the Quantitative Finance Community

 
User avatar
las
Topic Author
Posts: 55
Joined: August 3rd, 2005, 5:37 am

IR bucket sensitivites

July 31st, 2007, 5:43 am

If I want to get out bucket interest rate sensitivities is the market standard to shift the curve instruments or the curve after bootstrap?If I want to shift the curve instruments how do I shift the futures?las
 
User avatar
risk41
Posts: 43
Joined: November 13th, 2006, 8:45 am

IR bucket sensitivites

July 31st, 2007, 9:53 am

I think;You have to use correlation of instrument with not standard shifting.Firstly you have to take correlation matrix.Then you can follow the model steps.
 
User avatar
keztenpens
Posts: 27
Joined: February 8th, 2006, 6:04 pm

IR bucket sensitivites

July 31st, 2007, 10:52 am

QuoteOriginally posted by: lasIf I want to get out bucket interest rate sensitivities is the market standard to shift the curve instruments or the curve after bootstrap?shift the curve instrumentsQuoteIf I want to shift the curve instruments how do I shift the futures?compute the equivalent rate ie (100 - future price)/100 and shift it.
 
User avatar
Martinghoul
Posts: 3256
Joined: July 18th, 2006, 5:49 am

IR bucket sensitivites

July 31st, 2007, 5:47 pm

I shift the resulting curve, not the input instruments... After all you might like to have more buckets than there are input instruments.
 
User avatar
gallag
Posts: 80
Joined: April 5th, 2004, 6:39 pm

IR bucket sensitivites

July 31st, 2007, 6:57 pm

QuoteOriginally posted by: las is the market standard to shift the curve instruments or the curve after bootstrap?It depends on whether you want to calculate par rate sensitivities or zero rate sensitivities
 
User avatar
DavidJN
Posts: 1781
Joined: July 14th, 2002, 3:00 am

IR bucket sensitivites

July 31st, 2007, 7:09 pm

To add to galag's observation, front-office types will generally want to assess sensitivities to par rates since these are the instruments they use to trade/hedge. Risk managers will often want to assess sensitivities to zero rates since they are 'clean' and more ammenable to cross-book analysis.