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Joined: March 1st, 2003, 4:43 am

Fincad - Par Swap rates

September 1st, 2004, 8:27 am

hi,i'm trying to construct a simple zero curve using libor (to one year) and swap rates (beyond). - using fincad.for the swap rates on page like USDIRS, one set of quotes is for annual payments on the fixed leg and quarterly on the floating.in fincad, i'm allowed to specify a 'frequency' for the par swap rates but am not sure what leg it applies to.how does one construct the far end of the curve using these swap rates?cheers...
 
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gc
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Joined: September 21st, 2002, 10:08 pm

Fincad - Par Swap rates

September 1st, 2004, 8:49 am

I haven't used FinCad, but in terms of (theorical) pricing the frequency used for the floating leg of a swap is of no importance. So I'd say that if FinCad only has one frequency, it's the frequency of the fixed leg! (in the real world the price of two swaps with same fixed frequency and different floating leg frequencies will be slightly different, but it's determined by market dynamics, basis, liquidity reasons, and other reasons I haven't yet understood ...)gc
 
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Fincad - Par Swap rates

September 1st, 2004, 9:00 am

makes sense - thanks.also, then the par swap rate would be the rate i'm taking off the reuters page. or is there more to the term 'par swap rate' than it seems?regards
 
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gc
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Joined: September 21st, 2002, 10:08 pm

Fincad - Par Swap rates

September 1st, 2004, 9:05 am

Yes... that should be it....(the only thing is that for USD swap rates tend to be quoted as a spread in basis points to US treasury bills, but if the Reuter page you look at already shows the swap rates, you should be ok...)gc
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