July 3rd, 2014, 10:48 am
So in the case of a Fixed v LIB3M Swap which refixes every quarter; if my next fixing date is in 2 months do I shift all of the future fixings out to maturity (which have been found in the usual way by calculating forward rates) but keep the current period's rate fixed (as it was fixed 1 month ago)? i.e.BASE| <- Fixed -> | <------ Float-------> | <------ Float------> | <------ Float------> | <------ Float ------> |SHOCKED| <- Fixed -> | <- Float + 1bps -> | <- Float + 1bps -> | <- Float + 1bps -> | <- Float + 1bps -> |__ Val <--> Fix <-----------------> Fix <-----------------> Fix <-----------------> Fix <-----------------> MatJust to be certain, do I shock the discount rates on the floating leg of the swap at the same time or just the floating rates in isolation?Can anyone offer an explanation as to why I should care about fixing risk? Maybe then the way to calculate it will become clearer to me.Thanks.
Last edited by
smacc on July 2nd, 2014, 10:00 pm, edited 1 time in total.