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Roll-down
Hi,When people talk of the 'roll-down' of a trade, my understanding is that this is effectively the theta for a given time frame. However, how to calculate this? E.g trading 10yrs IR swap, 3month time window ..3m roll down = 10yr3m spot - 10yrs spot , or 10yrs spot - 9.75yrs spot or 10yrs3m fwd - 10yrs spot or 9.75yrs3m fwd - 10yrs spot ???!!!Rgds,Hiren.
Roll-down
If you enter a 10yr swap today, the 3-mth roll-down is (9.75yr swap) - (10yr swap)Because in 3 months' time you will have a 9.75yr swap that you had entered at the current 10yr rate.If you enter a 3-mth fwd-starting 10yr swap today, the 3-mth roll-down is (10yr swap)-(3m10yr swap)Because in 3 months' time you will have a 10yr swap that you had entered at the current 3m10yr rate.
Last edited by crisky on December 29th, 2006, 11:00 pm, edited 1 time in total.