Willmoters;a curve builder is generating 3 month forward rates,the rates generated reach around 6 % by 2016 and the 3 month fwd curve looks really jaggy, saw like behaviour.does that have an impact on vanilla swap trading ?thanks.

It will affect the pricing of vanilla swaps (especially forward starting). You should use some kind of spline routine to smooth out the forward rates. The trick is to smooth the forward rates and still be internally consistent. For example, if you include a seven-year swap in your inputs, the curve should re-produce the price of the seven-year swap with reasonable accuracy.

If it's very very jagged, you're doing smth wrong arnd the first fixing (at least that's when I have seen it before)...

thanks guy's.reallyOld :why it will have an impact more on Fwd starting swaps. ?Martingghoul: the first fixing as in the O?N rate ?

No, I mean the first fixing on your par swaps

QuoteOriginally posted by: Samsaveelthanks guy's.reallyOld :why it will have an impact more on Fwd starting swaps. ?A fwd starting swap could have its start date on a jagged 'down' point and have its maturity date on a jagged 'up' point.

Martinghoul,never thought about the first fixing on the par swaps.can you shed more light ?reallyold: if you have a portfolio of vanilla swaps ,pay fixed for each swap >4.5% and receive 3 month libor.:what is the daily PL beahviour under current market conditions?

QuoteOriginally posted by: Samsaveelreallyold: if you have a portfolio of vanilla swaps ,pay fixed for each swap >4.5% and receive 3 month libor.:what is the daily PL beahviour under current market conditions?That would depend on the maturity of the swap. Sorry if I am being obtuse, I'm just not sure that I understand your question.

majority of swaps are 5 years and maturity up to 2019.if you have a swap book that is worth -45 mm $$ ,what it the risk here,and what message you will convey ?

If the portfolio is in the red, I assume that the portfolio is net 'pay fixed'. The risk would be falling interest rates.

thanks really old.what is the risk in a swap portfolio comprised of 3mUSD && 3m emerging market currency .i heard it is a spread swap portfolio .how to bet on the spread?

QuoteOriginally posted by: MartinghoulNo, I mean the first fixing on your par swapsi am still in limbo,how do i check the first fixing on the par swap ?

QuoteOriginally posted by: SamsaveelQuoteOriginally posted by: MartinghoulNo, I mean the first fixing on your par swapsi am still in limbo,how do i check the first fixing on the par swap ?When you're building your curve out of mkt swap rates (among others), what is known about the cashflows on these swaps?

the cash flows on the fixed leg and the cash flows on the floating leg are equal at inception of the swap trade .the fixed rate on the fixed leg insures that this relation holds at inception.as time moves forward and the swap is marked to market daily, the holders of the zero sum game start to experience PL depending on who pay's the fixed rate and what the level of the floating leg index in the market.how is the first fixing on the par swap determined ?

QuoteOriginally posted by: Samsaveelthe cash flows on the fixed leg and the cash flows on the floating leg are equal at inception of the swap trade .the fixed rate on the fixed leg insures that this relation holds at inception.as time moves forward and the swap is marked to market daily, the holders of the zero sum game start to experience PL depending on who pay's the fixed rate and what the level of the floating leg index in the market.how is the first fixing on the par swap determined ?Yes, the fundamental feature of them par swaps is that they are par, so that goes without saying. My point is that if I trade a spot - 2y USD swap (mkt convention applies, i.e. semi vs 3m LIBOR, etc) today (assuming it's after 11AM Ldn time), I know what the first fixing on this swap is. So the par rate that's published by the brokers in the mkt assumes this, which has all sorts of implications. My point is that I have experienced the "jaggies" as a result of the curve builder not dealing with the first fixing correctly. Unfortunately, last time I saw this was a long time ago and my memory ain't what it used to be, so I can't give you anything more specific.