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How do you work out quickly a swap sensitivity using discount factors ?
How do you work out quickly a swap sensitivity using discount factors ?Is it possible at all ?
How do you work out quickly a swap sensitivity using discount factors ?
The accrual-weighted cumulative discount factor (CDF) IS the interest rate sensitivity.CDF = sum(accrual factor * discount factor)
How do you work out quickly a swap sensitivity using discount factors ?
So in practice you ve got 5y swap in 100mio, how do you work out it s about 50k/bp sensitivity ?
How do you work out quickly a swap sensitivity using discount factors ?
David just told you. Add up your discount factor for each accrual period multiplied by its fraction of a year (1 for annual, 1/2 for semi, 1/4 for quarterly etc).Just think about it ... if the floating side increases by a flat basis point you'll be getting/losing an extra basis point * (accrual fraction) for each accrual period. Multiply them by the corresponding discount factors to get the change in PV today.
Last edited by MattF on April 10th, 2013, 10:00 pm, edited 1 time in total.