Swap/Swaptions Trading for Dummies

bonron · May 2nd, 2013, 12:50 am

Hi,Just joined this forum.I am looking for something similar on swaptions as mentioned above by Martinghoul and hlbeckley.Thanks much!

bonron · May 7th, 2013, 3:23 pm

Thanks MG for the primers.Waiting on hlbeckley for his set.

titanium · May 23rd, 2013, 4:39 am

Hi, I am learning about the swaptions too. Could i get the primers ?Thanks in advance.

mathmarc · May 30th, 2013, 9:56 am

QuoteOriginally posted by: frattyquant I'm looking for a pdf that covers the basics of (preferably EUR) swap/swaptions including things like the convetions, quoting, and relevant bloomberg pages.You may be interested by the Interest Rate Instruments and Market Conventions GuideIt is made available under the terms of the Creative Commons CC BY 3.0 license. So you are free to download it and even to redistribute it if you like. Comments are welcome. I'm preparing the version 2.0 for June or July.

frattyquant · May 30th, 2013, 10:07 am

That is indeed a great reference, I wouldn't recommend reading it through

. Thanks!

seanmok · June 3rd, 2013, 9:23 am

Can I please ask what the below quote means for bermudan swaption? what does +1 mean?20nc5+1 50/58

gc · June 3rd, 2013, 11:47 am

Maybe the strike?

seanmok · June 3rd, 2013, 1:07 pm

No, I don't think so.Actually I think this quote is for callable bermudan swap, so 50/58 could be the bid/offer strikes. But not sure what +1 is. Can anybody help?

gc · June 3rd, 2013, 3:22 pm

QuoteOriginally posted by: seanmokNo, I don't think so.Actually I think this quote is for callable bermudan swap, so 50/58 could be the bid/offer strikes. But not sure what +1 is. Can anybody help?Are you sure that 50/58 is not the price of your bermudean swaption and 1% is the fixed rate on the swap?

seanmok · June 5th, 2013, 8:06 am

I am not too sure. can anybod who knows this help, please?

bonron · June 7th, 2013, 4:24 pm

I am new to the Swaptions world and therefore my question may sound too simplistic/stupid.In trading swaptions, what kind of limits do firms usually impose on traders?Typically, there some limits are imposed on Notional, Signed Notional, NPV, PV01 and Delta01 for most traded products.I am not sure for the optionality of Swaptions what kind of additional limits are used.Can someone please help with some real life examples?Thanks so much!

Martinghoul · June 7th, 2013, 5:11 pm

Sometimes net vega, sometimes vega per bucket, but there's a lot of potential variations...

bonron · June 7th, 2013, 6:27 pm

Thanks MG!Do you have any literature on this?Or may be a more complete list?It would really help!

Martinghoul · June 7th, 2013, 7:32 pm

QuoteOriginally posted by: bonronThanks MG!Do you have any literature on this?Or may be a more complete list?It would really help!No real literature on this, tbh... Not AFAIK. Maybe someone else could chime in?

frattyquant · June 9th, 2013, 8:37 am

QuoteOriginally posted by: MartinghoulQuoteOriginally posted by: bonronThanks MG!Do you have any literature on this?Or may be a more complete list?It would really help!No real literature on this, tbh... Not AFAIK. Maybe someone else could chime in?Net vega + dv01 per bucketOf your you are always running scenarios to check your convexity, trying not to be too badly exposed to skew, and looking at your bucket vega, but it would be tedious to have formal limits on this stuff so its more of a qualitative discussion.