Building a simple swap pricer

rongil20 · March 31st, 2015, 6:39 am

Hi all,I am trying to build a simple swap pricer for a better understanding on how swaps work. I think using future prices for the short end of the curve and then bootstrap bonds to get the long end I was hoping if someone could advise me on how to really begin.I have tried to create the shortend of the curve first using future prices. What would be my next step?Thanks

Martinghoul · March 31st, 2015, 10:13 am

Find ye the seminal paper by Uri Ron of the Bank of Canada. He talks about these things in some detail.I would suggest that it's definitely a bad idea to use STIRs and bonds to build your curve.

ReallyOld · April 24th, 2015, 7:18 pm

Use Euro$ futures for the the first three years (with convexity correction) and the bonds + swap spreads for the rest of the curve. If you don't have access to real-time market data, the FRED H15 database has both Treasury rates and swap rates. Not ideal levels, but more than adequate to get started on a curve.