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How do you work out quickly a swap sensitivity using discount factors ?
Posted: April 11th, 2013, 2:00 pm
by Padaiu
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 ?
Posted: April 11th, 2013, 2:41 pm
by DavidJN
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 ?
Posted: April 11th, 2013, 2:58 pm
by Padaiu
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 ?
Posted: April 11th, 2013, 5:03 pm
by MattF
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.
How do you work out quickly a swap sensitivity using discount factors ?
Posted: April 12th, 2013, 6:57 am
by Padaiu
thanks