Resources

Blog-style articles that help you understand derivatives better by pricing them in Excel.

Includes articles relating to working with interest rates and their derivatives in Excel through Deriscope

PnL Explained in Excel when trading USD Interest Rate Swaps

cover
 In one of my earlier posts I have shown how to use Deriscope to calculate the Carry and Roll of a single interest rate swap.There, I had defined the Carry and Roll-Down CR as:CR = PV(CFinterm) + PV(T) - PV(T0)where CFinterm stands for the cash flows received between the today's date T0 and some future horizon date T (including T, but not T0)P...
Continue reading
  3437 Hits
  0 Comments
3437 Hits
0 Comments

Dependence of USD Interest Rate Swaps Price & Risk on Modelling Assumptions affecting the Curve Building

cover
In my post about USD Interest Rate Swaps in Excel, I have explained in detail how to calculate the price and risk of a single USD interest rate swap using a multi-curve approach and actual market data from Bloomberg as of 22 May 2019.A comparative analysis between the single-curve and multi-curve approach has been laid out in my post focusing on sw...
Continue reading
  1378 Hits
  0 Comments
1378 Hits
0 Comments

Pricing of Cross-Currency Collateralized Swaps using OIS vs non-OIS Discounting: The Mexican case.

cover
Last week I described the unique problem faced by interest rate swap traders when the collateral is kept in a currency different than the one where the swaps are denominated. You may want to visit that post for details on how the appropriate discounting (basis) curve in the Mexican case is constructed out of several market rates that include t...
Continue reading
  2817 Hits
  0 Comments
2817 Hits
0 Comments

Using Bloomberg Tenor Basis Swap Spreads in Excel to calculate 1M USD Libor Forward Rates

cover
Until the 2007-08 financial crisis, forward interest rates of any tenor had been calculated off one single yield curve. In the US, traders had been building one USD yield curve out of market-traded deposits, futures and fixed-to-3M-Libor swaps and used that curve for all purposes involving interest rate calculations, such as extracting discount fac...
Continue reading
  4206 Hits
  0 Comments
4206 Hits
0 Comments

Carry and Roll-Down of USD Interest Rate Swaps in Excel with Bloomberg Comparison

cover2
In my previous two posts I have shown how to calculate the price and DV01 of a single interest rate swap and how to do so with a book containing thousands of swaps.Now I turn my attention to the calculation of the Carry and Roll-Down of a single swap, which is defined as the total amount earned (realized + unrealized) by holding a swap up to a...
Continue reading
  28111 Hits
  0 Comments
28111 Hits
0 Comments

Trading Blotter and Book Risk Management of USD Interest Rate Swaps in Excel: Example of a Book with 10,000 Trades.

cover
In my previous post about USD Interest Rate Swaps in Excel, I explained how to calculate the price and risk of a single USD interest rate swap using actual market data from Bloomberg as of 22 May 2019.In the current post, I will make use of the same market data to calculate the prices and DV01s (both flat and bucket) of two different swap collectio...
Continue reading
  2754 Hits
  0 Comments
2754 Hits
0 Comments

USD Interest Rate Swap: Cash Flows and DV01 in Excel using Bloomberg Market Data

cover
In this post I will make use of the realistic yield curves I built in Excel out of Bloomberg OIS, deposit, futures and Libor swap rates as of May 22, 2019 towards calculating the price and producing the detailed cash flows, flat DV01 and maturity-dependent DV01s of a bespoke forward starting 3-year swap.You may want to visit the respective article,...
Continue reading
  8249 Hits
  0 Comments
8249 Hits
0 Comments

Perfect Bloomberg Price Match of an Interest Rate Swap in Excel by using Dual Bootstrapping

cover
Up until the financial crisis of 2008, the price calculation of an interest rate swap involved only the so-called Libor curve. The latter was essentially the discount factors (or equivalently zero rates or forward rates) implied by market-traded instruments, such as deposits, futures, forwards and swaps. The Libor curve was used to derive everythin...
Continue reading
  12257 Hits
  0 Comments
12257 Hits
0 Comments

Overnight Index Swap (OIS): Pricing and Understanding using Excel

cover
Overnight Index Swaps (OIS) may be priced in Excel using the free and open source derivatives analytics QuantLib library through the Deriscope Excel interface.An OIS contract is very similar to a plain vanilla interest rate swap, the only difference being that each payment in the floating leg is calculated according to a floating number F that equa...
Continue reading
  21294 Hits
  0 Comments
21294 Hits
0 Comments

USD Swaption Pricing in Excel using SABR Stochastic Volatility and Market Vol Cube from CME

cover
The pricing of exotic interest rate products cannot ignore the so called market volatility cube that is made daily available by several swaption brokers.Traders often use the SABR Stochastic volatility model in order to estimate vols off the provided grid.In this article I will show you how to price an out-of-the-money swaption by applying SABR cal...
Continue reading
  9749 Hits
  0 Comments
9749 Hits
0 Comments

USD Swaption Pricing in Excel using the Bachelier Model and Market Normal Vols from CME

cover
The Chicago Mercantile Exchange (CME) clears European swaption trades on 3-month USD LIBOR since April 2016 and has thus become the first major exchange that lists Over-The-Counter (OTC) interest rate products with optionality.The standardized swaption contracts have 5 different expiries - 1M, 3M, 6M, 1Y, 2Y – and 7 underlying swap tenors - 1Y, 2Y,...
Continue reading
  15052 Hits
  0 Comments
15052 Hits
0 Comments

Swaption Pricing in Excel: 14 Free QuantLib Models plus Implied Volatility Surface and Cube

cover
Most people are unaware of the fact that free and open source QuantLib comes with a great variety of modelling approaches when it comes to pricing an interest rate European swaption in Excel that surpasses what is offered by expensive commercial products.In fact, 14 different modelling approaches are implemented, whereby the Black approach does not...
Continue reading
  12105 Hits
  0 Comments
12105 Hits
0 Comments

Excel Builder and Cash Flow Viewer for Non-Standard Interest Rates Swaps

cover
Building, pricing and analyzing even non-standard interest rate swaps in Excel becomes a simple exercise when the Deriscope interface to the open source QuantLib analytics library is employed.We have already encountered a simple interest rate swap contract in the Yield Curve Building in Excel using Swap Rates article, where vanilla swaps were used ...
Continue reading
  6319 Hits
  0 Comments
6319 Hits
0 Comments

Time for a coffee break? Understanding Time and its implications on Interest Rates

Cover
With this article I want to give you an intuitive feeling of the concept of interest rate and also show you how to work with various types of interest rates – such as a compounded interest rate - in Excel as accurately as market professionals do.Contrary to the four-dimensional space-time of relativistic physics, financial stochastic processes evol...
Continue reading
  4845 Hits
  0 Comments
4845 Hits
0 Comments