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

Articles relating to the various types of yield curves that may be built in Excel using Deriscope

Turn-of-the-Month Effect in SOFR Curve built out of 1- & 3- Month Futures

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In my previous article about building a SOFR yield curve in Excel using QuantLib and Deriscope I was confronted with an unexpected result concerning the short term – less than two years – section of the curve.The following two charts were produced that show the continuously compounded zero rates for every calendar maturity for the next two-yea...
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1036 Hits
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How to build a SOFR Yield Curve in Excel using QuantLib and Deriscope

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The markets expect that Libor will be gradually phased out as more investors and lenders prefer financial products tied to the Secured Overnight Financing Rate (SOFR) rather than the USD London Inter-bank Offered Rate (LIBOR).The main reason for this ongoing exodus is the expected cessation of the daily announcements of the interbank lending rates ...
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3415 Hits
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Dependence of USD Interest Rate Swaps Price & Risk on Modelling Assumptions affecting the Curve Building

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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...
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1049 Hits
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Pricing of Cross-Currency Collateralized Swaps using OIS vs non-OIS Discounting: The Mexican case.

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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...
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1965 Hits
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Building in Excel the Implied Risk-Free Discounting Curve when the Collateral is kept in another Currency. Example: Mexico, where no Local OIS Market exists.

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Before the 2007-08 financial crisis, all swap cash flows were discounted with the same yield curve used in "forecasting" the future Libor rates and thus the amounts of the floating cash flows.At any given time, this yield curve was constructed so that it reproduced the market prices of the swaps traded at that time.After its construction, the yield...
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2028 Hits
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Using Bloomberg Tenor Basis Swap Spreads in Excel to calculate 1M USD Libor Forward Rates

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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...
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2764 Hits
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OIS Discounted USD Libor Curve Production in Excel for Front Office Trading

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I have already explained in my earlier yield curve building post how one can use the Excel Deriscope addin to derive the discount factors and zero rates implied by any given market rates of deposits, futures and swaps.At another post about dual bootstrapping, I calculated in Excel the price of an actual 50-year EUR collateralized swap held by ...
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6851 Hits
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Perfect Bloomberg Price Match of an Interest Rate Swap in Excel by using Dual Bootstrapping

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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...
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10207 Hits
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Currency Swaps and Basis Curves in Excel

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​The basic concepts of spot fx rates, forward fx contracts, fx swaps and the construction of foreign yield curves out of fx forward rates have been described in detail in my previous fx rates article.While these instruments cover the short end of the maturity spectrum – typically about a year -, the tenor of so-called currency swaps (also know...
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8351 Hits
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FX Spots, Forwards, Swaps and Curves in Excel

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​Assume you possess Nd units of a currency DOM regarded as domestic currency. For example, you live in the US and hold 1,000 USD, ie. Nd = 1,000 and DOM = USD.For whatever reasons, you want to replace this money with their equivalent number of units Nf of another currency FOR regarded as foreign currency. For concreteness think of FOR like if it we...
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28455 Hits
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Risk free Yield Curve Building in Excel using Negative Overnight Index Swap (OIS) Rates

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Long are the dates when all-purpose risk free yield curves were produced out of deposits, futures and swaps. Since the credit crisis of 2007/08, banks realized they should use different curves for different purposes. In the intervening years, quants have proven mathematically that uncollateralized contingent flows should be discounted using a curve...
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4395 Hits
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Parametric Yield Curve Fitting to Bond Prices under constraints: The National Bank of Georgia case

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Both the Nelson Siegel method and its Svensson extension are very popular among central and other banks when the time spectrum of interest rates needs to be derived from market bond prices.As I have explained in my related article, QuantLib is capable of solving the respective parametric equations treating the model parameters as unknown.Due to the...
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Parametric Yield Curve Fitting to Bond Prices: The Nelson-Siegel-Svensson method

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When it comes to building a yield curve out of bond prices, QuantLib can handle both non-parametric and parametric methods, both deliverable to Excel through Deriscope.The former have been demonstrated at my previous article.The latter impose a parametric form on some mathematical quantity implied by the produced yield curve.The following parametri...
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29590 Hits
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Yield Curve Building in Excel using Bond Prices (QuantLibXL vs Deriscope)

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With this article I want to show you how to create a bond yield curve in Excel, i.e. a yield curve out of bond prices, using the open source QuantLib analytics library. I will present both alternative spreadsheet interfaces to QuantLib, which are the QuantLibXL and Deriscope.The main use of a yield curve is that it allows us to calculate the p...
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7162 Hits
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Yield Curve Building in Excel using Deposits, Futures and Swaps

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With this article I want to show you how to create a yield curve in Excel using the open source QuantLib analytics library, when the input market data are a mixture of deposit rates, futures prices and swap rates.I have already written how you may build a yield curve using a single type of market instruments, such as deposits, futures or swaps...
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3918 Hits
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Yield Curve Building in Excel using Swap Rates

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With this article I want to show you how to create a yield curve in Excel using the open source QuantLib analytics library, when the input market data are swap rates. I will also show you how to apply dual bootstrapping when an exogenous yield curve is present.For short term maturities – typically less than a year – the yield curve may be built out...
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Yield Curve Building in Excel using Futures

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With this article I want to show you how to create a yield curve in Excel using the open source QuantLib analytics library, when the input market data are futures prices. The futures convexity will be taken into account.I explained how you may build a yield curve in Excel out of forward rates in my previous article.In reality, forward rates are sel...
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4696 Hits
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Yield Curve Building in Excel using Forward Rates

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With this article I want to show you how to create a yield curve in Excel using the open source QuantLib analytics library, when the input market data are forward rates.My previous article focused on building a yield curve in Excel out of deposit rates in general and Libor rates in particular.These rates cover the short range of the maturity s...
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4500 Hits
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Yield Curve Building in Excel using Deposit (LIBOR) Rates

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With this article I want to show you how to create a yield curve in Excel using the open source QuantLib analytics library, when the input market data are deposit rates – such as Libor rates -, which are a special type of interest rates called zero rates. As I describe in my article about interest rates, a deposit rate - effectively the interest ra...
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7392 Hits
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