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Finance[InterestRateSwap] - create new interest-rate swap

Calling Sequence

InterestRateSwap(nominal, fixedrate, fixedschedule, floatrate, floatschedule, spread, opts)

InterestRateSwap(nominal, floatrate, floatschedule, fixedrate, fixedschedule, spread, opts)

Parameters

nominal

-

non-negative constant; nominal amount

fixedrate

-

non-negative constant; fixed-leg rate

fixedschedule

-

payment schedule (see Schedule); fixed-leg schedule

floatrate

-

benchmark rate (see BenchmarkRate) ; floating-leg rate

floatschedule

-

payment schedule (see Schedule); floating-leg schedule

spread

-

non-negative constant; swap spread

opts

-

(optional) equation(s) of the form option = value where option is daycounter; specify options for the InterestRateSwap command

Description

• 

The InterestRateSwap command constructs a simple interest rate swap. This is a contract that exchanges payments between two different indexed legs starting at some future time.

• 

The parameter fixedschedule defines a payment schedule for the fixed leg. Assume that fixedschedule consists of times Tα1, Tα2, ..., Tαn. At every date Tαi the fixed leg pays the amount

NdTαiR

where R is the fixed interest rate, N is the nominal value, and dTαi is the year fraction between dates Tαi1 and Tαi.

• 

The parameter floatschedule defines a payment schedule for the floating leg. Assume that floatschedule consists of dates Tβ1, Tβ2, ..., Tβn. At every date Tβj the floating leg pays the amount

NdTβiLTβi1,Tβi

where LTβi1,Tβi is the benchmark rate (for example, LIBOR rate), reset at the time Tβi1.

• 

The option daycounter specifies the day count convention used by the fixed leg. The day count convention used by the floating leg is implicitly defined by the corresponding benchmark rate.

Examples

withFinance:

SetEvaluationDateJanuary 02, 2007:

Consider two payment schedules. The first one consists of payments of 5% of the nominal every month between January 3, 2008 and January 3, 2018. The second one consists of payments of 3% of the nominal every quarter between January 3, 2010 and January 3, 2015.

Schedule1:=ScheduleJanuary 03, 2008,January 03, 2018,Monthly

Schedule1:=moduleend module

(1)

Schedule2:=ScheduleJanuary 03, 2010,January 03, 2015,Quarterly

Schedule2:=moduleend module

(2)

Rate1:=0.05

Rate1:=0.05

(3)

Rate2:=BenchmarkRate0.03

Rate2:=moduleend module

(4)

Consider two simple swaps that exchange the first set of payments for the second set.

Swap1:=InterestRateSwap1000,Rate1,Schedule1,Rate2,Schedule2,0.03

Swap1:=moduleend module

(5)

Swap2:=InterestRateSwap1000,Rate2,Schedule2,Rate1,Schedule1,0.03

Swap2:=moduleend module

(6)

Here is the set of cash flows for the paying leg of each swap.

PayingLeg1:=CashFlowsSwap1,paying

PayingLeg1:=4.234972678 on 'February 3, 2008',3.961748634 on 'March 3, 2008',4.234972678 on 'April 3, 2008',4.098360656 on 'May 3, 2008',4.234972678 on 'June 3, 2008',4.098360656 on 'July 3, 2008',4.234972678 on 'August 3, 2008',4.234972678 on 'September 3, 2008',4.098360656 on 'October 3, 2008',4.234972678 on 'November 3, 2008',4.098360656 on 'December 3, 2008',4.235721237 on 'January 3, 2009',4.246575342 on 'February 3, 2009',3.835616438 on 'March 3, 2009',4.246575342 on 'April 3, 2009',4.109589041 on 'May 3, 2009',4.246575342 on 'June 3, 2009',4.109589041 on 'July 3, 2009',4.246575342 on 'August 3, 2009',4.246575342 on 'September 3, 2009',4.109589041 on 'October 3, 2009',4.246575342 on 'November 3, 2009',4.109589041 on 'December 3, 2009',4.246575342 on 'January 3, 2010',4.246575342 on 'February 3, 2010',3.835616438 on 'March 3, 2010',4.246575342 on 'April 3, 2010',4.109589041 on 'May 3, 2010',4.246575342 on 'June 3, 2010',4.109589041 on 'July 3, 2010',4.246575342 on 'August 3, 2010',4.246575342 on 'September 3, 2010',4.109589041 on 'October 3, 2010',4.246575342 on 'November 3, 2010',4.109589041 on 'December 3, 2010',4.246575342 on 'January 3, 2011',4.246575342 on 'February 3, 2011',3.835616438 on 'March 3, 2011',4.246575342 on 'April 3, 2011',4.109589041 on 'May 3, 2011',4.246575342 on 'June 3, 2011',4.109589041 on 'July 3, 2011',4.246575342 on 'August 3, 2011',4.246575342 on 'September 3, 2011',4.109589041 on 'October 3, 2011',4.246575342 on 'November 3, 2011',4.109589041 on 'December 3, 2011',4.245826783 on 'January 3, 2012',4.234972678 on 'February 3, 2012',3.961748634 on 'March 3, 2012',4.234972678 on 'April 3, 2012',4.098360656 on 'May 3, 2012',4.234972678 on 'June 3, 2012',4.098360656 on 'July 3, 2012',4.234972678 on 'August 3, 2012',4.234972678 on 'September 3, 2012',4.098360656 on 'October 3, 2012',4.234972678 on 'November 3, 2012',4.098360656 on 'December 3, 2012',4.235721237 on 'January 3, 2013',4.246575342 on 'February 3, 2013',3.835616438 on 'March 3, 2013',4.246575342 on 'April 3, 2013',4.109589041 on 'May 3, 2013',4.246575342 on 'June 3, 2013',4.109589041 on 'July 3, 2013',4.246575342 on 'August 3, 2013',4.246575342 on 'September 3, 2013',4.109589041 on 'October 3, 2013',4.246575342 on 'November 3, 2013',4.109589041 on 'December 3, 2013',4.246575342 on 'January 3, 2014',4.246575342 on 'February 3, 2014',3.835616438 on 'March 3, 2014',4.246575342 on 'April 3, 2014',4.109589041 on 'May 3, 2014',4.246575342 on 'June 3, 2014',4.109589041 on 'July 3, 2014',4.246575342 on 'August 3, 2014',4.246575342 on 'September 3, 2014',4.109589041 on 'October 3, 2014',4.246575342 on 'November 3, 2014',4.109589041 on 'December 3, 2014',4.246575342 on 'January 3, 2015',4.246575342 on 'February 3, 2015',3.835616438 on 'March 3, 2015',4.246575342 on 'April 3, 2015',4.109589041 on 'May 3, 2015',4.246575342 on 'June 3, 2015',4.109589041 on 'July 3, 2015',4.246575342 on 'August 3, 2015',4.246575342 on 'September 3, 2015',4.109589041 on 'October 3, 2015',4.246575342 on 'November 3, 2015',4.109589041 on 'December 3, 2015',4.245826783 on 'January 3, 2016',4.234972678 on 'February 3, 2016',3.961748634 on 'March 3, 2016',4.234972678 on 'April 3, 2016',4.098360656 on 'May 3, 2016',4.234972678 on 'June 3, 2016',4.098360656 on 'July 3, 2016',4.234972678 on 'August 3, 2016',4.234972678 on 'September 3, 2016',4.098360656 on 'October 3, 2016',4.234972678 on 'November 3, 2016',4.098360656 on 'December 3, 2016',4.235721237 on 'January 3, 2017',4.246575342 on 'February 3, 2017',3.835616438 on 'March 3, 2017',4.246575342 on 'April 3, 2017',4.109589041 on 'May 3, 2017',4.246575342 on 'June 3, 2017',4.109589041 on 'July 3, 2017',4.246575342 on 'August 3, 2017',4.246575342 on 'September 3, 2017',4.109589041 on 'October 3, 2017',4.246575342 on 'November 3, 2017',4.109589041 on 'December 3, 2017',4.246575342 on 'January 3, 2018'

(7)

PayingLeg2:=CashFlowsSwap2,paying

PayingLeg2:=14.82194787 on 'April 3, 2010',14.98694508 on 'July 3, 2010',15.15194910 on 'October 3, 2010',15.15194910 on 'January 3, 2011',14.82194787 on 'April 3, 2011',14.98694508 on 'July 3, 2011',15.15194910 on 'October 3, 2011',15.15127369 on 'January 3, 2012',14.94592054 on 'April 3, 2012',14.94592054 on 'July 3, 2012',15.11047204 on 'October 3, 2012',15.11114744 on 'January 3, 2013',14.82194787 on 'April 3, 2013',14.98694508 on 'July 3, 2013',15.15194910 on 'October 3, 2013',15.15194910 on 'January 3, 2014',14.82194787 on 'April 3, 2014',14.98694508 on 'July 3, 2014',15.15194910 on 'October 3, 2014',15.15194910 on 'January 3, 2015'

(8)

Here is the set of cash flows for the receiving leg.

ReceivingLeg1:=CashFlowsSwap1,receiving

ReceivingLeg1:=14.82194787 on 'April 3, 2010',14.98694508 on 'July 3, 2010',15.15194910 on 'October 3, 2010',15.15194910 on 'January 3, 2011',14.82194787 on 'April 3, 2011',14.98694508 on 'July 3, 2011',15.15194910 on 'October 3, 2011',15.15127369 on 'January 3, 2012',14.94592054 on 'April 3, 2012',14.94592054 on 'July 3, 2012',15.11047204 on 'October 3, 2012',15.11114744 on 'January 3, 2013',14.82194787 on 'April 3, 2013',14.98694508 on 'July 3, 2013',15.15194910 on 'October 3, 2013',15.15194910 on 'January 3, 2014',14.82194787 on 'April 3, 2014',14.98694508 on 'July 3, 2014',15.15194910 on 'October 3, 2014',15.15194910 on 'January 3, 2015'

(9)

ReceivingLeg2:=CashFlowsSwap2,receiving

ReceivingLeg2:=4.234972678 on 'February 3, 2008',3.961748634 on 'March 3, 2008',4.234972678 on 'April 3, 2008',4.098360656 on 'May 3, 2008',4.234972678 on 'June 3, 2008',4.098360656 on 'July 3, 2008',4.234972678 on 'August 3, 2008',4.234972678 on 'September 3, 2008',4.098360656 on 'October 3, 2008',4.234972678 on 'November 3, 2008',4.098360656 on 'December 3, 2008',4.235721237 on 'January 3, 2009',4.246575342 on 'February 3, 2009',3.835616438 on 'March 3, 2009',4.246575342 on 'April 3, 2009',4.109589041 on 'May 3, 2009',4.246575342 on 'June 3, 2009',4.109589041 on 'July 3, 2009',4.246575342 on 'August 3, 2009',4.246575342 on 'September 3, 2009',4.109589041 on 'October 3, 2009',4.246575342 on 'November 3, 2009',4.109589041 on 'December 3, 2009',4.246575342 on 'January 3, 2010',4.246575342 on 'February 3, 2010',3.835616438 on 'March 3, 2010',4.246575342 on 'April 3, 2010',4.109589041 on 'May 3, 2010',4.246575342 on 'June 3, 2010',4.109589041 on 'July 3, 2010',4.246575342 on 'August 3, 2010',4.246575342 on 'September 3, 2010',4.109589041 on 'October 3, 2010',4.246575342 on 'November 3, 2010',4.109589041 on 'December 3, 2010',4.246575342 on 'January 3, 2011',4.246575342 on 'February 3, 2011',3.835616438 on 'March 3, 2011',4.246575342 on 'April 3, 2011',4.109589041 on 'May 3, 2011',4.246575342 on 'June 3, 2011',4.109589041 on 'July 3, 2011',4.246575342 on 'August 3, 2011',4.246575342 on 'September 3, 2011',4.109589041 on 'October 3, 2011',4.246575342 on 'November 3, 2011',4.109589041 on 'December 3, 2011',4.245826783 on 'January 3, 2012',4.234972678 on 'February 3, 2012',3.961748634 on 'March 3, 2012',4.234972678 on 'April 3, 2012',4.098360656 on 'May 3, 2012',4.234972678 on 'June 3, 2012',4.098360656 on 'July 3, 2012',4.234972678 on 'August 3, 2012',4.234972678 on 'September 3, 2012',4.098360656 on 'October 3, 2012',4.234972678 on 'November 3, 2012',4.098360656 on 'December 3, 2012',4.235721237 on 'January 3, 2013',4.246575342 on 'February 3, 2013',3.835616438 on 'March 3, 2013',4.246575342 on 'April 3, 2013',4.109589041 on 'May 3, 2013',4.246575342 on 'June 3, 2013',4.109589041 on 'July 3, 2013',4.246575342 on 'August 3, 2013',4.246575342 on 'September 3, 2013',4.109589041 on 'October 3, 2013',4.246575342 on 'November 3, 2013',4.109589041 on 'December 3, 2013',4.246575342 on 'January 3, 2014',4.246575342 on 'February 3, 2014',3.835616438 on 'March 3, 2014',4.246575342 on 'April 3, 2014',4.109589041 on 'May 3, 2014',4.246575342 on 'June 3, 2014',4.109589041 on 'July 3, 2014',4.246575342 on 'August 3, 2014',4.246575342 on 'September 3, 2014',4.109589041 on 'October 3, 2014',4.246575342 on 'November 3, 2014',4.109589041 on 'December 3, 2014',4.246575342 on 'January 3, 2015',4.246575342 on 'February 3, 2015',3.835616438 on 'March 3, 2015',4.246575342 on 'April 3, 2015',4.109589041 on 'May 3, 2015',4.246575342 on 'June 3, 2015',4.109589041 on 'July 3, 2015',4.246575342 on 'August 3, 2015',4.246575342 on 'September 3, 2015',4.109589041 on 'October 3, 2015',4.246575342 on 'November 3, 2015',4.109589041 on 'December 3, 2015',4.245826783 on 'January 3, 2016',4.234972678 on 'February 3, 2016',3.961748634 on 'March 3, 2016',4.234972678 on 'April 3, 2016',4.098360656 on 'May 3, 2016',4.234972678 on 'June 3, 2016',4.098360656 on 'July 3, 2016',4.234972678 on 'August 3, 2016',4.234972678 on 'September 3, 2016',4.098360656 on 'October 3, 2016',4.234972678 on 'November 3, 2016',4.098360656 on 'December 3, 2016',4.235721237 on 'January 3, 2017',4.246575342 on 'February 3, 2017',3.835616438 on 'March 3, 2017',4.246575342 on 'April 3, 2017',4.109589041 on 'May 3, 2017',4.246575342 on 'June 3, 2017',4.109589041 on 'July 3, 2017',4.246575342 on 'August 3, 2017',4.246575342 on 'September 3, 2017',4.109589041 on 'October 3, 2017',4.246575342 on 'November 3, 2017',4.109589041 on 'December 3, 2017',4.246575342 on 'January 3, 2018'

(10)

NetPresentValueSwap1,0.05

146.0132438

(11)

NetPresentValueSwap2,0.05

146.0132438

(12)

See Also

Finance[BasisPointSensitivity], Finance[BenchmarkRate], Finance[CashFlows], Finance[NetPresentValue], Finance[Swap]


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