|
Constant Maturity Swap
A constant maturity swap, also known as a CMS, is a swap that allows the purchaser to fix the duration of received flows on a swap. The floating leg of an interest rate swap typically resets against a published index. The floating leg of a constant maturity swap fixes against a point on the swap curve on a periodic basis. A constant maturity swap is an interest rate swap where the interest rate on one leg is reset periodically, but with reference to a market swap rate rather than LIBOR. The other leg of the swap is generally LIBOR, but may be a fixed rate or potentially another constant maturity rate. Constant maturity swaps can either be single currency or cross currency swaps. Therefore, the prime factor for a constant maturity swap is the shape of the forward implied yield curves. A single currency constant maturity swap versus LIBOR is similar to a series of differential interest rate fixes (or "DIRF") in the same way that an interest rate swap is similar to a series of forwar ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Swap (finance)
In finance, a swap is an agreement between two counterparties to exchange financial instruments, cashflows, or payments for a certain time. The instruments can be almost anything but most swaps involve cash based on a notional principal amount.Financial Industry Business Ontology Version 2 Annex D: Derivatives, EDM Council, Inc., Object Management Group, Inc., 2019 The general swap can also be seen as a series of forward contracts through which two parties exchange financial instruments, resulting in a common series of exchange dates and two streams of instruments, the ''legs'' of the swap. The legs can be almost anything but usually one leg involves cash flows based on a |
Bond Duration
In finance, the duration of a financial asset that consists of fixed cash flows, such as a bond, is the weighted average of the times until those fixed cash flows are received. When the price of an asset is considered as a function of yield, duration also measures the price sensitivity to yield, the rate of change of price with respect to yield, or the percentage change in price for a parallel shift in yields. The dual use of the word "duration", as both the weighted average time until repayment and as the percentage change in price, often causes confusion. Strictly speaking, Macaulay duration is the name given to the weighted average time until cash flows are received and is measured in years. Modified duration is the name given to the price sensitivity and is the percentage change in price for a unit change in yield. Both measures are termed "duration" and have the same (or close to the same) numerical value, but it is important to keep in mind the conceptual distinctions betw ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
LIBOR
The London Inter-Bank Offered Rate is an interest-rate average calculated from estimates submitted by the leading banks in London. Each bank estimates what it would be charged were it to borrow from other banks. The resulting average rate is usually abbreviated to Libor () or LIBOR, or more officially to ICE LIBOR (for Intercontinental Exchange LIBOR). It was formerly known as BBA Libor (for British Bankers' Association Libor or the trademark bba libor) before the responsibility for the administration was transferred to Intercontinental Exchange. It is the primary benchmark, along with the Euribor, for short-term interest rates around the world. Libor was phased out at the end of 2021, and market participants are being encouraged to transition to risk-free interest rates. As of late 2022, parts of it have been discontinued, and the rest is scheduled to end within 2023; the Secured Overnight Financing Rate (SOFR) is its replacement. Libor rates are calculated for five currenci ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Cross Currency Swap
A cross is a geometrical figure consisting of two intersecting lines or bars, usually perpendicular to each other. The lines usually run vertically and horizontally. A cross of oblique lines, in the shape of the Latin letter X, is termed a saltire in heraldic terminology. The cross has been widely recognized as a symbol of Christianity from an early period.''Christianity: an introduction'' by Alister E. McGrath 2006 pages 321-323 However, the use of the cross as a religious symbol predates Christianity; in the ancient times it was a pagan religious symbol throughout Europe and western Asia. The effigy of a man hanging on a cross was set up in the fields to protect the crops. It often appeared in conjunction with the female-genital circle or oval, to signify the sacred marriage, as in Egyptian amule ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Yield Curve
In finance, the yield curve is a graph which depicts how the yields on debt instruments - such as bonds - vary as a function of their years remaining to maturity. Typically, the graph's horizontal or x-axis is a time line of months or years remaining to maturity, with the shortest maturity on the left and progressively longer time periods on the right. The vertical or y-axis depicts the annualized yield to maturity. Those who issue and trade in forms of debt, such as loans and bonds, use yield curves to determine their value. Shifts in the shape and slope of the yield curve are thought to be related to investor expectations for the economy and interest rates. Ronald Melicher and Merle Welshans have identified several characteristics of a properly constructed yield curve. It should be based on a set of securities which have differing lengths of time to maturity, and all yields should be calculated as of the same point in time. All securities measured in the yield curve ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Differential Interest Rate Fix
Differential may refer to: Mathematics * Differential (mathematics) comprises multiple related meanings of the word, both in calculus and differential geometry, such as an infinitesimal change in the value of a function * Differential algebra * Differential calculus ** Differential of a function, represents a change in the linearization of a function *** Total differential is its generalization for functions of multiple variables ** Differential (infinitesimal) (e.g. ''dx'', ''dy'', ''dt'' etc.) are interpreted as infinitesimals ** Differential topology * Differential (pushforward) The total derivative of a map between manifolds. * Differential exponent, an exponent in the factorisation of the different ideal * Differential geometry, exterior differential, or exterior derivative, is a generalization to differential forms of the notion of differential of a function on a differentiable manifold * Differential (coboundary), in homological algebra and algebraic topology, one ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Forward Rate Agreement
In finance, a forward rate agreement (FRA) is an interest rate derivative (IRD). In particular it is a linear IRD with strong associations with interest rate swaps (IRSs). General description A forward rate agreement's (FRA's) effective description is a cash for difference derivative contract, between two parties, benchmarked against an interest rate index. That index is commonly an interbank offered rate (-IBOR) of specific tenor in different currencies, for example LIBOR in USD, GBP, EURIBOR in EUR or STIBOR in SEK. An FRA between two counterparties requires a fixed rate, notional amount, chosen interest rate index tenor and date to be completely specified.Pricing and Trading Interest Rate Derivatives: A Practical Guide to Swaps J H M Darbyshire, 2017, Extended description ...
|
Convexity Correction
In mathematical finance, convexity refers to non-linearities in a financial model. In other words, if the price of an underlying variable changes, the price of an output does not change linearly, but depends on the second derivative (or, loosely speaking, higher-order terms) of the modeling function. Geometrically, the model is no longer flat but curved, and the degree of curvature is called the convexity. Terminology Strictly speaking, convexity refers to the second derivative of output price with respect to an input price. In derivative pricing, this is referred to as Gamma (Γ), one of the Greeks. In practice the most significant of these is bond convexity, the second derivative of bond price with respect to interest rates. As the second derivative is the first non-linear term, and thus often the most significant, "convexity" is also used loosely to refer to non-linearities generally, including higher-order terms. Refining a model to account for non-linearities is referred ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Damiano Brigo
Damiano Brigo (born Venice, Italy 1966) is an applied mathematician and Chair in Mathematical Finance at Imperial College London. He is known for research in filtering theory and mathematical finance. Main results Brigo started his work with the development, with Bernard Hanzon and Francois Le Gland (1998), of the projection filters, a family of approximate nonlinear filters based on the differential geometry approach to statistics, also related to information geometry. With Fabio Mercurio (2002–2003), he has shown how to construct stochastic differential equations consistent with mixture models, applying this to volatility smile modeling in the context of local volatility models. With Aurelien Alfonsi (2005), Brigo introduced new families of multivariate distributions in statistics through the periodic copula function concept. Since 2002, Brigo contributed to credit derivatives modeling and counterparty risk valuation, showing with Pallavicini and Torresetti (2007) ho ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Fabio Mercurio
Fabio Mercurio (born 26 September 1966) is an Italian mathematician, internationally known for a number of results in mathematical finance. Main results Mercurio worked during his Ph.D. on incomplete markets theory using dynamic mean-variance hedging techniques. With Damiano Brigo (2002–2003), he has shown how to construct stochastic differential equations consistent with mixture models, applying this to volatility smile modeling in the context of local volatility models. He is also one of the main authors in inflation modeling. Mercurio has also authored several publications in top journals and co-authored the book ''Interest rate models: theory and practice'' for Springer-Verlag, that quickly became an international reference for stochastic dynamic interest rate modeling. He is the recipient of the 2020 Risk quant-of-the-year award [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
