Out of curiosity? How many of you are actually in the field might be a better question.
And as a follow on...am thinking of things analysts might be called upon to explain...the convexity adjustment springs to mind. Or even more broadly, when does a swap have vol?
market on traders here that can answer that question...
buy 3 sell 5.
yours.
and offered on
0 bid at 3.
mine. Time to cover my loss....
Jimbo, I want to answer your question, but I'm not sure I'm understanding what you're asking for correctly. Afaik, when rates are correlated with vol, swaps will have vega.
iambateman, skins, monty09 should all be able to answer....
I remain 3 x 5
alright...given again =)
let's see.
When you refer to convexity, are you talking about dVega/dVol (i.e. var swap), gamma, or something else altogether?
I can't think of a reason why a vanilla IRS would have vol. Am I missing something? I can't see the optionality.
fundamental credit guy here...dont know much about rates
rates options
aa...care to give the convexity adjustment a stab?
well, almost all swaps have convexity in the form of delta that is non-stable with rate levels.
some swaps (Interest rate swaps, without cearly embedded optionality) have an actual vol exposure though.
im in rates. assuming you are referring to the convexity adjustment required on eurodollar futures for construction of the front end of the yield curve since eurodollars have no convexity and it would be tough/more time consuming to construct a curve from FRA's.
would be interested to hear you expand on swaps and vol though. when you say vol are you specifically referring to vega? bc even though there is not optionality in a swap (besides right to cancel) there is always going to be gamma which from my understanding is a component of vol trading. just a shot in the dark but perhaps on a more exotic swap structure (CMS spread product or something similar)
also while we are on the topic. what are your thoughts on the rates market over the turn of the year with the continued pressures on the LIBOR-OIS spread as well as the loss of confidence in LIBOR.
"im in rates. assuming you are referring to the convexity adjustment required on eurodollar futures for construction of the front end of the yield curve since eurodollars have no convexity and it would be tough/more time consuming to construct a curve from FRA's.
would be interested to hear you expand on swaps and vol though. when you say vol are you specifically referring to vega? bc even though there is not optionality in a swap (besides right to cancel) there is always going to be gamma which from my understanding is a component of vol trading. just a shot in the dark but perhaps on a more exotic swap structure (CMS spread product or something similar)"
the convexity difference b/w swaps and futures becomes more pronounced as you increase maturity. so yes there must be a difference b/w a swap rate and the rates implied by the futures.
i'm not talking about swaptions or rights to cancel. but sometimes, fixed/floating swaps will have vega. do you know when?
"also while we are on the topic. what are your thoughts on the rates market over the turn of the year with the continued pressures on the LIBOR-OIS spread as well as the loss of confidence in LIBOR."
think pressure remains, going to be with us for a while
i'm not talking about swaptions or rights to cancel. but sometimes, fixed/floating swaps will have vega. do you know when?
arrears boys
"arrears boys"
ooh ra.
still 3 at 5, trade4size?
i think somebody just blew up...
How about CMS convexity adjustments? or arrears?
Some of my favourite interview questions involve quantos or yoy inflation swap convexity adjustments.
Qui voluptate consectetur ipsa ex consectetur sunt tempore. Ut maiores tempora qui ipsum.
Et iste nesciunt consequatur modi nihil velit aut laudantium. Error eveniet porro quod dolores sint sint nesciunt cumque. Officiis sint qui quis maxime voluptas maxime at. Et atque qui hic molestiae. Corrupti id corporis officia autem.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...
Aliquam laudantium molestias aut ab. Molestias itaque minus ipsa eveniet qui. In amet tenetur quia voluptate. Voluptates repellat et omnis.