How many of you are in rates?

Jimbo's picture
Rank: Neanderthal | banana points 2,643

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?

Comments (22)

Aug 25, 2008

market on traders here that can answer that question...

buy 3 sell 5.

"Oh the ladies ever tell you that you look like a fucking optical illusion" - Frank Slaughtery 25th Hour.

Aug 25, 2008

yours.

Aug 25, 2008

and offered on

0 bid at 3.

Aug 25, 2008
Jimbo:

and offered on

0 bid at 3.

mine. Time to cover my loss....

"Oh the ladies ever tell you that you look like a fucking optical illusion" - Frank Slaughtery 25th Hour.

Aug 27, 2008

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.

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Aug 25, 2008

iambateman, skins, monty09 should all be able to answer....

I remain 3 x 5

"Oh the ladies ever tell you that you look like a fucking optical illusion" - Frank Slaughtery 25th Hour.

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Aug 25, 2008

alright...given again =)

let's see.

Aug 25, 2008

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.

Aug 25, 2008

fundamental credit guy here...dont know much about rates

Aug 27, 2008

rates options

Aug 25, 2008

aa...care to give the convexity adjustment a stab?

Aug 25, 2008

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.

Aug 26, 2008

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)

Aug 26, 2008

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.

Aug 25, 2008

"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?

Aug 25, 2008

"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

Aug 26, 2008

i'm not talking about swaptions or rights to cancel. but sometimes, fixed/floating swaps will have vega. do you know when?

arrears boys

Aug 25, 2008

"arrears boys"

ooh ra.

still 3 at 5, trade4size?

Aug 26, 2008

i think somebody just blew up...

Aug 28, 2008

How about CMS convexity adjustments? or arrears?

Some of my favourite interview questions involve quantos or yoy inflation swap convexity adjustments.

Aug 25, 2008
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Aug 25, 2008