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yueZHAO
03-12-2008, 11:46 PM
given a 5y swap pay fixed-rate of 6%. how to calculate DVBP of the swap?

help me please.:rimshot:

yueZHAO
03-16-2008, 10:35 PM
Anyone can help?

gustav
03-17-2008, 10:15 AM
The swap consists of a fixed coupon bond and floating coupon bond. Get the DVBP of both bonds independently using

DVBP=Par+(price+accrued)+duration / 1000000 (from formula sheet)

and then the DVBP of the swap is

DVBP(swap)=DVBP(fixed bond) - DVBP (floating bond) if you are fixed rate payer.

If floating rate payer then

DVBP(swap)=DVBP(floating bond) - DVBP (fixed bond)

yueZHAO
03-18-2008, 03:49 AM
Thanks a lot. I know the formula above.
can you give an example?

Eroboy
03-19-2008, 07:17 PM
For the fixed bond, you can simply use modified duration * 1bps. Using the zero swap/Libor curve you can calculate the modified duration for the fixed bond.

For the floating bond, the duration is approximately equal to the time between the reseting date.

The DV01 of fixed swap receiver=fixed bond modified duration * 1bps - floating bond reseting time * 1bps

Eroboy
03-19-2008, 08:24 PM
I left the underlying principle in the follow formula. It shall be multiplied by the principle to get the dollar amount.


The DV01 of fixed swap receiver=fixed bond modified duration * 1bps - floating bond reseting time * 1bps

yueZHAO
03-20-2008, 12:10 AM
Thank you very much, Eroboy.
also, thanks to Gustav.