irs
Syntax
irs(settlement, resetInterval, start, maturity, notional, fixedRate, spread,
curve, frequency, calendar, [convention='ModifiedFollowing'], [basis=1],
[rateType=0])
Arguments
settlement is a DATE scalar or vector indicating the settlement date.
resetInterval is a DURATION scalar or vector indicating how often the interest rate is reset.
start is a DATE scalar or vector indicating the start date.
maturity is a DATE scalar or vector indicating the maturity date.
notional is a numeric scalar or vector indicating the notional amount.
fixedRate is a numeric scalar or vector indicating the fixed rate(s).
spread is a numeric scalar or vector indicating the interest rate spread.
curve is a dictionary scalar or vector indicating the fitted yield curve.
- 0/"Once": Bullet payment at maturity.
- 1/"Annual": Annual payments.
- 2/"Semiannual": Semi-annual payments.
- 4/"Quarterly": Quarterly payments.
- 12/"Monthly": Monthly payments.
calendar is a STRING scalar or vector indicating the trading calendar(s). See Trading Calendar for more information.
convention (optional) is a STRING scalar or vector indicating how cash flows that fall on a non-trading day are treated. The following options are available. Defaults to 'ModifiedFollowing'.
- 'Following': The following trading day.
- 'ModifiedFollowing': The following trading day. If that day is in a different month, the preceding trading day is adopted instead.
- 'Preceding': The preceding trading day.
- 'ModifiedPreceding': The preceding trading day. If that day is in a different month, the following trading day is adopted instead.
- 'Unadjusted': Unadjusted.
- 'HalfMonthModifiedFollowing': The following trading day. If that day crosses the mid-month (15th) or the end of month, the preceding trading day is adopted instead.
- 'Nearest': The nearest trading day. If both the preceding and following trading days are equally far away, default to following trading day.
rateType (optional) is an INT/STRING scalar or vector indicating compound interest. It can be:
- 0/"CC" (default): continuous compounding
- 1/"C": discrete compounding
Details
The irs
function prices an interest rate swap (IRS) for the
floating-rate side.
An IRS is a derivative contract in which two parties agree to exchange one stream of interest payments for another over a set period of time. The most commonly traded IRS is the exchange of a fixed interest rate payment and a floating rate payment (typically benchmarked to an interbank offered rate LIBOR).
Return Value: A DOUBLE scalar or vector.
Examples
This example describes an interest rate swap where fixed and floating rate payments are exchanged weekly over a 5-year period (2023.07.10-2028.01.10). The swap uses the XNYS calendar for determining trading days and applies a US (NASD) 30/360 day-count basis and continuous compounding for interest calculations.
settlement = 2023.07.10
calendar = `XNYS
day0 = temporalAdd(settlement, 0, calendar)
curveRateTime = [10y, 14d, 1d, 1M, 1y, 2y, 3M, 3y, 4y, 5y, 6M, 7d, 7y, 9M]
curveRateValue = [ 2.7013, 1.8, 1.27, 1.9425, 2.0263, 2.1265, 1.9725, 2.2438, 2.3575, 2.4538, 1.9938, 1.86, 2.5863, 2.0088] * 0.01
dates = []
for (dur in curveRateTime) {
dates.append!(temporalAdd(settlement, dur))
}
X = (dates - day0)$INT
// a curve for base rate (without spread)
curve = linearInterpolateFit(X, curveRateValue)
resetIntv = 7d
start = 2023.01.10
maturity = 2028.01.10
notional = 100.0
fixedRate = 0.02765
spread = 0.0
freq = 3M
basis = 0
irs(settlement, resetIntv, start, maturity, notional, fixedRate, spread, curve, freq, calendar, basis = basis)
// -1.54