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Interest rate Swaps with different settlement dates

Carnifex

Joined
11/15/11
Messages
2
Points
11
Hi all,
Im a young Actuarial Analyst working on adding some additional functionality to a interest rate swap model. The cash flow aspect of this won't be difficult, but the market value calculations is where I get confused. The traditional way swaps are described in texts, is that both parties make payments to eachother on the settlement date, which is assumed to occur at the same frequency (quarterly, annual, etc). However, in practice this is seldom the case. It is more common for say one party to make payments on say a semi annual basis, and the other party to make payments quarterly. All texts I have encountered thus far note that this is the more common type of contract one will encounter, but none explain how to go about calculating market value.

How does one calculate market value of the interest rate swap contract in this situation?

Is there a common method employed or does it vary across company?

Where/what resource can I use to learn more about this?
 
yes, semibond vs 3m libor is standard, although certainly not the final word.

common method is to bootstrap the curve. you have forward rates and spot rates.
 
mfegrad said:
yes, semibond vs 3m libor is standard, although certainly not the final word.

common method is to bootstrap the curve. you have forward rates and spot rates.
Click to expand...

Many thanks. Any text/article that possibly discusses this? How about a good search term for google?

Or do I just need to look into bootstrapping?
 
Hi all,

I would like to ask additional question - do have any idea if I can download matlab model pricing a sawp with 2 floating legs? And more important - what interest rates should I use to calculate the swap curves (it an ETF swap I'm trying to price).

Thank you in advance.
 
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