CVA (Credit Valuation Adjustment) = market value of counterparty credit risk Recent high levels of CDS spreads make CVA an important quantity in valuation of OTC derivatives. Before, the same interest rate swap would have the same value for two…
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OIS discounting
Swap valuation with OIS discounting OIS-discounting (from Overnight Indexed Swap) is a derivatives valuation method considering multiple curves (and not one as before) for discounting and for projecting future cash flows.It’s used for collateralized derivatives. CSA (Credit Support Annex) its…
how to value interest rate swap with 2 curves with QuantLib C++ (quantlib swap example)
example of interest rate swap derivative valuation in c++ with quantlib. for quantlib excel valuation see http://www.pricederivatives.com/en/amortizing-swap-valuation-excel-example/ maturity: 20 nov 2022 nominal: 1M init date: 20 nov 2012 floating leg pays: Euribor 3m + 2% every 3 months fixed leg…
How to value FX forward pricing example
FX forward Definition An FX Forward contract is an agreement to buy or sell a fixed amount of foreign currency at previously agreed exchange rate (called strike) at defined date (called maturity). FX Forward Valuation Calculator FX forward example trade…
Posted in OTC derivatives valuation Tagged with: foreign exchange risk, fx, fx forward, otc derivatives
how to install python quantlib windows
Here we’ll show two ways to install quantlib package for python under windows [under unix/linux just install quantlib-python package from your favorite package installer] first way (somewhat lengthy) is to compile it youself second and easy way is install it…
Posted in quantlib
simple example Libor Market Model (BGM)
Libor Market Model is a model where Libor forwards have log-normal distribution in their’s respective probability measures (called T-measure) example of Libor Market Model with just 2 forwards: $$ P_3(t)$$ is a price at time t of zero-coupon bond paying…
why discount collaterized swaps with EONIA?
the collateral at every moment must coincide with value mark-to-market of swap let’s take as a example simple swap with just one cashflow , which pays 100 euros at time T [it has no variable leg] at time T swap’s…
how to caclulate fair value of interest rate swap
how to caclulate fair value of interest rate swap Online Interest Rate Swap Calculator tipical example of interest rate swap contract between A and B: example of swap init date: 1/5/2012 maturity date: 1/5/2014 notional: 1 000 000 Eur payments:…
how to construct yield curve in quantlib [ quantlib yield curve example ]
bloomberg or reuters can give you already bootstrapped curve in format [date] [discount factor] here we’ll show a quantlib yield curve example construction yield curve normally is used for getting a discount factor for a given date and for calculating…
Posted in quantlib
monte carlo method in finance
whats is monte carlo method in finance? its a numerical method for calculating option’s price. it consist in generating many possible scenarios and calculate average. example – call option suppose Black-Scholes (lognormal) dynamics for underlying stock S. suppose interest rate and…
Posted in OTC derivatives valuation
