Hello Patrick, has the title "Trading and Pricing Financial Derrivtaves" changed to "Derrivatives for the Trading Floor"? Because the title you mentioned cannot be found. I bought both available titles, on derivatives and statistics, to brush up on statistics and finally understand derivatives. Which playlists or courses do I follow to help me get through the books?
Subscribed. Although I've not yet seen many of your videos, I am loving the titles and the content they promise. I'm positively delighted to find a channel focused on explaining derivatives. Although I don't mind it myself, I believe the excessive 'eye contact' present in your videos might weird some people out. If you care, create a more suitable visual focus for the viewer. Best of luck.
you probably dont care but does someone know of a tool to log back into an Instagram account? I stupidly lost the account password. I love any assistance you can give me
@Carmelo Jackson i really appreciate your reply. I found the site on google and im waiting for the hacking stuff now. Looks like it's gonna take quite some time so I will get back to you later when my account password hopefully is recovered.
Could you provide some insights on calculation for the Spread on floating leg when we are hedging a fixed coupon bond? For example, the current swap rate for 5Y is 0.50%, when I have a need to swap my bond with coupon of 4% to floating, how should I go about calculating the spread on my floating leg? Would it be just LiBor + 3.50%? Or is there another way to calculate that? Would be really helpful if you can provide some insights on that. Thanks!!
I have a query regarding pricing of a Swap, there is formula 1-dL/Sum of d. Where "d" is discounting factor for the LIBOR rates. I am not able to find what is dl, please help!!!!!
All you have to do to price a swap is present value the two streams of cash flow. The swap is worth the present value of what you are receiving less the present value of what you are paying.
Hi Patrick, how would you address non-linearity in swaps assuming you locked into receiving fixed 5 BPs fixed over a 2 years tenor by hedging one swap with another? As the PV of those 5 BPs would then be exposed to fluctuations in the interest rate curve, what tools would be best to hedge these future cash flows?
If the conventions of the two swaps are the same, you will always be flat, that is the hedge. On swap A you rec 5bps, pay that on swap B. Vice versa with the floating legs. The non linearity only occurs considering when you trade out of mid. (Which is expected) I.e. the 2 year swap has a 4bp, wide spread, so it may cost you 9bps, to pay, where you can only rec 5bps in the market. The real way to hedge swaps to be perfectly flat is by looking at DVO1, you want the two swaps to have the same DV01, I.e. you could have two completely different positions (one is 100mio, 3year, one is 100mio, 2 year, if the DVO1 is the same, you will be perfectly hedged).
Unless I am mistaken, and you are saying you have already hedged and now stand to rec 5bps across the 2 positions (?)- if that is the case and the swap floating (indexed) rates are the same, you would just have a positive mark-to-market of the PV of that future 5bp amount. Unsure what you mean by ‘non linearity’
Ah, I see your question. Simple answer would be a ‘floater’, fixed income product linked to the floating rate. So you are due to receive 5bps (let’s say that is 5million dollars of the notional), as rates increase your MTM falls, you could spend some money on a hedge by ‘depositing’ the PV of that 5mio- say 4mio today, to be extreme, and as the PV rises or falls, the Floater will move in the opposite direction.
