Tag archives for Mark to Market

Finance Online – Pricing Commodity linked notes

8th June 2010 by under Master Class     

The perquisite for this course is the first course on pricing interest rate swaps

Online Finance – Pricing Interest Rate Swaps – The valuation course

And the second more advance course on interest caps, interest rate floors and other related fixed income options. The same foundations…

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Finance Online – Pricing Range Accrual Notes – Extending the cap floor functions

8th June 2010 by Jawwad under Master Class     

The perquisite for this course is the first course on pricing interest rate swaps

Online Finance – Pricing Interest Rate Swaps – The valuation course

And the second more advance course on interest caps, interest rate floors and other related fixed income options. The same foundations…

Premium Courses Calculating VaR – EXCEL Example$13.99Valuing Options – Black Scholes Example$12.99Pricing IRS – Module II – IRS and CCS$14.49Forward Prices and Forward Rates - Calculation reference & detailed examples$27.79

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Online Finance – Interest Rate Options – Caps & Floors – Advance topics

4th June 2010 by Jawwad under Derivatives     

Here is the second course on Advance Interest Rate Products. The perquisite for this course is the first course on pricing interest rate swaps

Online Finance – Pricing Interest Rate Swaps – The valuation course

The second more advance course builds on the foundation laid in…

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Online Finance – Pricing Interest Rate Swaps – The valuation course

4th June 2010 by Jawwad under Derivatives     

Here is the first course on pricing interest rate swaps and cross currency swaps divided into three separate sections that address basics of interest rate swaps, term structure modeling and boot strapping and mark to market and valuation.

Basics

Online Finance Course – Pricing Interest Rate Swaps (IRS) – Terminology…

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Understanding Crude Oil – Popular posts and data

4th June 2010 by Jawwad under Finance     

Here are four posts from the Oil Insights blog that have caught the eye of traders and analysts that would also serve as useful reads for students of finance and options on this blog. Take a special look at the oil correlation posts and think about the impact and consequences on option trading and a constant volatility assumption.

Euro and Oil outlook – Trailing correlation between crude oil… Premium Courses Quant Crash Course$199.00Derivative Pricing – Binomial Trees – Efficient Approach$14.49Pitching for Startups$0.00Portfolio Risk Metrics – EXCEL Example$19.99

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Online Finance – Interest Rate Options – Pricing Caps & Floors

1st June 2010 by Jawwad under Derivatives     
Caps and Floors

The most commonly used options in the swaps market are caps and floors. A cap is a call on the rates where the payoff depends on Max (LIBOR – Strike, 0). A floor is a put on the rates where the payoff depends on Max (Strike-LIBOR, 0).

Cap

A cap may be considered as a portfolio of caplets on the underlying asset which is the LIBOR. The value of…

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Online Finance – Pricing Interest Rate Options – Cap Floor Parity

1st June 2010 by Jawwad under Derivatives     
Cap-Floor Parity

The cap- floor parity says that being long a cap and short a floor with the same strike is equivalent to paying the fixed leg in the swap where the fixed rate is equal to the strike rate.

In other words, Cap – Floor = Swap.

From the above two examples on caps and floors we see that this value is

408.33-669.22 =-260.89.

Calculating an interest rate swap, with fixed rate equal…

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Online Finance – Pricing a Cross Currency Swap – Amortizing and Indexed Term sheets

1st June 2010 by Jawwad under Derivatives     
Amortizing Floating for Floating Currency Swap

In an amortizing swap, the principal reduces in a predetermined way. For our illustration we assume that the principal reduces by 25% in each period. The rest of the parameters and assumptions are the same as for the floating for floating currency swap given above.

The amortization schedule is as follows:

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Online Finance – Pricing a Cross Currency Swap – Floating for Floating structure

1st June 2010 by Jawwad under Derivatives     
Floating for Floating Currency Swap

For our pricing example most of the assumptions will be the same as that used in the example for fixed for fixed floating currency swap above except for the interest rates used to calculate the floating rate payments. Let us assume that the floating interest rate payments for the USD leg is based on the US LIBOR and the floating interest rate payments for the…

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Online Finance – Pricing Cross Currency Swaps

1st June 2010 by Jawwad under Derivatives     
Pricing Cross Currency Swaps Fixed for Fixed Currency Swap

The fixed for fixed cross currency swap will be priced as a portfolio of forward foreign exchange contracts, where each exchange of payments is a forward foreign exchange contract. The assumption is that the forward exchange rates will be realized. The forward exchange rates will be calculated using the following equation:

where r and rf are compounded continuously

or

, if the interest rates were…

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