Pricing Swaps and Sensitivities Using Par Yields
5 Pages Posted: 4 Jun 2021
Date Written: November 21, 2016
The following document outlines a technique for pricing interest rate swaps in terms of the underlying asset exposures and the internal yield to maturity of the contract. Hence, you can use the Par Yield as opposed to the entire Zero Curve, since the Par Yield implicitly embeds the Curve at the start of the contract. Likewise, you can use the Duration calculation historically by looking at easily retrievable Par Yields.
Keywords: Swaps, Par Yield, Duration, Convexity, Theta, Risk Back Testing, Rate Formula
JEL Classification: C1, C2, C5
Suggested Citation: Suggested Citation
Khan, Taher, Pricing Swaps and Sensitivities Using Par Yields (November 21, 2016). Available at SSRN: https://ssrn.com/abstract=3855420 or http://dx.doi.org/10.2139/ssrn.3855420
Feedback to SSRN
If you need immediate assistance, call 877-SSRNHelp (877 777 6435) in the United States, or +1 212 448 2500 outside of the United States, 8:30AM to 6:00PM U.S. Eastern, Monday - Friday.