Carry vs Roll-Down on a zero-coupon IRSPricing an interest rate swap using Eurodollar futuresBootstrapping zero-rates from AUD swap ratesWhy Central Bank carry out Qe when they can directly force banks to lower down the interest rate?question regarding carry & roll of a bondInterest Rate Swap Pre-Settlement RiskRoll down Treasury curve (Coupon effects)Carry calculation on an interest rate swapTrading Jargon - Interest Rate Swaps / Bond TradingCarry and Rolldown of a Premium bondTreasury futures cost of carry and P&L
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Carry vs Roll-Down on a zero-coupon IRS
Pricing an interest rate swap using Eurodollar futuresBootstrapping zero-rates from AUD swap ratesWhy Central Bank carry out Qe when they can directly force banks to lower down the interest rate?question regarding carry & roll of a bondInterest Rate Swap Pre-Settlement RiskRoll down Treasury curve (Coupon effects)Carry calculation on an interest rate swapTrading Jargon - Interest Rate Swaps / Bond TradingCarry and Rolldown of a Premium bondTreasury futures cost of carry and P&L
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I am trying to understand the differences between carry vs roll-down on a zero-coupon interest rate swap.
Lets say we have a 10 day ZC IRS, meaning we will only swap once on maturity. We are a payer of the swap.
- Current 10-day spot rate: 3%
- Current 9-day spot rate: 2.9%
- Current Overnight rate: 3.2%
What is the carry on this trade? What is the roll-down?
fixed-income interest-rate-swap quantitative
asked 8 hours ago
V281V281
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$begingroup$
I am trying to understand the differences between carry vs roll-down on a zero-coupon interest rate swap.
Lets say we have a 10 day ZC IRS, meaning we will only swap once on maturity. We are a payer of the swap.
- Current 10-day spot rate: 3%
- Current 9-day spot rate: 2.9%
- Current Overnight rate: 3.2%
What is the carry on this trade? What is the roll-down?
fixed-income interest-rate-swap quantitative
asked 8 hours ago
V281V281
161 bronze badge
New contributor
V281 is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.
$endgroup$
add a comment
|
$begingroup$
I am trying to understand the differences between carry vs roll-down on a zero-coupon interest rate swap.
Lets say we have a 10 day ZC IRS, meaning we will only swap once on maturity. We are a payer of the swap.
- Current 10-day spot rate: 3%
- Current 9-day spot rate: 2.9%
- Current Overnight rate: 3.2%
What is the carry on this trade? What is the roll-down?
fixed-income interest-rate-swap quantitative
asked 8 hours ago
V281V281
161 bronze badge
New contributor
V281 is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.
$endgroup$
I am trying to understand the differences between carry vs roll-down on a zero-coupon interest rate swap.
Lets say we have a 10 day ZC IRS, meaning we will only swap once on maturity. We are a payer of the swap.
- Current 10-day spot rate: 3%
- Current 9-day spot rate: 2.9%
- Current Overnight rate: 3.2%
What is the carry on this trade? What is the roll-down?
fixed-income interest-rate-swap quantitative
fixed-income interest-rate-swap quantitative
asked 8 hours ago
V281V281
161 bronze badge
New contributor
V281 is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.
asked 8 hours ago
V281V281
161 bronze badge
New contributor
V281 is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.
asked 8 hours ago
V281V281
161 bronze badge
New contributor
V281 is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.
asked 8 hours ago
V281V281
161 bronze badge
asked 8 hours ago
V281V281
161 bronze badge
161 bronze badge
New contributor
V281 is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.
New contributor
V281 is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.
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2 Answers
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(This is my opinion; someone is likely to disagee).
I like to think of the carry as the predictable part (e.g. the coupon that accrues daily) and the rolldown as the stochastic part (the curves moved - maybe the forwards realized, maybe not. A good estimate of what it might turn out to be as to reprice for the next day assuming all forwards are realized.
I would therefore view a zero-coupon as having all rolldown and no carry.
You could view the financing cost of the swap as carry.
answered 8 hours ago
Dimitri VulisDimitri Vulis
9292 silver badges13 bronze badges
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$begingroup$
Most people would say: carry = the 1day p/l resulting from overnight rate being different from coupon = (3.2- 3.0)* 1day accrual. Roll down = p/l on remaining swap assuming spot rates remain the same = (2.9-3.0) * 9 days accrual.
answered 4 hours ago
dm63dm63
8,5581 gold badge9 silver badges35 bronze badges
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2 Answers
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2 Answers
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$begingroup$
(This is my opinion; someone is likely to disagee).
I like to think of the carry as the predictable part (e.g. the coupon that accrues daily) and the rolldown as the stochastic part (the curves moved - maybe the forwards realized, maybe not. A good estimate of what it might turn out to be as to reprice for the next day assuming all forwards are realized.
I would therefore view a zero-coupon as having all rolldown and no carry.
You could view the financing cost of the swap as carry.
answered 8 hours ago
Dimitri VulisDimitri Vulis
9292 silver badges13 bronze badges
$endgroup$
add a comment
|
$begingroup$
(This is my opinion; someone is likely to disagee).
I like to think of the carry as the predictable part (e.g. the coupon that accrues daily) and the rolldown as the stochastic part (the curves moved - maybe the forwards realized, maybe not. A good estimate of what it might turn out to be as to reprice for the next day assuming all forwards are realized.
I would therefore view a zero-coupon as having all rolldown and no carry.
You could view the financing cost of the swap as carry.
answered 8 hours ago
Dimitri VulisDimitri Vulis
9292 silver badges13 bronze badges
$endgroup$
add a comment
|
$begingroup$
(This is my opinion; someone is likely to disagee).
I like to think of the carry as the predictable part (e.g. the coupon that accrues daily) and the rolldown as the stochastic part (the curves moved - maybe the forwards realized, maybe not. A good estimate of what it might turn out to be as to reprice for the next day assuming all forwards are realized.
I would therefore view a zero-coupon as having all rolldown and no carry.
You could view the financing cost of the swap as carry.
answered 8 hours ago
Dimitri VulisDimitri Vulis
9292 silver badges13 bronze badges
$endgroup$
(This is my opinion; someone is likely to disagee).
I like to think of the carry as the predictable part (e.g. the coupon that accrues daily) and the rolldown as the stochastic part (the curves moved - maybe the forwards realized, maybe not. A good estimate of what it might turn out to be as to reprice for the next day assuming all forwards are realized.
I would therefore view a zero-coupon as having all rolldown and no carry.
You could view the financing cost of the swap as carry.
answered 8 hours ago
Dimitri VulisDimitri Vulis
9292 silver badges13 bronze badges
edited 8 hours ago
answered 8 hours ago
Dimitri VulisDimitri Vulis
9292 silver badges13 bronze badges
answered 8 hours ago
Dimitri VulisDimitri Vulis
9292 silver badges13 bronze badges
answered 8 hours ago
Dimitri VulisDimitri Vulis
9292 silver badges13 bronze badges
9292 silver badges13 bronze badges
add a comment
|
add a comment
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$begingroup$
Most people would say: carry = the 1day p/l resulting from overnight rate being different from coupon = (3.2- 3.0)* 1day accrual. Roll down = p/l on remaining swap assuming spot rates remain the same = (2.9-3.0) * 9 days accrual.
answered 4 hours ago
dm63dm63
8,5581 gold badge9 silver badges35 bronze badges
$endgroup$
add a comment
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$begingroup$
Most people would say: carry = the 1day p/l resulting from overnight rate being different from coupon = (3.2- 3.0)* 1day accrual. Roll down = p/l on remaining swap assuming spot rates remain the same = (2.9-3.0) * 9 days accrual.
answered 4 hours ago
dm63dm63
8,5581 gold badge9 silver badges35 bronze badges
$endgroup$
add a comment
|
$begingroup$
Most people would say: carry = the 1day p/l resulting from overnight rate being different from coupon = (3.2- 3.0)* 1day accrual. Roll down = p/l on remaining swap assuming spot rates remain the same = (2.9-3.0) * 9 days accrual.
answered 4 hours ago
dm63dm63
8,5581 gold badge9 silver badges35 bronze badges
$endgroup$
Most people would say: carry = the 1day p/l resulting from overnight rate being different from coupon = (3.2- 3.0)* 1day accrual. Roll down = p/l on remaining swap assuming spot rates remain the same = (2.9-3.0) * 9 days accrual.
answered 4 hours ago
dm63dm63
8,5581 gold badge9 silver badges35 bronze badges
answered 4 hours ago
dm63dm63
8,5581 gold badge9 silver badges35 bronze badges
answered 4 hours ago
dm63dm63
8,5581 gold badge9 silver badges35 bronze badges
answered 4 hours ago
dm63dm63
8,5581 gold badge9 silver badges35 bronze badges
8,5581 gold badge9 silver badges35 bronze badges
add a comment
|
add a comment
|
V281 is a new contributor. Be nice, and check out our Code of Conduct.
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