Theory
Yield Curve
The yield curve is a mathematical concept in the finance. It represents the yield from the observation date to future dates.
The yield curve is a mathematical concept in the finance. It represents the yield from the observation date to future dates.
| Tenor | Date | Zero Rate |
|---|---|---|
| 1M | 2026-04-28 | 0.0369489 |
| 1Y | 2027-03-26 | 0.0363448 |
| 5Y | 2031-03-26 | 0.0363395 |
| 10Y | 2036-03-26 | 0.0363387 |
It is a common convention to display the curve in terms of zero rates or discount factors. But the modelling behind can use a different variable.
Interest Rate Swap
The interest rate swap is an OTC derivative exchanging one type of cash flows against other type of cash flows. These cash flows are the accrued interest rates.
| Party A | Bank A |
| Party B | Bank B |
| Effective date | 5 May 2026 |
| Termination date | 5 May 2036 |
| Fixed rate payer | Party A |
| Fixed rate payment dates | 5 Nov and 5 May each year, starting on 5 Nov 2026 and final payment is on 5 May 2036 |
| Fixed rate payment delay | 2 Business days, subject to Business Day adjustment |
| Floating rate receiver | Party B |
| Floating rate payment dates | 5 May each year, starting on 5 May 2027 and final payment is on 5 May 2036 |
| Floating rate payment delay | 2 Business days, subject to Business Day adjustment |
| Business Day holidays | London, New York |
| Business Day adjustment | Modified Following |
Currency Swap
The currency swap is an OTC derivative similar to the interest rate swaps, but the exchanged cash flow are of different currencies.