The market price calculator for swaps calculates current market values. It also calculates market values and time values for a future point in time (horizon).

Swaps are agreements for swapping fixed and/or variable interest rates. The system allows you to map the individual variations of almost all forms of swap. Besides interest swaps (one transaction currency), you can represent currency swaps and cross-currency interest rate swaps (two transaction currencies). A capital swap can be processed at the beginning and/or end of the term. Flexible condition items allow you to structure interest rate agreements as you wish. In addition to fixed-rate payer and receiver swaps (swap of fixed for floating rate), you can also process basis swaps (floating rate swap). You can also create amortization and step-up swaps. Floating interest rate spreads and the interest payment frequency are flexible.

To value a swap, you need to enter transaction data and either a par coupon or zero coupon yield curve in the transaction currencies (bid or ask rates) for the evaluation date. In addition to the yield curves necessary to discount a generated cash flow, you may also have to specify yield curves for calculating forward rates for variable interest payments (see Input Parameters).

If the display currency differs from the transaction currency (currencies) of the swap, you will need the relevant exchange rate (bid or ask rate). If the horizon comes after the evaluation date and a transaction currency differs from the display currency, then you have to enter a par coupon or zero coupon yield curve in the display currency (bid or ask rates) to calculate the forward exchange rate for the horizon.

First, the entire cash flow is reduced to the payments due after the horizon. The forward reference interest rates are then calculated for swaps with variable interest payments (on one or both sides). The resulting interest payments are included in the cash flow, which only contains payments with set amounts and payment dates.

Depending on the calculation routine (par or zero coupon method), the NPVs of the individual cash flows (each side) at the horizon are calculated using the yield curves for the transaction currencies. The value of both sides of the swap (in the transaction currencies) is then the sum of the NPVs of the cash flows from both sides. The NPV of the swap in display currency is the difference between the display currency values of both sides of the swap (translated into display currency using (forward) exchange rates (bid or ask)).

The following definitions apply:

• t_i: Due dates of the cash flows
• C_i: Cash flow of the receiver side of the swap at date t _i, i=1,..n
• D_i: Cash flow of the payer side of the swap at date t _i, i=1,..m
• PV(C_i / D _i): Present value of the cash flow C _i or D _i due on t _i at the horizon
• TC (RS): Transaction currency of the receiver side of the swap
• TC (PS): Transaction currency of the payer side of the swap
• DC: Display currency
• BR(TC(RS);DC): (Forward) bid exchange rate TC (RS) / DC at horizon
• AR(TC(PS);DC): (Forward) ask exchange rate TC (PS) / DC at horizon
• NPV: Net present value