.. DO NOT EDIT.
.. THIS FILE WAS AUTOMATICALLY GENERATED BY SPHINX-GALLERY.
.. TO MAKE CHANGES, EDIT THE SOURCE PYTHON FILE:
.. "api/gallery/fixed_income/swaps/plot_02_interest_rate_swap.py"
.. LINE NUMBERS ARE GIVEN BELOW.

.. only:: html

    .. note::
        :class: sphx-glr-download-link-note

        :ref:`Go to the end <sphx_glr_download_api_gallery_fixed_income_swaps_plot_02_interest_rate_swap.py>`
        to download the full example code or to run this example in your browser via JupyterLite.

.. rst-class:: sphx-glr-example-title

.. _sphx_glr_api_gallery_fixed_income_swaps_plot_02_interest_rate_swap.py:


The plain-vanilla interest-rate swap
====================================

The single-currency swap followed within a year of the IBM-World Bank
deal. One side pays a fixed rate and the other pays a floating rate on
the same notional. The floating leg is worth par on every reset date, so
the swap is worth a floating-rate note minus a fixed-coupon bond. The par
swap rate is the coupon that makes the two equal.

.. GENERATED FROM PYTHON SOURCE LINES 13-18

.. code-block:: Python

    import matplotlib.pyplot as plt
    import numpy as np

    from financialkit.fixed_income import NelsonSiegelCurve, ZeroCurve, interest_rate_swap_value, swap_rate








.. GENERATED FROM PYTHON SOURCE LINES 19-21

Hull's Example 7.1
------------------

.. GENERATED FROM PYTHON SOURCE LINES 21-26

.. code-block:: Python


    curve = ZeroCurve([0.25, 0.75, 1.25], [0.10, 0.105, 0.11])
    v = interest_rate_swap_value(curve, 100.0, 0.08, 1.25, pay_fixed=False, floating_rate=0.102)
    print(f"fixed bond {v.receive_leg:.3f}, floating note {v.pay_leg:.3f}, swap to fixed receiver {v.value:.3f} ($m)")





.. rst-class:: sphx-glr-script-out

 .. code-block:: none

    fixed bond 98.238, floating note 102.505, swap to fixed receiver -4.267 ($m)




.. GENERATED FROM PYTHON SOURCE LINES 27-29

The par swap curve
------------------

.. GENERATED FROM PYTHON SOURCE LINES 29-39

.. code-block:: Python


    ns = NelsonSiegelCurve(0.045, -0.025, 0.01, 2.0)
    T = np.arange(1, 31, dtype=float)
    fig, axes = plt.subplots(1, 2, figsize=(10, 4))
    axes[0].plot(T, 100 * swap_rate(ns, T), "o-", ms=3, label="par swap rate")
    axes[0].plot(T, 100 * ns.zero_rate(T), label="zero rate")
    axes[0].set_xlabel("swap maturity (years)")
    axes[0].set_ylabel("rate (%)")
    axes[0].legend()




.. image-sg:: /api/gallery/fixed_income/swaps/images/sphx_glr_plot_02_interest_rate_swap_001.png
   :alt: plot 02 interest rate swap
   :srcset: /api/gallery/fixed_income/swaps/images/sphx_glr_plot_02_interest_rate_swap_001.png
   :class: sphx-glr-single-img


.. rst-class:: sphx-glr-script-out

 .. code-block:: none


    <matplotlib.legend.Legend object at 0x116f0e120>



.. GENERATED FROM PYTHON SOURCE LINES 40-42

A 10-year payer swap after parallel moves
-----------------------------------------

.. GENERATED FROM PYTHON SOURCE LINES 42-50

.. code-block:: Python


    K = swap_rate(ns, 10.0)
    shifts = np.linspace(-0.02, 0.02, 41)
    axes[1].plot(1e4 * shifts, [interest_rate_swap_value(ns.shifted(s), 100.0, K, 10.0).value for s in shifts])
    axes[1].axhline(0.0, color="0.6", lw=0.8)
    axes[1].set_xlabel("parallel shift (bp)")
    axes[1].set_ylabel("value to fixed payer per 100")
    plt.show()








.. rst-class:: sphx-glr-timing

   **Total running time of the script:** (0 minutes 0.035 seconds)


.. _sphx_glr_download_api_gallery_fixed_income_swaps_plot_02_interest_rate_swap.py:

.. only:: html

  .. container:: sphx-glr-footer sphx-glr-footer-example

    .. container:: lite-badge

      .. image:: images/jupyterlite_badge_logo.svg
        :target: ../../../../lite/lab/index.html?path=api/gallery/fixed_income/swaps/plot_02_interest_rate_swap.ipynb
        :alt: Launch JupyterLite
        :width: 150 px

    .. container:: sphx-glr-download sphx-glr-download-jupyter

      :download:`Download Jupyter notebook: plot_02_interest_rate_swap.ipynb <plot_02_interest_rate_swap.ipynb>`

    .. container:: sphx-glr-download sphx-glr-download-python

      :download:`Download Python source code: plot_02_interest_rate_swap.py <plot_02_interest_rate_swap.py>`

    .. container:: sphx-glr-download sphx-glr-download-zip

      :download:`Download zipped: plot_02_interest_rate_swap.zip <plot_02_interest_rate_swap.zip>`


.. only:: html

 .. rst-class:: sphx-glr-signature

    `Gallery generated by Sphinx-Gallery <https://sphinx-gallery.github.io>`_