Bloomberg SWPM

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> SWAP MANAGER (SWPM)
HELP PAGE
SWAP MANAGER
(SWPM)
Enter SWPM<Go>, then press <Help>
Bloomberg's commitment to reducing our environmental

impact starts with you. Please help us eliminate
unnecessary printing by reading this document online.
This document was prepared for the exclusive use of
Yunsong Huang and may not be redistributed.
Date: 01/12/2015
CONTENTS
WHAT IS SWAP MANAGER (SWPM)?

Control Area
Main Tab
SWPM Tabs
05
05
06
USING SWPM
Pricing a Vanilla Swap
Plain Vanilla Template
Example: Solving for Spread
Example: Solving for Price
Backdating the Valuation
Managing Deals
Saving Deals
Loading Saved Deals
Editing Deals
Sending Deals
Sharing Deals
Booking Deals
Deleting Deals
Bulk-Deleting Deals
Recovering Sessions
Analyzing Curves
Customizing Curves
Cashows and Resets
Cashows
Analyzing Cashows
Resets
Managing Resets
Conguring Leg Details
Single Leg Details
Multi-Leg Details
Scenarios and Risk
Scenario
Analyzing Scenarios
Charting Results
Risk
Managing Risk
Matrix
Matrix Pricing
Calculating CVA
CVA
Calculating CVA
10
10
10
12
15
16
18
19
20
20
21
22
23
25
25
25
26
28
29
29
31
33
33
34
36
37
39
39
40
42
43
45
46
47
48
49
50
Calculating DVA
Calculating Bilateral CVA
Calculating Margin
LCH Initial Margin
CME Initial Margin
Incremental Margin
Settings
Setting a Source Curve
Applying Dual-Curve Stripping
Choosing Wakeup Settings
Customizing Templates
Choosing Bid/Ask Settings
Shortcuts
51
52
53
53
54
55
57
57
58
58
61
62
63
SUPPORTED STRUCTURES
Vanilla
Cross-Currency
Mark-to-Market Currency Swap
Amortizing
FRA
Non-Vanilla
IMM
Muni Swap
Arrears
Basis Swap
CMS
OIS
Zero Coupon Swap
Total Return Swap
Basket Total Return
iBoxx Total Return Swap
Property Derivative
Asset Swap
Quanto Swap
Dual Digital Swap
Three Zone Digital Swap
Multi-Leg Swap
Asian Swap
Ination
Customizing CPI Projections
Ination Zero Coupon Swap
Ination YoY Swap
68
68
68
71
73
76
78
78
80
82
85
87
90
92
94
96
98
100
103
104
106
108
110
113
115
115
116
119
CONTENTS
Ination YoY Cap/Floor

Ination LPI Swap
Ination Bond Swap
Ination Real Rate Swap
Exotics
Fixed Coupon Range Accrual
Floater Range Accrual
Fixed In/Out Range Accrual
CMS Spread Range Accrual
Power Reversal Dual Currency
Target Accrual Redemption Note
Fixed-Float
Snowball
Snowbear
Thunderball
Knock In/Out
Nikkei Linked Notes
Options
Swaption
Cancellable Swap
Cap/Floor/Collar/Straddle
Digital Cap/Floor
Asian Cap/Floor
Cross-Currency Swaption
Cross-Currency Cancellable Swap
Capped Floater
CMS Spread Capped Floater
Cap/Floor Spread
Swaption Straddle
Swaption Strangle
Swaption Risk Reversal
Swaption Call Spread
Swaption Calendar Spread
Emerging Markets
Non-Deliverable Cross Crncy Swap/IRS
Pre - DI Onshore Brazilian Swap
CDI Onshore Swaption
Cupom Cambial Swap
USD Fixed vs. %CDI Swap
USD Libor vs. %CDI Swap
CLP Fixed Float Swap
122
124
127
130
133
133
136
138
141
141
144
146
148
150
152
154
156
159
159
165
170
173
173
175
177
179
181
183
185
187
189
191
192
194
194
197
199
202
204
206
208
CLF CLP X-Crncy Fixed Float Swap
210
CALCULATIONS
Cashows
Payment Dates
Day Count
Risk Analytics
Deal Risk
Greek Methodologies
Delta Hedge
Models
Black-Scholes
Hull & White 1 Factor (HW1F)
Calibration Procedure
Diagonal Swaptions
Diag. Swaptions with Constant
One-Factor LGM Model
Two-Factor LGM Model
Popular Calibration Strategies
Brazilian Swaps
Brazilian Swap Types
Cupom Cambial Curves
Deal-Specic Calculations
CMS: Convexity Adjustment
Nikkei Linked Notes: Volatility
Total Return Swap
Swaption Settlement Methods
214
214
214
214
215
215
215
216
216
216
216
217
217
217
217
217
218
218
218
218
219
219
220
221
222
DOCUMENTS AND VIDEOS

Volatility
Strategies
Counterparty Valuation
Methodologies and Spreadsheets
Hull-White Models
SWPM Tutorials
224
224
224
224
225
225
225
EXCEL INTEGRATION
Importing/Exporting
Importing Data from Excel
Uploading Deals
Exporting to Excel
Exporting to FpML
226
226
226
226
226
227
CONTENTS
API Formulas
Formula Construction
Deal IDs
Finding Data Fields
Example: Cashow Schedule
Example: Historical Net Payments
Example: Interest Rate Curves
227
227
228
228
229
229
230
LEARN MORE
SWPM Tabs
Additional Tabs
Pricing a Swap
Choosing a Template
Adding a Leg
Copying a Leg
Deleting a Leg
Scaling Reset Rates
Managing Deals
Editing Deal Properties
Trading Tools
Calculating Margin
LCH Margin Simulator
Analyzing Curves
Importing Curve Rates
Cashows and Resets
Charting Cashows
Conguring Leg Details
Amortization Schedule
Amortization Methods
Fees
Accrual Dates
Compounding
Scenarios and Risk
Hedging Risk
Single-Stock Total Return Swap
Introduction
TRS Tabs
Projection-Based Model (Equity)
Accrual-Based Model (Equity)
Index Total Return Swap
Index TRS
Bond Total Return Swap
231
231
231
232
232
233
235
235
236
237
237
238
239
239
241
241
241
242
243
243
245
248
249
251
252
252
252
253
253
260
270
273
273
275
Introduction
Accrual-Based Model (Bond)
Projection-Based Model (Bond)
Swaption/Cancellable Swap
Dening Your View
Sample Deal Terms (Swaption)
Details
Curves
Cashows
Resets
Scenario
Risk
Matrix
Amortization Wizard
276
276
280
280
281
281
282
283
285
286
287
289
291
292
DEFINITIONS
294
WHAT IS SWAP MANAGER (SWPM)?

SWPM allows you to price over-the-counter derivative contracts, so you can accurately quantify your market exposures for a
wide range of vanilla and exotic interest-rate swaps, interest-rate options, swaptions, and interest-rate and hybrid structured
notes. Using an exhaustive list of pre-trade analytical tools, you can analyze and update curves and cashows, as well as
perform risk and scenario analyses for the entire deal or individual legs. SWPM is also the platform for creating custom deals
that you can add to the Multi-Asset Risk System (MARS) function.
Note: For more information about MARS, see MARS <Help>.
CONTROL AREA
SWPM is organized into a series of tabs that allow you to analyze and price listed and over-the-counter interest-rate swaps
from different perspectives. You can use the tools in the control area at the top of the screen to navigate between the tabs,
analyze deals, set up scenarios, manage risk, generate trade tickets, and congure your default settings.
Toolbar: The toolbar allows you to select from a wide variety of swaps and structures that you can analyze and price. You
can also hedge your risk, select and customize your views, congure your default settings, and access the Swap Uploader,
which allows you to upload multiple deals at once and store them on Bloomberg.
Tabs: The tabs in SWPM allow you to perform deep analyses of various components of your deals, including curve shifts,
cashows, resets, key rate risk, counterparty valuations, and "what-if?" scenarios.
Buttons: The buttons display specic options that allow you to quickly load, save, and share deals; generate trade tickets;
and display cashow charts and tables. Depending on the deal-type and tab you select, buttons may or may not appear.
Setup Options: The drop-down elds allow you to set up the analysis for the current tab. The elds in the setup options
area are the same across all tabs.
MAIN TAB
When you launch SWPM, the Main tab appears with a general overview of the currently loaded deal. The Main tab is
organized into four sections that allow you to structure and price your deal. You can customize the deal type, the curves used
to price the deal, and the variable you want to solve for (e.g., xed coupon or spread).
Date printed: 01/12/2015
WHAT IS SWAP MANAGER (SWPM)? //05
Note: The options available from the Main tab depend on the structure you have loaded. The image above illustrates the Main
tab for plain vanilla swaps. For information about other structures, see Supported Structures.
Leg 1/Leg 2: Allows you to congure the xed and oating legs of the deal, including the market side, notional amount,
currency, effective date, and maturity date.
Curve Data: Allows you to update the curves SWPM uses to discount cashows and project forward pricing when pricing
the swap.
Valuation: Allows you to see the results of your analysis and choose the variable that SWPM solves for.
For a complete breakdown of the Main tab, see Pricing a Vanilla Swap.
SWPM TABS
The SWPM tabs provide sophisticated analytical tools that allow you to price interest-rate swap deals and other structures.
Depending on the deal type, the tabs may vary.
Note: This section describes the tabs that appear for a plain vanilla swap in SWPM. For information about additional tabs that
appear for different instruments, see Additional Tabs.
In addition to the Main Tab, described above, the following tabs appear in SWPM for a plain vanilla swap:
Curves: Allows you to visualize and export to Excel the par curve used to generate reset rates or the zero coupon curve,
whose nominal rates are used to discount cashows. The Curves tab allows you to display and edit curve information,
1
including Curve# , Curve Date , Tenor , Interpolation Method , Shift , and Spread , so you can determine where the
The curve number that corresponds to the curve data that appear. The curve data appear for the curve number you
select. Curve numbers are compiled from the discount curves, forecast curves, and FX basis curves used in the swap
deal.
market is currently pricing a security at different points in the future. The curve data is plotted on a chart corresponding to
your customized shifts and selected interpolation method, which enables you to identify historical pricing trends by seeing
how the shape of the curve has changed.
For more information, see Analyzing Curves.
Cashow: Allows you to display and export to Excel the present value of the cashow amounts for each leg or on a net
7
basis, including Zero Rate , discount rates, Equivalent Coupon Rate , and historical cash ows, so you can better
understand the stream of cashows behind a security. You can also customize the analysis with your own spot rates for
present-valuing cashows.
For more information, see Cashows.
10
Details: Displays detailed information for each leg, including Cashow frequency, First Payment
(business day adjustment), Roll Convention
12
13
, Calendar
14
, Amort Dates
, Bus Day Adj
11
(amortization dates), and fee amounts, so you
The date of the curve used in calculations and payments. This can be a historical date or today's date. If the date is
historical, then historical data from that date for the curve selected (which can be a discount, forecast, or basis curve) is
applied in the valuation. If the date is today, then the most recent curve is used.
The tenor of the reference rate. If the tenor is greater than one year, the underlying becomes a swap rate, the deal
becomes a CMS deal, and convexity adjustment applies. The tenor should correspond to a valid index on the curve.
The methodology applied to interpolate between points on the curve.
The shift (in basis points) applied to the curve.
The number of basis points over/under the oating rate index that the oating rate payer is obligated to pay.
7
8
Alternatively, the spread amount added to the oater index in the oating rate reset. The latest oating rate = Latest Index
x Leverage + Spread.
The interest rate earned on a bond or swap with no coupon payments (zero coupon), which is presented based on a
specic day-count convention and compound frequency.
The equivalent coupon rate (for the oating leg) based on the reset rates.
The cashow projections for individual legs and the entire deal.
10
11
The nominal date on which the rst coupon payment is scheduled. It appears as a nominal date and should be entered
as a nominal date without business adjustment. For more information, see Payment Dates.
Appears on the Details tab. The method used to adjust cashow dates to business days when necessary. The
drop-down menu displays the following choices:
No Adjustment: There is no adjustment to a business day.
Ahead (Following): If the date is not a business day, then the date is adjusted forward to the next business day.
Back (Preceding): If the date is not a business day, then the date is adjusted backward to the preceding business
day.
Modied (Following): If the date is not a business day, then the date is adjusted forward to the next business day, but
stays in the current month.
12
Modied (Preceding): If the date is not a business day, then the date is adjusted backward to the preceding business
day but stays in the current month. For example, if March 30, 2013 is a Saturday, "Ahead (Following)" adjusts the
date to April 1, 2013, but "Modied Preceding" uses a date of March 29, 2013.
The method to use in order to generate cashow dates. For example, "Backward" starts from the Next To Last Payment
Date, then generates periodic dates backwards based on payment frequency.
can analyze and update specic components of the deal. Additionally, the Details tab allows you to import an amortization
schedule from Excel.
For more information, see Conguring Leg Details.
15
16
17
Resets: Allows you to display the swap deal's Reset Rate on every Reset Date until the Maturity Date , so you can
see how frequently the oating coupon is reset to the market level. The reset rates feed directly from the forward curve
that you set in the curve data section on SWPM's Main tab. For information about how to customize the forward curve that
feeds the reset rates into SWPM, see ICVS <Help>.
For more information, see Resets.
18
Risk: Allows you to display the key rate risk and DV01 data for each tenor of the swap deal in a table and on a chart,
so you can see your underlying interest rate exposure. You can further analyze interest rate sensitivity by adjusting the Shift
19
(bp)
(shift in basis points) for each tenor.
For more information, see Risk.
Scenario: Allows you to perform one or more scenario analyses, so you can see potential changes in market conditions
and their effects on a deal. You can launch the Scenario Manager (SHOC) function inside SWPM to congure multiple
scenarios based on price, interest rate, credit, and swap shifts, then display the results in a table and display cashows for
individual scenarios.
For more information, see Scenario.
For more information about SHOC, see SHOC <Help>.
20
21
CVA: Allows you to display the CVA and DVA for over-the-counter derivative contracts, so you can see the market
value of the default risk embedded in the deal. You can analyze such data inputs as credit curves, spreads, interest rate
volatilities, and CDS recovery rates, then display the results on a chart.
For more information, see CVA.
13
14
15
16
The aggregate calendar of up to three countries that is used to generate actual reset and payment dates. The Calendar
eld takes into consideration holidays in the selected countries to ensure that contract payment and reset dates do not
fall on a holiday or weekend.
The scheduled amortization dates. Amort dates may be different from the payment/cashow dates. Amort amounts
that fall between two payment dates are accumulated into the ending amort payment date for the percent of notional
and amort amount, in thousands. The amount specied as the latest between two payment dates (inclusive on ending
payment date) is used for the ending payment date for the balance.
The reset rates for the corresponding accrual periods. Both historical and implied forward reset rates appear. You
can change historical reset rates, which default to rates on the historical curve, by entering new values into the
corresponding highlighted elds. The implied forward reset rates are determined by the forward curve and cannot be
changed.
The date on which the rate is reset to apply to the next accrual period.
18
The termination date of the deal. This appears as a nominal date and should be entered as a nominal date without
business adjustment.
The sensitivity to the curve shift (downPrincipal - upPrincipal)/(2xShiftinPercent).
19
The number of basis points each tenor has been shifted.
20
The counterparty valuation adjustment amount. CVA represents the risk that your counterparty will default.
21
The default valuation adjustment. DVA represents the risk (assumed by your counterparty) that you will default.
17
Matrix: Allows you to display a grid of similar structures, so you can conduct simulations and create custom "what if?"
22
23
24
25
analyses of Market Value , Premium , Notional , Volatility , and other measures for the entire deal and/or individual
legs. You can create a matrix with anchor values in both the x-axis and y-axis.
For more information, see Matrix.
22
The sum of the present values of the leg cashows.
23
1.) In the Calculate drop-down menu, calculates the market value based on your inputs. The Market Value appears in the
Valuation section. 2.) The premium, calculated as (Market Value / Notional) x 100.00. 3.) In the Solver drop-down menu,
calculates the net present value (NPV) based on your inputs. The NPV appears in the Results section.
1.) In the Calculate drop-down menu, calculates a notional amount based on your DV01 input. The Notional appears in
the Leg 1/Leg 2 sections. 2.) Applies to an individual swap leg. The notional value of the swap leg.
The relative rate at which the price of the deal moves up and down, found by calculating the annualized standard
deviation of the daily change in price.
24
25
USING SWPM
The following topics explain how to price swap deals in SWPM.
For a description of the function, see What Is Swap Manager (SWPM)?.
PRICING A VANILLA SWAP

A plain vanilla interest rate swap is an agreement between two counterparties to exchange cash ows (xed vs. oat)
in the same currency. The payments are made during the life of the swap in the frequency that is pre-established by the
counterparties.
The following topics describe how to use SWPM's default template to price plain vanilla swaps. For information about pricing
another structure, see Supported Structures.
PLAIN VANILLA TEMPLATE
SWPM has a customizable user interface that allows you to choose the type of deal you want to structure, the curves used to
price your swap, and the variable you want to solve for. The plain vanilla template appears by default when you access SWPM.
Note: You can use shortcuts (e.g., SWPM EUR <Go> or SWPM JPY <Go>) to access the plain vanilla swap template in a
different currency. For more information about shortcuts, see Shortcuts.
SWPM's plain vanilla swap template is organized into nine tabs that allow you to set up and analyze the swap. You can
structure and price your swap on the Main tab of the template, which is divided into four sections. You can input details of the
swap in the Leg 1 and Leg 2 sections, choose curves in curve data section, and then evaluate the swap value and risk gures
in the valuation section.
Control Area: Allows you to navigate between tabs, analyze deals, set up scenarios, manage risk, generate trade tickets,
and congure your default settings. For more information, see Control Area.
Leg 1: Allows you to congure your settings for the xed leg of the deal. You can enter, for example, the market side,
notional amount, currency, effective date, maturity, and xed coupon for the deal. You can backdate the swap to a past
date or enter a future date to build a forward-starting swap (FSS). At the bottom of the section, the market value, accrued
interest since the last leg cashow date, premium, and DV01 for the xed leg appear. For information about a eld, position
your cursor over it or see Denitions.
Note: If you currently have a swap loaded on your terminal, SWPM displays the terms of the currently loaded deal. By
default, the elds are not editable. For information about editing a saved swap, see Editing Deals.
Leg 2: Allows you to congure your settings for the oating leg of the deal. You can enter the market side, the notional
amount (SWPM supports asymmetric notionals), and the index used to calculate the oating rate, along with the reset
frequency, pay frequency, tenor, and other details. At the bottom of the section, the market value, accrued interest since
the last leg cashow date, premium, and DV01 for the oating leg appear.
For information about a eld, position your cursor over it or see Denitions.
For information about how to add or copy a leg, see Adding a Leg and Copying a Leg.
For information about scaling reset rates, see Scaling Reset Rates.
For information about editing leg characteristics, such as date generation, amortization, and payoff information, see
Conguring Leg Details.
Curve Data: Allows you to update the curves that SWPM uses to discount cashows and project forward pricing when
calculating the Market Value of the swap. SWPM calculates the market value using the selected curve at the market close
26
of the day indicated in the Curve Date
27
eld. The Valuation
date is the date at which future cashows are discounted.
Note: By default, SWPM prices swaps as of today, i.e., the default curve date is the current date and the valuation date is
T+2. To price swaps as of a historical date, you must backdate both the Curve Date and Valuation elds. For example, to
mark to market at quarter's end, you can enter the historical quarter-end date in both the Curve Date and Valuation elds.
For more information, see Backdating the Valuation.
For information about how to update the curves that appear by default, see Setting a Source Curve.
For information about how to visualize, customize, and apply shifts to the selected curve, see Analyzing Curves.
Valuation: Allows you to select the variable you want to solve for and evaluate the swap. You can calculate the market
value of the deal (the sum of the present values of the receive leg minus the sum of the present values of the pay leg), or
you can customize the valuation by choosing a variable from the Calculate drop-down menu. You can solve for the following
28
29
30
31
32
variables: Premium , Notional , Leg1: Coupon , Leg2: Spread , Leg2: Leverage

26
27
28
33
, Par Shift...
34
, Z-Spread...
The date on which the transaction occurs. For example, in the U.S., the valuation date is T + 2 days. In Great Britain, it is
T + 0 days.
You can further analyze vanilla swaps by selecting another tab from the control area. Additionally, you can save your deal by
selecting Actions > Save from the toolbar. Once you have saved the deal, you can access it from other Bloomberg functions
or through Bloomberg's API by entering the deal number followed by the <CORP> key. For example, this allows you to
download the cashow schedule for an individual leg to Microsoft Excel with Bloomberg's API.
For information about the other tabs that appear on the template, see SWPM Tabs.
For more information about saving deals, see Saving Deals.
For examples of using the template to price a plain vanilla swap, see Example: Solving for Spread and Example: Solving for
Price.
For information about Bloomberg's API, see DAPI <Help>.
EXAMPLE: SOLVING FOR SPREAD
This topic provides a practical example of how to calculate the spread above USD 3M Libor on the oating leg side of a plain
vanilla swap deal with a premium of 0. The swap deal in this example is a ve-year USD vanilla xed-to-oat swap with a USD
xed coupon payment of 2% and a oating rate based on USD 3M Libor plus a spread.
For information about pricing other swap types, see Choosing a Template.
Steps:
1. In the Leg 1 section, congure your settings for the xed-leg side of the deal.
Market Side: Receive Fixed
30
Calculates the xed coupon based on your Premium input. The Coupon appears in the Leg 1 section.
31
Calculates the oating leg spread based on your Premium input. The Spread appears in the Leg 2 section.
32
Calculates the oating leg leverage based on your Premium input. The Leverage appears in the Leg 2 section.
33
Displays the Par Shift Quick Calculator, a scenario analysis tool that allows you to analyze the relationship between the
discount curve and the premium. The Par Shift Quick Calculator presumes that cashows are unchanged and shifts only
the discount curve. Par shift is the shift on the par curve (not stripped).
Displays the Z-Spread Quick Calculator, a scenario analysis tool that allows you to analyze the relationship between the
discount curve and the premium. The Z-Spread Quick Calculator presumes that cashows are unchanged and shifts
only the discount curve. The Z-Spread is the spread of the stripped, zero-coupon curve that makes the multi-leg deal
premium match the value specied in the Premium eld.
29
34
Notional: 10 MM
Effective: Today's date (for example, 07/19/2013)
Maturity: Five years forward (for example, 07/19/2018)
Coupon: 2%
Day Count: 30I/360

For denitions of the elds that appear, see Denitions.
2. In the Leg 2 section, congure your settings for the oating-leg side of the deal.
Market Side: Pay Float
Index: US0003M
Reset Frequency: Quarterly
Pay Frequency: Quarterly
Day Count: ACT/360

3. In the curve data section, choose the curves to be used for discounting and projecting forward pricing when pricing the
swap.
In this example, use the default selections:

35
Dscnt Curve: 42 USD OIS Swaps
Fwd Curve: 23 USD Swaps (30/360,S/A)
36
4. From the Calculate drop-down in the Valuation section, choose the variable that you want to solve for: Leg2: Spread37 .
The elds required to solve for the selected variable (in this case thePremium eld), activate.
5. In the Premium eld, enter the premium for your deal: 0 .
35
36
37
This curve represents USD overnight index swaps. Payments are based on a xed-rate versus a oating-rate overnight
index with the xed-rate portion on an annual, Actual/360 day-count basis and the oating-rate on an annual, Actual/360
day-count basis from the FED Funds Effective Rate (FEDL01 <INDEX>). Pricing is a best bid/ask composite from latest
quotes and the sources include both banks and brokers.
This curve represents US dollar-denominated interest-rate swaps. The short-end of the curve are cash rates with a day
count of Actual/360. Payments on the long end of the curve are based on a xed-rate versus a oating-rate with the
xed-rate portion on a semi-annual, 30/360 day-count basis and the oating-rate on a quarterly, Actual/360 day-count
basis from the BBA LIBOR USD three-month rate (US0003M <INDEX>). Pricing for long-end terms are a best bid/ask
composite from latest quotes and the sources include both banks and brokers.
6. Press <Go>.
In the Leg 2 section, the Spread updates based on your inputs.
7. If you want to save your swap, select Actions > Save from the toolbar. For more information, see Saving Deals.
EXAMPLE: SOLVING FOR PRICE
This topic provides a practical example of how to calculate the market value of a plain vanilla swap deal with a premium of 0.
The swap deal in this example is a ve-year USD vanilla xed-to-oat swap with a USD xed coupon payment of 2% and a
oating rate based on USD 3M LIBOR plus a spread.
For information about pricing other swap types, see Choosing a Template.
Steps:
1. In the Leg 1, Leg 2, and curve data sections, congure your settings for the deal by following Steps 1 - 3 in Example:
Solving for Spread.
2. From the Calculate drop-down in the Valuation section, choose the variable that you want to solve for (Premium), then
press <Go>.
The Market Value appears in the Valuation section at the bottom of the screen.
BACKDATING THE VALUATION
You can use SWPM to "mark to market" swap deals using historical curves for a backdated evaluation.
To mark to market a swap deal at a specic date in the past:
1. In the Leg 1 section, congure your settings for the xed-leg side of the deal.

2. In the Leg 2 section, congure your settings for the oating-leg side of the deal.

3. In the curve data section, choose the curves to be used for discounting and projecting forward pricing when pricing the
swap.
4. In the Curve Date eld, enter the historical curve date38 , i.e., the date from which to pull historical curve values.
5. In the Valuation eld, enter the date on which the transaction occurred.
6. Press <Go>.
The Market Value appears in the Valuation section at the bottom of the screen.
The Market Value is calculated using the selected curve at the market close of the day indicated in Curve eld. Future cash
ows are discounted at the date indicated in the Valuation eld.
MANAGING DEALS
SWPM allows you to create deals, save them for future use, and share them with other BLOOMBERG PROFESSIONAL
service users.
38
The following topics explain how to save deals, recover data lost during a recent session, and manage saved deals, including
how to add deals to a MARS portfolio, as well as load, edit, and delete deals. Additionally, this section includes topics that
explain how to send swap deal information to and share swap deals with (i.e., grant access privileges to) other Bloomberg
users.
SAVING DEALS
Once you have priced a swap, you can save the deal so you can access the deal from other Bloomberg functions or through
Bloomberg's API by entering the deal number followed by the <CORP> key.
Steps:
1. Follow the steps in Pricing a Vanilla Swap to create your deal.
2. From the toolbar, select Actions > Save.
The Save Deal window appears.
Note: If you have modied your default settings, the Save Deal window may not appear. For more information, see
Choosing Wakeup Settings.
3. Specify the OTC Ticker39 , Counterparty40 and Custom ID41 that identify your deal.
4. Specify privileging for your deal by updating the following: User/Firm Sharing42 , SPDL Sharing43 , Folder44 .
5. If you want to add notes, enter them in the Notes eld.
6. If you want to add the deal to a portfolio, select Add to Portfolio, then specify: Portfolio Name45 , Buy46 , Cost47 .
7. Click the Save button.
Your deal ID appears at the top right of the Swap Manager screen. You can access saved deals by entering the deal
number followed by the <CORP> key.
48
Note: SWPM generates unique CUSIP codes for the swap, including one ID for the entire deal and one for each leg.
You can use a Leg ID to access information about an individual leg. For example, you can download the cashow schedule
for a leg to Microsoft Excel with Bloomberg's API. For more information, see Example: Cashow Schedule and DAPI
<Help>.
39
The ticker symbol used for the over-the-counter security.
40
The name of the counterparty to the swap contract.
41
Allows you to enter a custom identier for the swap leg or deal.
42
Allows you to congure your rm's access to your deal.
43
44
Allows you to share via MSG the swap with groups created in the Speed Dial function (SPDL). For more information,
see Choosing Wakeup Settings and SPDL <Help>.
Allows you to organize saved deals into folders.
45
Allows you to select the portfolio to which you want to book your deal.
46
The buy, or bid, side of the trade.
47
The cost or premium for the deal.
48
The Committee on Uniform Securities Identication Procedures number assigned to U.S. and Canadian companies.
LOADING SAVED DEALS

Your saved deals are stored in the Interest Rate Derivatives List (IRDL) function, which you can access from SWPM.
To load a saved deal from SWPM:
1. From the control area, click the gray Load button.
IRDL appears with a list of your saved swaps. For more information about IRDL, see IRDL <Help>.
2. Click the swap you want to load.
The swap loads on the terminal.
Note: You can also access saved deals from the command line by entering the deal ID followed by the <CORP> key.
For information about how to edit a saved deal, see Editing Deals.
EDITING DEALS
To edit a saved deal:
1. Follow the steps in Loading Saved Deals to load a deal.
Data for the deal appears.
2. From the control area, click the gray Edit button.
Editable elds activate.

3. Update the elds, then click the gray Savebutton.
Note: You can update leg details on the Details tab. For more information, see Single Leg Details.
The Save Deal window appears.
4. If you want to update identifying information, deal privileging, or portfolio settings:
a) Specify the OTC Ticker49 , Counterparty50 and Custom ID51 that identify your deal.
b) Specify privileging for your deal by updating the following: User/Firm Sharing52 , SPDL Sharing53 , Folder54 . For more
information about editing deal properties, see Editing Deal Properties.
c) If you want to add notes, enter them in the Notes eld.
d) If you want to add the deal to a portfolio, select Add to Portfolio, then specify: Portfolio Name55 , Buy56 , Cost57 .
5. Click Save.
The updated deal saves.
SENDING DEALS
You can send deal information to other BLOOMBERG PROFESSIONAL service users. When you send a deal, you are
sending a copy (snapshot) of your deal to another Bloomberg user. Your future edits are not reected in the copy of the deal.
Steps:
1. Follow the steps in Pricing a Vanilla Swap or Loading Saved Deals to create or load a deal.
2. From the toolbar, select Actions > Send.
49
50
51
52
53
54
55
56
57
The Send Deal to User window appears.

3. In the Receiver eld, enter a name or contact list, then press <Go>.
For more information on contact lists, see SPDL <Help>.
4. In the Message eld, enter a note.
5. Click Send.
The deal information sends.
SHARING DEALS
You can share your deals with other BLOOMBERG PROFESSIONAL service users, using your contacts lists from the
Speed Dial (SPDL) function. SWPM allows you to grant access privileges to individuals, members of your rm, or SPDL
contact lists. When you share a deal with other Bloomberg users, your updates are reected in their copy of the deal.
Steps:
1. Follow the steps in Pricing a Vanilla Swap or Loading Saved Deals to create or load a swap.
2. From the toolbar, select Data & Settings > SWPM Settings/Templates.
The Settings and Templates window appears.

3. Share the deal:
If you want to grant read-only access to members of your rm, on the Wakeup tab, choose Firm from the Privilege Type
drop-down menu.
If you want to grant read/write access to a contact list or individual user, on the Wakeup tab, enter a SPDL ID in the
SPDL Sharing eld, then press <Go>.
Depending on the SPDL ID you enter, the Searching for: (Name) screen may appear from which you can select the
contact list. If you enter an invalid SPDL ID, the message "The name you entered could not be found. Please try again"
appears. Re-enter a valid SDPL ID. For more information, see SPDL <Help>.
4. Click Update.
The Swap Manager screen appears. Your settings save.
Note: You can click Reset to restore SWPM's default settings or Close to exit the window without saving.
BOOKING DEALS
You can book your swap deals to your Multi Asset Risk System (MARS) function portfolio.
MARS provides risk management, stress-testing, and scenario analyses of various derivative strategies across asset classes,
including interest-rate derivatives and their underlying instruments. For more information, see MARS <Help>.
To book a deal to your MARS portfolio:

1. From the toolbar, select Actions > Add to Portfolio.
The Add to Portfolio window appears.

2. If you have not previously saved the deal, specify the details of the deal:
a) Specify the OTC Ticker58 , Counterparty59 and Custom ID60 that identify your deal.
b) Specify privileging for your deal by updating the following: User/Firm Sharing61 , SPDL Sharing62 , Folder63 .
c) If you want to add notes, enter them in the Notes eld.
Note: For information about saving a deal, see Saving Deals.
3. In the Add to Portfolio section at the bottom of the window, specify: Portfolio Name64 , Buy65 , Cost66 .
4. Click Save.
Your deal is added to your portfolio.
5. If you want to display the deal in MARS, click the 2<Go> to run MARS to view portfolio link at the top of the screen.
58
59
60
61
62
63
64
65
66
Your portfolio appears in MARS. For more information about MARS, see MARS <Help>.
For more information about trading tools, see Trading Tools.
DELETING DEALS
You can delete individual or multiple swaps that you have created and saved.
Steps:
1. Follow the steps in Loading Saved Deals to load a deal.
Data for the deal appears.
2. From the toolbar, select Actions > Delete.
The Conrm window appears.
3. Click Yes.
The swap deletes.
Note: For information about how to delete swaps in bulk, see Bulk-Deleting Deals.
BULK-DELETING DEALS
You can delete multiple deals at once from the Interest Rate Derivatives List (IRDL) function.
1. From the toolbar in SWPM, select Actions > Load.
The Interest Rate Derivatives List (IRDL) function appears with a list of your saved swaps.
2. From IRDL, select Actions > Bulk Mode.
Bulk mode activates.
3. Select the deals you want to delete.
4. From the toolbar, select Actions > Delete.
The Delete window appears.
5. Click Yes to delete the selected deals.
The deals are deleted.
For more information about IRDL, see IRDL <Help>.
RECOVERING SESSIONS
You can recover SWPM data lost during a recent session caused, for example, by a system problem or navigating away from
the function.
Steps:
1. Access recent sessions:
Enter SWPM DRAFTS <Go>.
On SWPM, from the toolbar, select Actions > Recover Recent Sessions from the toolbar.
The Recover Recent Sessions window appears with a list of your most recent SWPM sessions.
2. Click a session.
The Swap Manager screen appears with the recovered data.
ANALYZING CURVES
The Curves tab provides transparency into the tickers used to construct the curves used to price a swap in SWPM and allows
you to evaluate the impact that different scenarios would have on your swap deal.
The tab is divided into four sections. The curve conguration section allows you to congure the curve used to project forward
rates or discount cashows. The tickers and rates section provides transparency into the tickers used to construct the curves
and allows you to manually override curve values and apply shifts to the whole curve or to dened buckets. The zero rates chart
visualizes curve data, and the valuation section displays swap values and risk gures.
Control Area: Allows you to navigate between tabs and congure your default settings. For more information, see Control
Area.
Curve Conguration: Allows you to choose the method used to interpolate between points on the selected curve, specify
the curve date, turn OIS dual-curve stripping on/off, and specify the DV01 calculation method. You can also enter a shift to
be applied to the entire curve, refresh the data that appears, and export the curve data to Microsoft Excel (in which you
can manipulate the data and then drag it back into SWPM).
Note: The changes you make on the Curves tab impact the deal valuation on the Main tab.
For information about the elds that appear, see Denitions.
For information about dual-curve stripping, see Applying Dual-Curve Stripping.
For information about the Curves Toolkit, which allows you to interact with interest rate curves directly in Excel, see the
Curves Toolkit section of DAPI <Help>.
For information about dragging and dropping rate data into SWPM, see Importing Curve Rates.
Tickers and Rates: Displays curve data in a table:

Term: The term to maturity of the particular point on the curve.
Market Rate: The market-quoted par coupon swap curve.
Shift: Allows you to apply shifts to the whole curve or to dened buckets. You can manually input shifts for specic
terms, or, in the curve conguration section, you can enter one shift to be applied to the entire curve.
Shifted Rate: Displays the rate resulting from applying the specied shift to the market rate.
|Hint|You can drag values from Excel into the Shifted Rate column. For more information, see Importing Curve Rates.
Zero Rate: Displays the zero coupon swap rates implied by the quoted par coupon swap curve (i.e., the market rates
in the Market Rate column). These zero rates are used to calculate the discount factors, and may be thought of as
discount factors expressed as an annualized percentage return.
67
Note: Short-term rates, e.g., Libor rates, are naturally spot/zero rates . Where the market rates are not naturally zero
rates, e.g., in the case of Eurodollar contracts, bootstrapping is used to convert the market rates into spot (zero) rates.
For more information, see Building the Bloomberg Interest Rate Curve.
Discount: The rate used to discount the cashow back to the valuation date. Discount rates represent the value of one
dollar at a specic point in the future.
Zero Rates: Allows you to visualize the zero rates in the curve. For information about using advanced charting options, see
GP <Help>.
Valuation: Allows you to evaluate the swap based on its valuation and sensitivity gures. For information about a eld,
position your cursor over it or see Denitions.
For instructions for customizing and applying shifts to a curve, see Customizing Curves.
CUSTOMIZING CURVES
The Curves tab allows you to evaluate the impact that different scenarios would have on your swap deal. You can apply shifts
to the whole curve or to dened buckets and then evaluate the results.
To analyze a curve:
2. Select the Curves tab.
Curve data appears.
3. From the Curve# (Curves)68 eld, choose the curve you want to analyze.
4. If you want to customize the curve data used to price your deal, update the following: Interpolation69 , OIS Dual Curve
Stripping
70
71
, Curve Date
, and DV01 Calc Method
72
5. If you want to run a scenario on your swap deal, do either of the following:
To apply a shift to the entire curve, in the Shift
73
eld, enter the shift.
67
Interest rates earned on a bond or swap with no coupon payments (zero coupon).
68
69
Applies to the Curves tab. Curve data appear for the curve number you select. The curve numbers are compiled from the
discount curves, forecast curves, and FX-basis curves used in the swap deal.
70
Allows you to strip a standard (Libor) swap curve contingent upon the OIS discounting of cashows.
71
The sensitivity to the curve shift (downPrincipal - upPrincipal)/(2xShiftinPercent). ShiftinPercent is 0.1 for the default
process of 10-basis-point up and down shifts. It is the shift used to generate the upPrincipal and downPrincipal. The
resulting DV01 is therefore normalized for a 1 bp shift.
72
73
74
To apply a shift to a specic term or terms, in the tickers and rates section, update the Shift
elds in the table.
and/or Shifted Rate
75
Note: You can drag and drop curve rates from an Excel spreadsheet into the Shifted Rate column. For more
information, see Importing Curve Rates.
The swap deal data updates.
CASHFLOWS AND RESETS

You can analyze cashow amounts and the reset rates used to calculate cashows and value the deal. The following topics
explain how to analyze cashows on the Cashows tab and manage reset rates on the Resets tab.
CASHFLOWS
The Cashow tab displays the present value of the cashow amounts for each leg or on a net basis, so you can better
understand the stream of cashows in a deal.
74
75
The new shifted rate = market rate + shift.
The tab is divided into two sections. The cashow options section allows you to customize the data that appears in the
cashow data section.
Control Area: Allows you to navigate between tabs, congure your default settings, and switch between the table and
chart views of cashows by clicking the Cashow Table and Cashow Graph sub-tabs.
For more information about charting cashows, see Charting Cashows.
For more information about the tabs and toolbar options, see Control Area.
Cashow Options: Allows you to customize the cashow data that appears and then export customized cashow data to
Microsoft Excel. You can display cashow amounts for each leg or on a net basis, historical cashows, the zero rates used
to calculate the discount factor, and the equivalent coupon rate (for the oating leg) based on the reset rates.
For more information about customizing cashow data, see Analyzing Cashows.
For more information about exporting to Excel, see Exporting to Excel.
Cashow Data: Displays future cashows along with their present values. Your selections from the cashow options
section determine the columns of data that appear. Either nominal or actual business-adjusted payment dates appear,
according to your selection from the Bus Day Adj
76
76
eld on the Details tab.
day.
Note: The rst payment date is the nominal date on which the rst coupon payment is scheduled. When the coupon
payment dates for the swap generate, nominal dates appear according to the roll convention and payment frequency
specied on the Details tab.
For more information about conguring the business day adjustment, roll convention, and payment frequency on the
Details tab, see Conguring Leg Details.
For more information about generating payment dates, see Payment Dates.
ANALYZING CASHFLOWS
This topic explains how to use functionality on the Cashow tab to analyze cashows. For information about cashow
calculations, see Payment Dates.
To analyze cashows:
2. Select the Cashow tab.
Cashow data appears.

3. From the Cashow drop-down menu, specify the cashows you want to analyze. You can choose Net to see cashows for
the entire deal or you can choose an individual leg.
The cashow table updates.

4. Specify the data you want to see in the cashow table:
If you want to see historical cashows, select Historical Cashows77 .
77
The realized cashows over time.
78
If you want to see zero-rate coupon amounts, select Zero Rate
If you want so see the equivalent coupon amount for the oating leg, select Equiv. Coupon
79
The cashow table updates.

5. If you want to display the cashow data in a chart, click the Cashow Graph sub-tab.
Cashow data appears in a chart. For information about using the chart, see Charting Cashows.
6. If you want to export the cashow data to a Microsoft Excel spreadsheet, click Export to Excel.
78
79
The cashow data appears in an Excel spreadsheet on your desktop.

RESETS
The coupon of the oating leg of a swap deal is based on the rate of a specied index. The index rate changes over time, and
the rate used to determine the leg's coupon resets periodically to follow the changing index. The Resets tab allows you to
analyze the historic and projected periodic resets. You can display reset, convexity, and forward rates for the deal and enter
custom historical rates in the oating leg cashow schedule.
The Resets tab is organized into a control area and a table of reset rates.
Area.
Reset Rates: Displays the implied forward reset rates used to value the deal and allows you to export them to Microsoft
Excel. The reset rates feed directly from the forward curve that you set in the curve data section on SWPM's Main tab.
For information about customizing reset rates, see Managing Resets.
For information about how to display and customize the forward curve that feeds the reset rates into SWPM, see ICVS
<Help>.
For information about exporting reset rates to Excel, see Exporting to Excel.
MANAGING RESETS
You can customize the reset frequency for a swap on the Main tab, then modify the historical reset rates on the Resets tab. By
default, the rates default to rates on the historical curve.
1. From the Main tab, select the reset frequency for the oating leg from the Reset Freq drop-down menu.
The screen updates.

2. Click the Resets tab.
Reset rates appear.
3. If you want to change historical reset rates, update any highlighted Reset Rate80 eld, then press <Go>.
The screen updates. For information about scaling reset rates, see Scaling Reset Rates.
CONFIGURING LEG DETAILS

The Details tab allows you to display detailed leg information and edit leg characteristics, such as date generation,
amortization, and payoff information. For example, you can manually enter step-up xed coupons or increasing spreads for
oating legs. You can also update the accrual periods and amortization amounts for the leg and calculate fees.
The Details tab is divided into two sections. The Details section allows you to congure settings for the individual legs of the
deal, including amortization methods. The amortization schedule allows you to customize the amortization schedule for the
individual legs of the deal.
80
The reset rates for the corresponding accrual periods. Both historical and implied forward reset rates appear. You
can change historical reset rates, which default to rates on the historical curve, by entering new values into the
corresponding highlighted elds. The implied forward reset rates are determined by the forward curve and cannot be
changed.
Area.
Detail: Allows you to further congure the settings for the individual legs of the deal, including amortization methods and
the methods used to generate dates for the amortization schedule. Depending on whether you select Leg 1 or Leg 2,
81
different settings appear. For example, the Bus Day Adj eld allows you to choose the business day adjustment method
used to adjust cashow dates to business days. You can also specify whether to adjust payment dates only or to adjust
82
accrual end dates and payment dates when calculating swap cashows. Further, you can specify the roll convention
method and calendar used to generate cashow dates.
For detailed instructions for conguring settings for individual legs of a deal, see Single Leg Details or Multi-Leg
Details.
81
day.
82
For information about conguring amortization methods, see Amortization Methods.

Amortization Schedule: Allows you to customize the amortization schedule. By default, the amortization schedule is not
populated. You can export the schedule to Excel, and you can drag and drop amortization values from Excel into the Amort
83
84
85
Rates (%) , Amort Amount , and Balance columns. The Apply Amortization to the Other Leg checkbox allows you to
automatically populate the other leg's amortization schedule according to your inputs for the current leg. When this option
is not selected, the two amortization schedules remain independent.
|Hint|You can export the values to Excel by clicking the Export to Excel button, manipulate them in Excel, then drag and
drop them back into the appropriate column in the amortization schedule in SWPM. The columns to which you can drag
and drop data include Amort Rate (%), Amort Amount, and Balance. You must drop the data into the appropriate column.
For information about customizing the amortization schedule, see Amortization Schedule.
For information about customizing fees, see Fees.
For information about customizing accrual dates, see Accrual Dates.
For information about customizing compounding, see Compounding.
For more information about importing data from Excel to SWPM, see Importing Data from Excel.
SINGLE LEG DETAILS
You can display detailed leg information and edit leg characteristics, such as date generation, amortization, and payoff
information.
Steps:
2. If you are conguring leg details for a previously saved deal, from the Main tab, click the gray Edit button.
83
The amortization rates on scheduled dates. You can enter values into the amortization table to apply new rates.
84
The amount to be amortized on each scheduled amortization date. You can enter a dollar amount to increase or decrease
the notional amount at any period. A positive dollar amount decreases the notional whereas a negative dollar amount
increases it.
Applies to the Details and Resets tabs. The actual amount or remaining balance of the original notional. The latest
balance amount is used for the next payment date if multiple balance amounts are specied after the previous payment
date, up to and including the next payment date. On the Details tab, you can enter the notional amount to be used for
each accrual period.
85

3. Select the Details tab.
Detailed leg data appears.

4. Select the leg you want to congure.
Data for the selected leg appears.

5. To congure the leg details, update any of the editable elds.
For more information on updating the elds, see:
Amortization Schedule
Amortization Methods
Fees
Accrual Dates
Compounding
The swap deal updates based on your changes. For information about saving your changes, see Saving Deals.
MULTI-LEG DETAILS
When you are pricing a multi-leg deal, the Leg drop-down menu gives you access to leg details, which you can congure on
several different tabs.
To congure the details of an individual leg in a multi-leg deal:
1. From the Main tab, click the Leg drop-down menu corresponding to the leg you want to congure, then select Leg Detail.
The leg detail tabs appear.
2. Click a tab to congure the settings:
Main: Provides a general overview of the leg and allows you to update settings. You can see and update the curves
SWPM uses to discount cashows and project forward pricing when pricing the swap. Additionally, the Main tab allows
you to see the valuation for the individual leg and choose the variable that SWPM solves for. For more information, see
Multi-Leg Swap.
Cashow: Allows you to display and export to Microsoft Excel the present value of the cashow amounts for each
86
87
leg, including Zero Rate , discount rates, Equivalent Coupon Rate , and historical cash ows, so you can better
understand the stream of cashows behind a security. You can also customize the analysis with your own spot rates for
present-valuing cashows. For more information, see Cashows.
88
Details: Displays detailed information for each leg, including Cashow

91
92
frequency, First Payment
89
, Bus Day Adj
90
93
(business day adjustment), Roll Convention , Calendar , Amort Dates (amortization dates), and fee amounts,
so you can analyze and update specic components of the deal. Additionally, the Details tab allows you to import an
amortization schedule. For more information, see Conguring Leg Details.
Resets: Allows you to analyze historic and projected periodic reset rates used in the valuation of the deal. You can
display reset, convexity, and forward rates for the deal and enter custom historical rates in the oating leg cashow
schedule. For more information, see Resets.
3. Congure the settings, then press <Go>.
For information about the elds that appear, see Denitions.
The values update.
4. If you want to return to the Multi-Leg template, press the <MENU> key.
87
88
89
The nominal date on which the rst coupon payment is scheduled. It appears as a nominal date and should be entered
as a nominal date without business adjustment. For more information, see Payment Dates.
86
90

day.
91
92
93
The aggregate calendar of up to three countries that is used to generate actual reset and payment dates. The Calendar
eld takes into consideration holidays in the selected countries to ensure that contract payment and reset dates do not
fall on a holiday or weekend.
The scheduled amortization dates. Amort dates may be different from the payment/cashow dates. Amort amounts
that fall between two payment dates are accumulated into the ending amort payment date for the percent of notional
and amort amount, in thousands. The amount specied as the latest between two payment dates (inclusive on ending
payment date) is used for the ending payment date for the balance.
The Main tab of the Multi-Leg template appears.
SCENARIOS AND RISK

Once you have set up a swap deal, you can stress test it and analyze its sensitivity to rate shifts. The following topics describe
how to analyze scenarios and risk on the Scenario, Risk, and Matrix tabs.
For information about how to hedge risk, see Hedging Risk.
SCENARIO
The Scenario tab allows you to perform what if scenario analyses in which you can see the effect of specic shifts in the swap
curve on a future date and assess the risks of an open swap position. SWPM allows you to test different scenarios on the
same horizon date or the same scenario on different horizon dates. You can also store the scenarios (market shifts and time
shifts) and global settings (forward evolution and pricing modes).
The Scenario tab is divided into two sections. The scenario section allows you to congure up to four different scenarios, and
the Results section displays the results of your analysis.
Area.
Scenario: Allows you to congure up to four different scenarios for analysis. For each scenario, you can specify the
horizon term (Time Shift) and the curve date you want to use. You can choose a saved scenario from the OTC Derivative
Scenario Analysis (SHOC) function, or apply custom basis point shifts to a selected swap curve. The Path Progression
drop-down menu allows you to congure the progression for the scenario: you can apply the shock either today, at the
nal horizon date, or over time to the horizon date. The forward evolution settings allow you to choose the curve used as
the base case in your analysis. You can use the projected interest rate curve at the horizon date (Y) or today's interest rate
curve (N) as the base case for your analysis. The plus sign to the left of the curve names allows you to display the individual
basis point shifts that are applied to each point on the curve. For cross-currency swap structures, a customizable FX rate
eld appears. For swap structures with embedded options, a customizable volatility eld appears. You can enter a value
in units of "percent of Black Vol." For a VCUB shift, each and every VCUB market volatility quote is shifted by the shock
amount. For a at volatility shift, a 5% shift, for example, shifts a at Black vol of 20% to 25%.
For information about a eld, see Denitions.
For detailed instructions for setting up and analyzing scenarios, see Analyzing Scenarios.
For information about SHOC, see SHOC <Help>.
Results: Displays the results of your scenario analysis and allows you to display the projected cashows based on your
scenario inputs. Results include the present value of the individual legs (Leg1/2 PV) and the deal (Net PV), accrued
94
95
interest, Gamma (1bp) , DV01 , and the present value of payments that are reinvested based on rates on the curve.
The Basic Results drop-down menu at the top-right of the section allows you to chart the market value, Gamma, or DV01
of a selected scenario over time.
For information about a eld, see Denitions.
For information about charting scenario results, see Charting Results.
ANALYZING SCENARIOS
The Scenario tab allows you to perform what if scenario analyses in which you can see the effect of specic shifts in the swap
curve on a future date and assess the risks of an open swap position.
Steps:
2. Select the Scenario tab.
Scenario data appears.
3. Choose the scenarios you want to assess (up to four):
To create a custom scenario, in the command line, enter SHOC <Go> to launch the Scenario Manager (SHOC)
function. For more information on creating custom scenarios, see SHOC <Help>.
To choose a pre-built scenario, from the Market Shifts drop-down menu, choose a shift:
My Scenarios: Allows you to choose a custom shift you have created in SHOC.
Bloomberg Scenarios: Allows you to choose a shift pre-congured by Bloomberg.
Other Shared Scenarios: Allows you to choose a shift shared with you by other BLOOMBERG PROFESSIONAL
service users, including members of your rm.
To customize curve shifts directly from SWPM, choose Negative/Positive Change from the Market Shifts drop-down
96
menu, then specify the type of shift (Additive

corresponding to the relevant curves.
97
, Multiplicative
98
, Override
), and the shift amount in the elds
94
The rate of change in delta per unit change in the price of the underlying security.
95
If applicable, the gamma for the swaptions priced by the HW1F model is the difference between deltas when the swap
curve is parallel-shifted up and down by 10 bps. Delta1 shift up the swap curve by 10 bps, Delta2 shift down the swap
curve by 10 bps. Gamma = (Delta1 - Delta2) / 2 and then scaled to 1 bp.
96
Allows you to apply an absolute shift (in bps).
97
Allows you to apply a relative shift (in percent).
The scenario loads.

4. If you want to adjust the shift parameters, update the Time Shifts99 and/or Curve Date100 elds.
5. If you want to display the individual basis point shifts that are applied to each point on the curve, click the plus sign to the
left of the corresponding curve name.
The individual points on the curve appear.

6. Choose a Path Progression101 setting: Shift at Hzn Date102 , Shift Today (Instantaneous Shift)103 , or Linear
104
.
7. Choose a Fwd Evolution105 setting:
Y: Allows you to use the projected yield curve at the horizon date as the base case.
N: Uses today's interest rate curve as the base case.
8. Choose the type of Reinvestment Rate106 and, if you choose a at annual rate, specify the APR107 .
Progression
9. Press <Go>.
The results for each scenario appear at the bottom of the screen.
10.If you want to display cashows for a scenario, click the corresponding View Cashow button.
98
Allows you to apply a shift with a custom value.
99
Applies to the Curve Date eld on the Scenario tab. The time shift and corresponding curve date.
101
The path used in the path-dependent strategy.
102
No change in market inputs, and "shock" at the nal horizon date.
103
The shock as of "today" and no change between today and the horizon date.
104
The linear progression of the shock over time to the horizon date.
105
The evolution to the forward. The down arrow to the right of the highlighted eld allows you to forward evolve the
market (curves and the FX) or use the same market that is being used by the deal. The forward evolving of the curves is
consistent with the curve horizon tab in the Curve Builder (ICVS) function. For more information, see ICVS <Help>.
The type of cashow reinvestment rate for the horizon period. You can choose between a at annual rate, which you can
specify in the APR eld, and the actual market rate.
The annual percentage rate at which cashows are reinvested between the original curve date and the horizon date.
100
106
107
Cashows for the scenario appear in a table format.

Note: To return to the Scenario tab, click the Return to Scenario Table button.
11.If you want to save your updates, click the Save Settings button.
Your updates save.
For information about charting your results, see Charting Results.
CHARTING RESULTS
You can chart the results of your scenario analysis.
Steps:
1. Follow the steps in Analyzing Scenarios to create a scenario.
2. From the Basic Results drop-down menu in the Results section of the screen, select Horizon Graph.
The horizon graph appears.

3. Customize the graph:
Select the Scenario checkboxes corresponding to the scenario data you want to chart.
From the Display drop-down menu, select the measure you want to chart: Market Value
108
, DV01
109
, Gamma
110
From the Interval drop-down menu, choose the interval at which you want to chart data.
The chart updates according to your selections.
Note: To return to the Basic Results view, select Basic Results from the Horizon Graph drop-down menu.
RISK
The Risk tab allows you analyze the sensitivity of a deal to various rate shifts at individual points along the curve.
The Risk tab is divided into four sections. You can congure the curve shift and calculation method in the conguration section,
and then analyze risk values in the risk table and risk chart. The valuation section allows you to evaluate the swap value along
with additional risk gures.
Conguration: Allows you to congure curve shift options, currency/curve conventions, IMM date, and Libor xing
options. Your selections override the DV01/KRR curve settings from the Swap Curve Defaults (SWDF) function. The
DV01/KRR Calc Method drop-down menu allows you to choose whether the reference rate used for the rst oating
coupon in the par swap curve is presumed to be xed or allowed to shift. The Show Curve Rate checkbox allows you to
111
display the synthetic curve in a Rate column in the risk table. You can also choose to display portfolio key rate risk
112
key rate risk
or full
in the risk table.
108
109
110
The rate of change in the delta with respect to change in the curve shift. Delta is dened as the rate of change in market
value with respect to change in the curve shift.
The change in the market value of the deal for a basis point change on a particular swap rate or tenor, based on the
standard consolidated portfolio risk grid. Portfolio key rate risk denes bucketed interest rate exposure in terms of
111
Key rate risk is the change in the market value of the deal for a basis point change in a particular swap rate. For example, if
the par curve is shifted up or down by one basis point at a specic term point, and the rest of the points on the par curve
remain the same, the dollar change in market value divided by two is the key rate risk for the term. Key rate risk measures
the effect of a 1 bp change in the yield curve for each maturity point individually, leaving the other points unchanged. DV01
describes the change in the portfolio value for a 1 bp parallel shift of the entire curve.
For more information about SWDF, see SWDF <Help> or enter SWDF DFLT <Go>.
For detailed instructions for analyzing risk according to your specications, see Managing Risk.
Risk: Displays risk values for individual curve components based on your selections from the conguration section. For
example, the 3 MO row displays the change in market value of the deal for a basis point change on the three-month cash
rate. If you select the Show Curve Rate checkbox in the conguration section, the synthetic curve appears. For information
about the synthetic curve, see DV01/KRR Synthetic Curves Release Notes. At the bottom of the section, the Additional
Risk sub-section displays risk
whole.
113
, DV01
114
, and mod. duration
115
for the individual legs of the deal and for the deal as a
Risk Chart: Charts net portfolio/full key rate risk values from the risk table.
112
113
interest rate swap maturities and outright swap rates. It adds all the risk below the one year tenor to the one year risk
bucket to facilitate swap portfolio analysis.
standard Portfolio Risk Grid and your custom tenors and expiries. The points of calibration you choose for your yield
curve determine the bucketed risk.
The risk for each leg. The deal is calculated according to the following equations:
Leg Risk = [DV01 / Notional] x 10,000
Deal Risk = [DV01 / Notional] x 10,000
For a cross-currency swap, where the leg notionals may be different, an average notional amount is used in the
equations. The average notional is determined in the following way:
Average Notional =
[Pay Notional in Report Currency + Receive Notional in Report Currency] / 2
Therefore, for a cross-currency swap:
Deal Risk = [ DV01 / Average Notional ] x 10,000 Modied Duration Modied Duration = Modied Duration = [ DV01 / (
Notional + Market Value ) ] x 10,000
For a par swap, Deal Risk is equal to Modied Duration because the Market Value is zero.
Leg Mod Duration = (DV01 / Market Value) x 10,000
114
For more information, see Risk Analytics and Managing Risk.

115
Modied Duration = [ DV01 / ( Notional + Market Value ) ] x 10,000

For a par swap, the deal risk is equal to Modied Duration because the Market Value is zero. Leg Modied Duration =
(DV01 / Market Value) x 10,000
Valuation: Allows you to evaluate the market value of the deal along with risk values. For certain congurations (e.g.,
DV01/KRR Curve Option: Swaps, 3-Month), the Valuation section displays DV01 for individual curves. Curve01
represents the DV01 for the deal based on shifting only the selected curve. In contrast, the DV01 is based on the impact of
shifting all the applicable interest rate curves (except for cases where a different sensitivity value is provided, such as BR01
for basis swap curves). The sum of all the curves available in Curve01 will be equal to the DV01. For information about a
eld, position your cursor over it or see Denitions.
MANAGING RISK
The Risk tab allows you to assess the sensitivity of your swap deal to shifts in the par curve.
To assess risk:
1. Follow the steps in Example: Solving for Spread or Loading Saved Deals to create or load a deal.
2. Select the Risk tab.
Risk data appears.
3. From the risk type drop-down menu, choose the type of key rate risk you want to analyze (Full Key Rate Risk116 or Portfolio
117
Key Rate Risk
), then press <Go>.
The data updates.

4. Specify the curve shift whose impact you want to assess:
a) From the DV01/KRR Curve Option drop-down menu, congure the shift.
b) Enter the shift amount, in basis points, in the Shift (bp)118 eld, then press <Go>.
116
117
118
The Additional Risks section updates with the following key risk measures: Risk
119
120
, DV01
Note: You can further your analysis of risk in the Multi Asset Risk System (MARS) function by selecting Actions > Run
MARS for this security from the toolbar. MARS allows you to perform risk management, stress-testing, and scenario
analysis of interest-rate derivative strategies. For more information, see MARS <Help>.
MATRIX
The Matrix tab for swaption deals allows you to create a matrix to quickly compare the impact of different scenarios on
measures such as market value, premium, and DV01. The data on the Main tab appears as the base case used in the matrix.
The Matrix tab is divided into two sections. The matrix conguration section allows you to specify the measures for your x and
y axes. The matrix displays the results of your "what if" analysis, according to your selections from the matrix conguration
section.
119
Average Notional =
120

Matrix Conguration: Allows you to specify the measures, intervals, and number of data points you want to display on
the x and y axes of the matrix. For example, you can evaluate the impact that 10 bp shifts at ve different points on the
curve would have on the market value of four deals with different maturity dates, at intervals of one year.
The Calculate button populates the matrix. The Export to Excel button allows you to export your matrix values to a
Microsoft Excel spreadsheet. For detailed instructions on customizing the matrix, see Matrix.
Matrix: Displays the results of your customized "what if" analysis. The Outputs sub-section on the right side allows you to
add additional measures (outputs) to the matrix. You can show/hide the Outputs sub-section by clicking the double arrows
(>>). For denitions of the outputs, see Denitions.
MATRIX PRICING
On the Matrix tab, you can create and value a grid of similar structures to conduct simulations and what if analyses.
To create and value a grid of similar structures:
1. If you want to customize the measure that appears in the matrix, update the calculate eld.
The screen updates with the data for the selected measure.
2. Set up the matrix inputs, then click the Calculate button:
121
To specify the x-axis inputs, update the X-Axis
122
, X-Step
, and X-Size
123
elds.
For example, you can display curve shift data at intervals of ten basis points for seven points on the curve:
To specify the y-axis inputs, update the Y-Axis
124
125
, Y-Step
126
, and Y-Size
elds.
For example, you can display maturity dates at intervals of one year for ve dates:
The matrix updates based on your selections.

3. If you want to set up the matrix outputs, from the Outputs sidebar, select or deselect the outputs.
For information on the choices that appear, seeDenitions.

The screen updates with the what-if data in the grid.
Note: You can click the double arrows (>> or <<) to hide or show the Outputs sidebar.
CALCULATING CVA
121
Applies to the Matrix tab. Allows you to select the pricing inputs on the x-axis of the grid.
122
Applies to the Matrix tab. Allows you to select the intervals on the x-axis of the grid.
123
Applies to the Matrix tab. Allows you to select the number of data points on the x-axis of the grid.
124
Applies to the Matrix tab. Allows you to select the inputs on the y-axis of the grid.
125
Applies to the Matrix tab. Allows you to select the intervals on the y-axis of the grid. Allows you to select the number of
data points on the y-axis of the grid.
Applies to the Matrix tab. Allows you to select the number of data points on the y-axis of the grid.
126
Counterparty risk (also known as credit or default risk) is the potential loss that an investor is exposed to due to a specic
counterparty failing to meet its contractual obligations. For example, an interest rate swap can either be an asset or a liability,
depending on its market value at a particular time. When the swap has a negative value, counterparty default causes no loss.
When the swap has a positive value, then the investor would stand to lose some or all of the amount if the counterparty to the
transaction were to default.
The following topics provide an overview of the CVA tab and describe how to calculate CVA, DVA, and bilateral CVA. For
information on calculating portfolio CVA in the Multi Asset Risk System (MARS) function, see Counterparty Valuation.
CVA
The CVA tab allows you to calculate the counterparty valuation adjustment (CVA) for over-the-counter derivative contracts, so
you can determine the market value of the default risk embedded in a contract. The CVA tab can also be used to calculate debt
valuation adjustments (DVA) and bilateral CVA. DVA is the CVA exposure of the counterparty to the investor. Bilateral CVA is
the adjustment to the risk-free market value that takes into account the losses to each party if the other party defaults rst.
The CVA tab is divided into six sections that allow you to update your deal, switch between CVA, DVA, and bilateral mode, and
evaluate the CVA/DVA a deal.
Area.
Deal Summary: Displays key data for the deal, and allows you to update the deal's effective date, maturity dates, and
coupon.
View/Mode: The View and Mode options allow you to congure your analysis on the CVA tab:
The View: Pricing Analysis option displays the default view, including CDS curve data and pricing parameters.
The View: Exposure Graph option allows you to chart how the value of the potential loss and the credit default exposure
127
may change over time. For each period, the Option MV
128
, the Interval DP
, and the Fwd CVA
129
appears.
The Mode options allow you to choose between CVA130 , DVA131 , and Bilateral132 modes. If you choose bilateral
mode, two tabs of data appear in the credit spreads section. For more information, see Calculating CVA, Calculating
DVA, and Calculating Bilateral CVA.
Credit Spreads: Allows you to specify the reference entity (counterparty to the deal) and choose the preferred senior
reference obligation. Once you specify the counterparty and reference obligation, the corresponding CDS curve data
appears for the selected reference entity. For counterparties with no liquid CDS curve, a custom curve or a at spread can
be input to estimate the default probabilities.
Pricing Parameters: Allows you to update the curves and volatilities that SWPM uses to discount cashows when
calculating the Market Value of the deal. You can also specify the deal recovery rate (i.e., the percentage of a deal's market
value that a counterparty receives if the investor goes into default), and the CDS recovery rate (i.e., the recovery rate for the
credit curve of the counterparty that is used to generate default probabilities). The Vol Cube drop-down menu allows you to
choose between Flat volatility (manual input) and volatilities from the Volatility Cube (VCUB) function. For more information
about VCUB, see VCUB <Help>.
Greeks/Sensitivity: Allows you to analyze the sensitivity of the deal to shifts in the swap curve, volatilities, and credit
spreads. For information about a eld, position your cursor over it or see Denitions.
Valuation: Allows you to analyze the CVA, which is expressed as a cash amount, as well as in basis points, as a
133
percentage of the underlying notional (Pct. Notional
136
of the deal also appears, as well as the Peak Exposure
134
), and as a Running CVA Spread
. The Credit Adjusted MV
135
, and the time at which the peak exposure occurs (Time to
137
Peak
). SWPM strips the default probabilities implied by the CDS curve, using the Bloomberg Credit Default Swap
Valuation (CDSW) calculator. The default probabilities are applied to the expected exposure of the deal to calculate the
credit valuation adjustment. For more information about CDSW, see CDSW <Help>.
CALCULATING CVA
To calculate the CVA:
2. From the control area, select the CVA tab.
CVA data appears.
127
The current value of the total loss if there is a default in the period. Option MV takes into account the recovery rate.
128
The implied default probability for the period.
129
The current value of the future CVA, assuming the counterparty does not default before the period.
130
131
The default valuation adjustment. DVA represents the risk (assumed by your counterparty) that you will default.
132
133
Allows you to calculate bilateral CVA to determine the risk-free market value that reects the losses to each party if the
other party defaults rst.
The percentage of the notional amount.
134
The CVA spread calculated as a running amount.
135
The security's market value minus the credit adjusted spread.
136
The maximum expected loss in the event of the counterparty's default.
137
The time at which the peak exposure to counterparty risk occurs.
3. In the Reference Entity eld, enter the counterparty.
As you type, an auto-complete menu appears with a list of possible matches from which you can select the counterparty.
4. Click the reference entity.
CDS curve data appears for the selected reference entity.
SWPM strips the default probabilities implied by the CDS curve, using the Bloomberg CDSW calculator. The default
probabilities are applied to the expected exposure of the deal to calculate the credit valuation adjustment. CVA is
138
expressed in the Valuation section as CVA

Notional
139
); and Running CVA Spread
140
cash amount; basis points, as a percentage of the underlying notional (Pct.
For more information on the elds that appear, see Denitions.

5. If you want to see how the value of the potential loss and the credit default exposure may change over time, select
Exposure Graph.
The exposure view appears.

CALCULATING DVA
You can calculate the DVA (debt valuation adjustment) to determine the CVA (counterparty valuation adjustment) exposure of
the counterparty to the investor (you).
To calculate the DVA:
CVA data appears.
3. From the Mode options, select DVA.
138
139
140
DVA mode activates.

4. In the Reference Entity eld, enter the investor's name. As you type, an auto-complete menu appears with a list of possible
matches from which you can select the investor.
5. Click the investor.
CDS curve data appears for the selected reference entity. DVA is expressed in the Valuation section as DVA cash amount;
141
142
basis points, as a percentage of the underlying notional (Pct. Notional

); and Running DVA Spread
.
Exposure Graph.

CALCULATING BILATERAL CVA
You can calculate the bilateral CVA to determine the risk-free market value that reects the losses to each party if the other
party defaults rst.
To calculate bilateral CVA:
CVA data appears.
3. From the Mode options, select Bilateral.
141
142
The number of basis points to add to the xed rate to compensate for the default risk. The DVA spread calculated as a
running amount.
4. In the Reference Entity eld, enter the investor's name. As you type, an auto-complete menu appears with a list of possible
matches from which you can select the investor.
5. Click the investor.
CDS curve data for the selected reference entity. The sensitivities to the counterparty's CDS spreads and the investor's
CDS spreads both appear. Bilateral CVA is expressed in the Valuation section as bilateral cash amount; basis points, as a
143
144
percentage of the underlying notional (Pct. Notional

); and Running Bilateral Spread
.
Exposure Graph.
CALCULATING MARGIN
An initial margin (IM) is the returnable deposit required when opening new positions for interest rate swap derivatives at
a clearing house. It is held in case of default, in which case the clearing house would inherit the defaulted positions and
therefore would have the potential to incur losses while transferring or closing the defaulted portfolio. The BLOOMBERG
PROFESSIONAL service has integrated two tools for performing pre-trade assessment of estimated IM requirements prior
to actual submission of trades for clearing: the LCH.Clearnet SwapClear Margin Approximation Risk Tool (SMART) library (for
SwapClear members and clients) and the CME CORE tool (for CME clients).
The following topics explain how to calculate LCH.Clearnet SwapClear and CME initial margins on SWPM for single
securities, as well as how to calculate the initial incremental margin at the portfolio level.
LCH INITIAL MARGIN
Bloomberg has integrated the LCH.Clearnet SwapClear Margin Approximation Risk Tool (SMART) library and associated
"SMART information" onto its platform, making SMART data available to Bloomberg users. Initial margin (IM) calculations
are available from SWPM for various cleared interest rate swap derivatives, for both SwapClear members and clients. The
approximate SwapClear net present value (NPV) of the interest rate derivative is also available and is based upon SMART
analytics, for the close of the prior business day.
Portfolio IM and variation margin (VM) will be available in the Multi-Asset Risk System (MARS) function at a future time.
For detailed information about the LCH margin calculator, see LCH Margin Simulator.
To calculate initial margin:
1. Follow the steps in Pricing a Vanilla Swap or Loading Saved Deals to create/load a swap.
2. From the control area, select CCP Margin > LCH.Clearnet.
143
144
The bilateral CVA spread calculated as a running amount.
Note: The rst time you select LCH.Clearnet, the LCH Disclaimer window appears. Click the blue link to agree to the
terms and conditions.
The LCH.Clearnet Initial Margin Simulator window appears, with the terms of your deal and the initial margin value.
3. Choose the mode that you want to use to calculate margin:
145
Member
: Calculates the expected shortfall by averaging over six worst-case losses over a ve-business-day holding
period, based on the volatility-ltered historical simulation of a rolling ten year history of interest rate data. This is
designed to give the clearing house a ve day period to neutralize the risk of a members positions in the event of
default.
146
Client
: Scales scenarios by (7/5) to take into account an additional two-day holding period to allow for the
expected time taken to transfer the clients portfolio to a surviving clearing member.
The LCH.Clearnet Initial Margin Simulator calculates initial margin according to your selection.
CME INITIAL MARGIN

Bloomberg users who are also CME clients and need to price and value swaps have the capability to perform pre-trade
assessment of their estimated initial margin (IM) requirements prior to actual submission of trades for clearing through CME.
CME CORE is the engine that calculates the initial margin. More information on CME CORE can be found on
http://www.cmegroup.com/ or by contacting CME support at cme.core@cmegroup.com or (312) 580-5353.
For more information on how the CME IM is calculated, see
http://www.cmegroup.com/education/les/cleared-otc-irs-margin-methodology.pdf.
Steps:
2. From the control area, select CCP Margin > CME CORE.
145
A clearing member registered with the clearing house.
146
Someone who clears swaps through a clearing member.
The CME CORE Margin Calculator window appears, with the basic terms of your deal and the initial margin value (CME
IM).
Note: If your swap deal type is not supported by CME CORE, a window appears that indicates the deal type is not
supported.
3. From the Display Currency drop-down menu, select the currency in which you want to calculate the initial margin.
For more information on the currency codes that appear, see CURR <Help>.
The CME CORE Margin Calculator calculates initial margin according to your selection.
Note: CME CORE calculates the initial margin in USD. When another currency is selected, Bloomberg itself performs
the calculation. The non-USD initial margin is based on the CME CORE USD calculation and yesterday's end-of-day
Bloomberg cross-currency rate (BGN).
INCREMENTAL MARGIN
Incremental initial margin represents the additional initial margin (IM) needed for a given portfolio as a result of a new trade or
amended trade. Incremental margin is calculated as:
Portfolio IM after the addition (or closeout) Portfolio IM before the transaction
You can use SWPM to assess the change to incremental initial margin for a portfolio as a result of a new swap deal.
Bloomberg provides both LCH.Clearnet SwapClear and CME calculations for incremental initial margin.
Steps:
2. In the control area, from the CCP147 drop-down menu, depending on the clearing house of which you are a user or client,
select LCH or CME.
147
Used for classifying trades that are Swap Execution Facility-cleared (SEF) through exchanges (CME, ICE, IDCG, LCH).
The default is "OTC," which is the current standard, and the trade is conrmed by both counterparties.
The FCM drop-down menu activates.

3. From the FCM148 drop-down menu, designate an FCM.
4. Select CCP Margin > Incremental Margin.
The Portfolio Selection window appears.

5. Select the portfolio for which you want to calculate incremental initial margin, then click the Continue button.
148
The Futures Commission Merchant.
The Multi Asset Risk System (MARS) function appears in another window. The swap deal you created is added to the
portfolio and the incremental initial margin calculation appears on the CCP sub-tab of the Counterparty Risk tab. For more
information on MARS, see MARS <Help>.
SETTINGS
You can customize your SWPM analysis by updating the default settings.
The following topics explain how to update your settings, including source curve, OIS dual-curve stripping, wake-up, template,
and bid/ask settings.
SETTING A SOURCE CURVE
You can choose the source curve used to price a swap in SWPM using the Swap Curve Defaults (SWDF) function. SWDF is
a curve setting function that allows you to specify the curve that feeds into the SWPM pricer.
This topic provides instructions for applying Bloomberg's recommended curve settings to your terminal via SWDF. For
information regarding customizing your settings in SWDF, see SWDF <Help>.
1. In the command line, enter SWDF DFLT<Go>.
The Swap Curve Defaults screen appears.
Note: From the Swap Curve Defaults screen, you can customize your swap curve settings, including the side of the basis
curve for cross-currency swaps. For more information, see SWDF <Help>.
2. From the toolbar, select the Recommended Settings button.
The Recommended Settings screen appears with information regarding the recommended settings. If your current settings
do not match Bloomberg's recommended settings, the Update button appears in the toolbar.
3. From the toolbar, select Update button to apply Bloomberg's recommended settings to your terminal.
The Conrm Action window appears asking you to conrm that you want to update your interest rate swap curve settings.
4. Click the Conrm button to update your settings.
The following text appears at the top of the screen: "Settings saved successfully."
Note: Bloomberg recommends using the Source 8 swap curve, which you can customize in the Swap Curve (ICVS)
function. For more information about customizing the Source 8 swap curve or another curve, see ICVS <Help>.
APPLYING DUAL-CURVE STRIPPING
Overnight index swaps exchange a xed rate for the average of a central-bank overnight rate during their term. The recent
credit crises led to profound changes in OTC derivatives market practice, including the market adoption of the OIS as the
"new risk-free swap curve." OIS discounting means discounting the expected cash ows of a derivative using a nearly risk-free
curve such as an OIS curve. With OIS-discounting, swap rates are calculated using a different formula than its single-curve
counterpart, and the OIS-discounted interest rate curves are built using a dual-curve (DC) stripping technique.
For more information about OIS discounting, see the OIS Discounting Overview document in the OIS Resource Center (OIS).
To apply OIS dual-curve stripping in SWPM:
1. Ensure that dual-curve stripping is enabled in the Swap Curve Defaults (SWDF) function:
a) Enter SWDF DFLT <Go>.
b) Select Enable OIS Discounting/Dual-Curve Stripping.
c) From the toolbar, select Save.
OIS discounting is enabled. For more information, see Setting a Source Curve.
2. Enter SWPM <Go>.
SWPM appears.
3. From the control area, click the Curves tab.
The Curves tab appears.
4. From the OIS Dual Curve Stripping drop-down menu, select Yes.
The discount curve in SWPM is now OIS, and the forward curve is dual-curve stripped.
Note: Currently for USD, OIS rates are not quoted in the marketplace beyond the ten-year maturity. In order to support OIS
discounting and dual-curve stripping, it is necessary to extend the OIS curves beyond the ten-year maturity. For information
about methods for extending the OIS curves to the thirty-year maturity by harnessing USD Fed Funds (FF) basis swap quotes,
see Extending USD OIS Curves Using FF Basis Swap Quotes.
CHOOSING WAKEUP SETTINGS
You can customize the default (or "wakeup") settings for your SWPM deals.
Steps:

2. Select the Wakeup Settings tab.
Your wake-up settings appear.
3. Congure your general settings:
To congure your default trade settings, under Trade Details, update the relevant elds: Currency (Settings and
Templates)
149
150
151
149
, Deal Type
150
151
, Notional (Settings and Templates)
Applies to the Settings and Templates window. Allows you to set the default currency for SWPM. For more information
on currency settings, see Choosing Wakeup Settings. For more information on currencies, see CURR <Help>.
The default deal type on which the template is based.
Applies to the Settings and Templates window. The notional size. Allows you to customize the size of the notional by
currency. For more information, see Choosing Wakeup Settings.
152
To congure the default access to your deals, under Access Control, update: Privilege Type
more information, see Sharing Deals.
To congure your default screen settings, under Display, update: Save Deal Popup
154
, SPDL Sharing
, Session Recovery
155
153
. For
4. Congure your deal-specic settings:
156
157
To specify for your same-currency deals how the principal is exchanged, update Principal Exchange
To specify for your cross-currency deals how the principal is exchanged, update Principal Exchange
To indicate for your cross-currency deals whether the notional is adjusted using the current FX rate, update Convert
Notional by FX
158
To specify for your total return swaps how the notional appears, update Notional Type
159
154
The level of access to your deals. User allows you to limit privileging to the person who created the swap, so only
he/she can view and update the deal. Firm allows you to privilege other members of your rm so they can see but not
update the deal.
Allows you to display or hide the Save Deal window when saving a swap.
155
Allows you to congure SWPM to recover your most recent deal(s) in case of a system error.
156
158
Indicates when the principal is exchanged and on what dates (e.g., on Effective and Maturity Dates, only on Effective
Date, etc.).
Date, etc.).
Allows you to convert the notional amount to the current FX rate for the selected currency.
159
Indicates whether the swap leg is denominated in units or notional amount.
152
153
157
To specify for your total return swaps the default number of units (shares) that appear, update Default Num of Units
160
Note: The Default Num of Units eld appears only when you choose Const Share as the notional type.
To specify the currency for your non-delivery swaps, update Non-Delivery Currency
161
5. Click the Update button.

The Settings and Templates window closes. Your settings save.
Note: You can click the Reset button to restore SWPM's default settings or theClose button to exit the window without
saving.
CUSTOMIZING TEMPLATES
You can customize the deal templates provided in SWPM, or you can create new deal templates.
Once you save a template with custom deal terms, you can access it via shortcuts. For example, if you save a swaption
template with the currency GBP, notional 20MM, when you launch a new swaption by running SWPM -OV<Go>, SWPM
wakes up with your custom deal terms.
Steps:
1. From the toolbar, select Data & Settings > SWPM Settings/ Templates.

2. Select the Deal Templates tab.
Template settings appears.
3. For each deal type, update any of the corresponding elds: Currency (Settings and Templates)162 , Deal ID163 , Tenor164 ,
Calculate (Settings and Templates)
165
166
, Valuation (Settings and Templates)
167
, Shortcut
160
Allows you to set the default number of units.
161
Applies to total return swaps. Allows you to choose the currency for non-delivery swaps.
162
Applies to the Settings and Templates window. Allows you to set the default currency for SWPM. For more information
on currency settings, see Choosing Wakeup Settings. For more information on currencies, see CURR <Help>.
The code assigned to the deal by the BLOOMBERG PROFESSIONAL service.
163
164
The tenor of the reference rate. If the tenor is greater than one year, the underlying becomes a swap rate, the deal
becomes a CMS deal, and convexity adjustment applies. The tenor should correspond to a valid index on the curve.

The Settings and Templates window closes. Your settings save.
Note: You can click the Reset button to restore SWPM's default settings or the Close button to exit the window without
saving.
CHOOSING BID/ASK SETTINGS
You can congure your bid and ask adjustments and currency scaling settings. For each deal type, you can congure the
percent of notional, delta, and volatility adjustments for the bid and ask.
Steps:

165
166
167
Applies to the Settings and Templates window. Allows you to set the default valuations for templates in SWPM. For
more information, see Customizing Templates.
Applies to the Settings and Templates window. The default valuation date (Days to Settle), i.e., how many business days
from the curve date. For more information, see Customizing Templates.
Allows you to create a keyboard shortcut to access a specic template. For more information, see Customizing
Templates.
2. Select the Bid/Ask Adjustments tab.

Bid and ask adjustments appear.
3. From the Bid/Ask Adjustments eld drop-down menu, choose Enabled.
The elds activate.

4. For each deal type in the Spreads table, update the corresponding elds: % Notl 168 , Delta169 , Vol170 .
5. If you want to congure the default multiples for your currency settings, in the Currency Scaling table, update the CCY171
eld(s) and the corresponding Factor
172
eld(s).

The Settings and Defaults window closes. Your settings save.
Note: You can click the Reset button to restore SWPM's default settings or the Close button to exit the window without
saving.
SHORTCUTS
168
169
The market value change for a 1% price change.
170
The relative rate at which the price of the deal moves up and down, found by calculating the annualized standard
deviation of the daily change in price.
Allows you to select the currency for which you want to adjust the scaling (multiple). For more information on currencies,
see CURR <Help>.
The value by which you multiply the index; the number to be multiplied by the barrier.
171
172
You can use shortcuts, also known as tails, to access specic SWPM functionality.
A list of shortcuts appears below. For a complete guide to using shortcuts in SWPM, see How to Use Tails in SWPM.
Vanilla Structures
Enter
To Specify
SWPM -FXFL <Go>
Fix Float
SWPM -FXFX <Go>
Fixed-Fixed
SWPM -FLFL <Go>
Float-Float
SWPM -AMT <Go>
Amortizing
SWPM -FRA <Go>
FRA
Non-Vanilla Structures
Enter
To Specify
SWPM -IMM <Go>
IMM Swap
SWPM -ARR <Go>
Arrears
SWPM -MUNI <Go>
Muni Swap
SWPM -FF <Go>
Fed Fund Basis Swap
SWPM -PRIME <Go>
Prime Basis Swap
SWPM -TBIL <Go>
T-Bill Basis Swap
SWPM -1MLB <Go>
1M Libor US Basis Swap
SWPM -1MEUR <Go>
1M Euribor Basis Swap
SWPM -1MGBP <Go>
1M Libor Basis Swap
SWPM -3MCHF <Go>
3M CHF Libor Basis Swap
SWPM -3MEUR <Go>
3M Euribor Basis Swap
SWPM -6MLB <Go>
6M Libor US Basis Swap
SWPM -3MUSD <Go>
3M USD Libor Swap
SWPM -6MUSD <Go>
6M USD Libor Swap
Enter
To Specify
SWPM -CMS <Go>
CMS Swap
SWPM -OIS <Go>
OIS Swap
SWPM -ZERO <Go>
Zero Coupon Swap
SWPM -TRS <Go>
Total Return Swap
SWPM -ETRS <Go>
Basket Total Return
SWPM -PTRS <Go>
Property Derivative
SWPM -ASW <Go>
Asset Swap
SWPM -QNTO <Go>
Quanto Swap
SWPM -MLDP <Go>
Dual Payoff / Funding Leg
SWPM -TZD <Go>
Three Zone Digital
SWPM -ML <Go>
MultiLeg Swap
Ination
Enter
To Specify
SWPM -ILFX <Go>
Ination Fixed
SWPM -ILFL <Go>
Ination Floating
SWPM -ILFXYOY <Go>
Ination Fixed Year-On-Year
SWPM -ILFLYOY <Go>
Ination Float Year-On-Year
SWPM -ILFLR <Go>
Ination Floor
Options
Enter
To Specify
SWPM -CAP <Go>
Cap
SWPM -FLR <Go>
Floor
SWPM -COLLAR <Go>
Collar
Enter
To Specify
SWPM -DG -CAP <Go>
Digital Cap
SWPM -DG -FLR <Go>
Digital Floor
SWPM -DG -COLLAR <Go>
Digital Collar
SWPM -OV <Go>
Swaption
SWPM -OV -AMR <Go>
American Swaption
SWPM -OV -BMD <Go>
Bermudean Swaption
SWPM -OV -FSS <Go>
Forward-Starting Swaption
SWPM -OV -MUNI <Go>
Muni Swaption
SWPM -XCOVFXFL <Go>
CCY Fixed Float Swaption
SWPM -XCOVFXFX <Go>
CCY Fixed Fixed Swaption
SWPM -XCOVFLFL <Go>
CCY Float Float Swaption
SWPM -CS <Go>
Cancellable Swaps
SWPM -XCCSFXFL <Go>
CCY Fixed Float Cancellable CCY Fixed
SWPM -XCCSFXFX <Go>
Fixed Swaption
SWPM -XCCSFLFL <Go>
CCY Float Float Swaption
SWPM -CAPFLT <Go>
Capped Floater
SWPM -FLRFLT <Go>
Floored Floater
SWPM -COLFLT <Go>
Collar Floater
SWPM -CAPFLT CMSSPRD <Go>
CMS Spread Capped Floater
SWPM -FLRFLT -CMSSPRD <Go>
CMS Spread Floored Floater
SWPM -COLFLT -CMSSPRD <Go>
CMS Spread Collared Floater
SWPM -CAPSPRD <Go>
Cap Spread
SWPM -FLRSPRD <Go>
Floor Spread
Swaption Strategies
Enter
To Specify
SWPM -OVSTRDL <Go>
Straddle
SWPM -OVSTRANGLE <Go>
Strangle
SWPM -OVRISKREV <Go>
Risk Reversal
SWPM -OVCDRSPR <Go>
Calendar Spread
SWPM -OVCALLSPR <Go>
Call Spread
Examples
Below are examples of how to use SWPM shortcuts:
To create a 12.6-years-to-maturity Japanese yen swap with a 110 million notional and a 1.33 xed coupon on the pay side,
enter SWPM P 110MM JPY 12.6Y 1.33 <Go>.
To create a 1.5-years-to-maturity Euro swap with a 6 million notional and a 2.25 coupon on the receive (default) side, enter
SWPM 2.25 1.5Y 6MM EUR <Go>.
SUPPORTED STRUCTURES
SWPM provides more than 100 templates that allow you to structure different types of products. This section describes the
types of interest rate swaps supported in SWPM. For information about how to choose a specic swap template from SWPM,
see Choosing a Template.
Note: If a specic swap type is not supported in SWPM, Bloomberg's in-house team of nancial engineers can structure a
deal for you. For more information, see BVIP <Go>.
VANILLA
This section includes instructions for pricing specic vanilla swaps in SWPM.
For information about pricing plain vanilla swaps, see Pricing a Vanilla Swap.
CROSS-CURRENCY
This topic explains cross-currency swaps and then describes how to use the associated templates in SWPM to price a
cross-currency swap.
A cross-currency interest rate swap is an agreement between two counterparties to exchange cash ows (e.g., xed vs. oat)
in different currencies. The payments are made during the life of the swap in the frequency that is pre-established.
You can choose between two vanilla cross-currency swap templates in SWPM: xed-xed or xed-oat. For information about
cross-currency basis swaps (oat-oat), see Basis Swap.
You can use shortcuts (e.g., SWPM -XCCY -FXFL EUR JPY <Go>) to access cross-currency templates from the command
line, or you can click the Products toolbar button to choose a template from a menu.
For more information about shortcuts, see Shortcuts.
For information about how to load templates from the toolbar, see Choosing a Template.
SWPM's cross-currency swap templates are organized into eight tabs that allow you to set up and analyze the swap. You can
structure and value your swap on the Main tab of the template, which is divided into four sections. You can input details of the
swap in the Leg1, Leg2, and curve data sections, then evaluate the swap in the valuation section.
Leg 1/Leg 2: Allows you to congure your settings for the legs of the deal. Depending on whether your swap is xed-xed
or xed-oat, different settings appear. You can enter, for example, the market side, notional amount (SWPM supports
asymmetric notionals), currency, effective date, maturity, and the xed coupon or the index used to calculate the oating
rate for the deal (along with the reset frequency, pay frequency, tenor, and other details.) At the bottom of the section, the
market value, accrued interest since the last leg cashow date, premium, and DV01 for each leg appears.
calculating the Market Value of the swap. Depending on whether your swap is xed-xed or xed-oat, different settings
appear. SWPM calculates the market value using the selected curve at the market close of the day indicated in the Curve
Date eld. The Valuation date is the date at which future cashows are discounted.
Note: By default, SWPM prices swaps as of today, i.e., the default curve date is the current date and the valuation date is,
e.g., T+2. To price swaps as of a historical date, you must backdate both the Curve Date and Valuation elds. For example,
to mark to market at quarter's end, you can enter the historical quarter-end date in both the Curve Date and Valuation
elds. For more information, see Backdating the Valuation.
variables: Premium
Shift...
179
173
, Notional
, and Z-Spread...
180
174
, Leg1: Coupon
175
176
, Leg2: Coupon
,Leg2: Spread
177
178
, Leg2: Leverage
, Par
. For information about a eld, position your cursor over it or see Denitions.
You can further analyze cross-currency swaps by selecting another tab from the control area. Additionally, you can save
your deal by selecting Actions > Save from the toolbar. Once you save the deal, you can access it from other Bloomberg
functions or through Bloomberg's API by entering the deal number followed by the <CORP> key. For example, this allows you
to download the cashow schedule for an individual leg to Microsoft Excel with Bloomberg's API.
Price.
Sample Deal Terms for a Cross-Currency Swap
Below are sample deal terms for a ve-year USD xed vs. EUR 3M Euribor swap, which you can price using the
cross-currency swap template in SWPM. You can input the terms in the Leg 1 and Leg 2 sections of the cross-currency
template and press <Go> to price the deal.
Leg 1 (Receive Leg)
Input
Market Side
Receive Fixed
Notional
10 MM
Currency
USD
Effective
03/12/2010
Maturity
03/12/2015
175
176
Calculates the xed coupon/par coupon rate. The Coupon appears in the Leg 2 section.
177
178
179
173
174
180
Leg 1 (Receive Leg)
Input
Coupon
1.774199 p.a.
Day Count
30I/360
Bus Day Adj (appears on the Details tab)
Modied Following
Leg 2 (Pay Leg)
Input
Market Side
Pay Float
Index
EUR003M
Reset Frequency
Quarterly
Pay Frequency
Quarterly
Day Count
ACT/360
Modied Following
MARK-TO-MARKET CURRENCY SWAP

This topic explains mark-to-market (MTM) currency swaps and then describes how to use the associated templates in SWPM
to price a MTM currency swap.
A mark-to-market (MTM) currency, similar to a cross-currency swap, is an agreement between two counterparties to exchange
cash ows (oat vs. oat) in different currencies. The MTM (resetting) swap differs from the cross-currency swap in that each
period one leg notional is adjusted with an applicable FX xing rate. As with regular cross currency swaps, both counterparties
exchange notional at the start and end of the swap. Additionally, the MTM on the swap (largely a result of FX movements on
the nal principal exchanges) is exchanged, and the swap is then reset with the prevailing FX spot rate. The idea behind this
is to reduce the outstanding FX and counterparty risk exposures. The payments are made during the life of the swap in the
frequency that is pre-established.
You can choose between the following MTM currency swap templates in SWPM: xed-xed, xed-oat, or oat-oat. You can
use shortcuts (e.g., SWPM FLFL MTM <Go>) to access MTM currency templates from the command line, or you can click
the Products toolbar button to choose a template from a menu.
SWPM's MTM currency swap templates are organized into eight tabs that allow you to set up and analyze the swap. You can
Leg 1/Leg 2: Allows you to congure your settings for the legs of the deal. Depending on whether your swap is xed-xed,
xed-oat, or oat-oat, different settings appear. You can enter, for example, the market side, notional amount (SWPM
supports asymmetric notionals), currency, effective date, maturity, and the xed coupon or the index used to calculate the
oating rate for the deal (along with the reset frequency, pay frequency, tenor, and other details.) At the bottom of the
section, the market value, accrued interest since the last leg cashow date, premium, and DV01 for each leg appears.
For information about displaying the reset notional along with the FX rate, see Cashows and Resets.
calculating the Market Value of the swap. Depending on whether your swap is xed-xed, xed-oat, or oat-oat, different
settings appear. SWPM calculates the market value using the selected curve at the market close of the day indicated in the
Curve Date eld. The Valuation date is the date at which future cashows are discounted.
For information about how to update the curves that appear by default for a specic currency, see Setting a Source
Curve.
variables: Premium
Leverage
187
181
, Notional
188
, Par Shift...
182
, Leg1: Spread
189
, Z-Spread...
183
184
, Leg1: Coupon
185
, Leg1: Leverage
186
, Leg2: Spread
, Leg2:
You can further analyze MTM currency swaps by selecting another tab from the control area. Additionally, you can save
Price.
AMORTIZING
This topic explains amortizing swaps and then describes how to use the associated templates in SWPM to price an amortizing
swap.
An amortizing swap is a type of swap in which both counterparties make interest payments based on a notional that is
declining (amortizing) or accreting (increasing) over the life of the trade. Amortizing swaps can be xed vs. oat or oat vs.
oat. Amortization factors are entered in the leg detail section. You can enter a simple schedule, security-based amortization
(FNMA or other mortgage security), or loan type.
181
182
183
184
Calculates the spread above/below the index selected for Leg 1, based on your Premium input. The Spread appears in
the Leg 1 section. For example, for an ination swap, Leg1: Spread solves for the spread above the CPI(T)/CPI(0) ratio.
For a oat-oat muni swap, Leg1: Spread solves for the spread above/below, e.g., LIBOR.
186
Calculates the oating leg leverage based on your Premium input. The Leverage appears in the Leg 1 section. For
example, for an ination swap, Leg1: Leverage calculates the leverage applied to the CPI(T)/CPI(0) ratio. For a oat-oat
muni swap, Leg1: Leverage solves for the percentage of the index rate to be paid/received.
187
188
185
189
You can choose between xed-oat and oat-oat amortizing swap templates. You can use shortcuts (e.g., SWPM -FXFL
-AMT <Go> or SWPM -AMT <Go>) to access amortizing swap templates from the command line, or you can click the
Products toolbar button to choose a template from a menu.
SWPM's amortizing swap templates are organized into nine tabs that allow you to set up and analyze the swap. You can
Leg 1/Leg 2: Allows you to congure your settings for the legs of the deal. Depending on whether your swap is xed-oat
or oat-oat, different settings appear. You can enter, for example, the market side, notional amount (SWPM supports
Note: The Details tab allows you to congure the amortization schedule for the deal; you can manually enter the schedule
or drag and drop the schedule from Excel into SWPM. For more information, see Amortization Schedule and Amortization
Methods.
For information about how to update the curves that appear by default for a specic currency, see Setting a Source
Curve.
variables: Premium
Leverage
196
190
, Notional
197
, Par Shift...
191
, Leg1: Spread
198
, Z-Spread...
192
193
, Leg1: Coupon
194
, Leg1: Leverage
195
, Leg2: Spread
, Leg2:
You can further analyze amortizing swaps by selecting another tab from the control area. Additionally, you can save your deal
by selecting Actions > Save from the toolbar. Once you save the deal, you can access it from other Bloomberg functions
To access additional information about the swap, in the control area, click a tab. For information about the other tabs that
appear on the template, see SWPM Tabs.
To save your deal, from the toolbar, select Actions > Save. For more information, see Saving Deals.
190
191
192
193
195
196
197
194
198
Price.
FRA
This topic explains forward rate agreements (FRAs) and then describes how to use the associated template in SWPM to price
an FRA.
A forward rate agreement (FRA) is a forward contract similar to a futures contract that determines the interest rate, to be paid
or received, on an obligation beginning at some future start date. Unlike futures, FRAs are highly exible over-the-counter
instruments (OTCs), as they can be structured to mature on any date. In general, FRAs are traded on the future level of three
or six-month Libor. An FRA is an off balance sheet instrument. Unlike the cash deposit market, there is no delivery of capital;
only the differential between the contract rate and the settlement rate is exchanged. FRA trades do not appear as assets or
liabilities.
FRAs can be valued in SWPM as a spot start, IMM, or broken date FRAs. IMM FRAs are specic types that start and end
on IMM dates. Broken date FRAs are customized start and end dates that can be used to coincide with central bank meeting
dates.
You can use shortcuts (e.g., SWPM -FRA <Go> or SWPM EUR -FRA <Go>) to access SWPM's FRA template from the
command line, or you can click the Products toolbar button to choose a template from a menu.
SWPM's FRA template is organized into ve tabs that allow you to set up and analyze the FRA. You can structure and value
your FRA on the Main tab of the template, which is divided into three sections. You can input details of the swap in the
structure and curve data sections, then evaluate the swap in the valuation section.
Structure: Allows you to congure your settings for the FRA. You can enter, for example, the market side, notional amount,
currency, effective date, maturity, and the index used to calculate the oating rate, along with other details. For information
about a eld, position your cursor over it or see Denitions.
calculating the Market Value of the FRA. SWPM calculates the market value using the selected curve at the market close of
the day indicated in the Curve Date eld. The Valuation date is the date at which future cashows are discounted.
Valuation: Allows you to select the variable you want to solve for and evaluate the FRA. You can calculate the market value
of the deal or you can customize the valuation by choosing a variable from the Calculate drop-down menu. You can solve
199
for the following variables: Premium

, Rate
200
201
, Par Shift...
202
, Z-Spread...
. For information about a eld, position
You can further analyze FRAs by selecting another tab from the control area. Additionally, you can save your deal by selecting
Actions > Save from the toolbar. Once you save the deal, you can access it from other Bloomberg functions or through
Bloomberg's API by entering the deal number followed by the <CORP> key. For example, this allows you to download the
cashow schedule for the deal to Microsoft Excel with Bloomberg's API.
To access additional information about the FRA, in the control area, click a tab. For information about the other tabs that
appear on the template, see SWPM Tabs.
To save your deal, from the toolbar, select Actions > Save. For more information, see Saving Deals.
Price.
199
200
1.) In the Calculate drop-down menu, the xed coupon that equates the Premium to the Market Value divided by the
Notional.
2.)The annualized interest rate for the specied term point on the curve.
201
202
To override any rate or rates on the curve, enter the new rate or rates in the respective elds, then press <Go>. The
rate(s) entered become part of the curve and the market value and risk analytics are recalculated using the new curve. If
any of the rates are set to zero, or the rate elds are blanked out, new implied par curve rates are lled in for the missing
points.
NON-VANILLA
IMM
This topic explains IMM swaps and then describes how to use the associated template in SWPM to price an IMM swap.
An IMM swap is a xed-oating interest rate swap where payment and reset dates are determined by the contract periods
for the three-month Eurodollar futures contracts traded on the Chicago Mercantile Exchange's International Monetary Market
(IMM). The start, maturity, and payment dates all use the third Wednesday of March, June, September, and December (IMM
dates) in line with Financial Futures Exchanges.
The most popular tenor is one year. However, shorter and longer tenors are traded. A one year IMM swap starting on the third
Wednesday of March 2010 and maturing on the third Wednesday of March, 2011, is known as a March-March IMM swap.
Resets in IMM swaps are usually against 3M Libor. However, in the Yen market, because TIFFE is used for majority of hedging,
the reset is against Tibor. It is possible to perfectly hedge cash ows to IMM dates using the Financial Futures Market, and, for
this reason, FRAs frequently use these dates.
You can use the shortcut SWPM -IMM <Go> to access the IMM template, or you can click the Products toolbar button to
choose a template from a menu.
SWPM's IMM template is organized into eight tabs that allow you to set up and analyze the swap. You can structure and value
your swap on the Main tab of the template, which is divided into four sections. You can input details of the swap in the Leg 1,
Leg 2, and curve data sections, then evaluate the swap in the valuation section.
notional amount, currency, effective date, maturity, and xed coupon for the deal. At the bottom of the section, the market
value, accrued interest since the last leg cashow date, premium and DV01 for the xed leg appear. For information about
a eld, position your cursor over it or see Denitions.
amount (SWPM supports asymmetric notionals), the index used to calculate the oating rate, along with the reset
of the day indicated in the Curve Date eld. The Valuation date is the date at which future cashows are discounted.
value of the deal (the sum of the present values of the receive leg minus the sum of the present values of the pay leg),
or you can customize the valuation by choosing a variable from the Calculate drop-down menu. You can solve for the
203
following variables: Premium

Z-Spread...
209
204
, Notional
205
, Leg1: Coupon
206
, Leg2: Spread
207
, Leg2: Leverage
, Par Shift...
208
205
206
207
208
203
204
209
You can further analyze IMM swaps by selecting another tab from the control area. Additionally, you can save your deal by
selecting Actions > Save from the toolbar. Once you save the deal, you can access it from other Bloomberg functions
Price.
MUNI SWAP
This topic explains muni swaps and then describes how to use the associated template in SWPM to price a muni swap.
A muni swap is a nancial instrument where an investor receives or pays a oating leg indexed to the municipal bond yield
index (MUNIPSA <INDEX> <Go>) and in exchange pays or receives a xed rate or a oating rate based on an interest rate
index, such as Libor, for example. The SIFMA Municipal Swap Index Yield (MUNIPSA <INDEX> <Go>) is quoted on an
actual/actual basis. This index is a weekly high grade market index comprised of seven-day tax exempt variable rate demand
notes, calculated on a weekly basis based on the previous Wednesdays value to the current Wednesday and released to
subscribers on Thursday. The reset rate that is applied to a payment is the time weighted average of the resets during the
previous period. A muni swap may be used to hedge the oating risk of muni bonds. Because muni bonds are exempt from
Federal taxes, the interest rate levels on the muni curve are less than on Libor curves.
You can use shortcuts (e.g., SWPM -MUNI <Go> or SWPM -FLFL -MUNI <Go>) to access SWPM's muni swap
templates from the command line, or you can click the Products toolbar button to choose a template from a menu.
SWPM's muni swap template is organized into eight tabs that allow you to set up and analyze the swap. You can structure and
value your swap on the Main tab of the template, which is divided into four sections. You can input details of the swap in the
Leg 1, Leg 2, and curve data sections, then evaluate the swap in the valuation section.
value, accrued interest since the last leg cashow date, premium, and DV01 for the xed leg appear. For information about
the last leg cashow date, premium and DV01 for the oating leg appear.
210

, Leg2: Leverage
Denitions.
216
211
, Notional
, Par Shift...
217
212
, Leg1: Coupon
218
, and Z-Spread...
213
, Leg1: Spread
214
, Leg1: Leverage
, Leg2: Spread
215
. For information about a eld, position your cursor over it or see
Note: The DV0R eld appears for muni swaps and displays the change in value due to a parallel shift of "% of Libor"
quotes.
You can further analyze muni swaps by selecting another tab from the control area. Additionally, you can save your deal by
Price.
ARREARS
This topic explains arrears swaps and then describes how to the associate template in SWPM to price an arrears swap.
There are two types of in-arrears swaps in SWPM: xed-oat/oat-oat (in arrears) and constant maturity swaps (CMS). An
interest rate swap-in-arrears is similar to a standard xed-oat swap, except that the oating reset rate for each period is set
210
211
212
215
216
217
213
214
218
at the end of the period on the same date as the payment date. Hence, the reset rate is applied retroactively to the period just
ended and convexity adjustment is applied for each reset rate. The reset dates are two business days before the payment. The
convexity adjustment is applied for each reset rate and the reset rate is applied retroactively to the period just ended.
Note: You can display convexity adjustments on the Reset tab in SWPM, where you can toggle between reset rate, convexity,
and forward rate.
You can choose between the following arrears swap templates in SWPM: xed-oat, or oat-oat. You can use shortcuts (e.g.,
SWPM FXFL ARR <Go> or SWPM FLFL ARR <Go>) to access arrears swap templates from the command line, or
you can click the Products toolbar button to choose a template from a menu.
SWPM's arrears swap templates are organized into eight tabs that allow you to set up and analyze the swap. You can structure
and value your swap on the Main tab of the template, which is divided into four sections. You can input details of the swap in
the Leg1, Leg2, and curve data sections, then evaluate the swap in the valuation section.
rate for the deal, along with the reset frequency, pay frequency, tenor, and other details. At the bottom of the section, the
calculating the Market Value of the swap. Depending on whether your swap is xed-oat or oat-oat, different settings
appear. The Vol Cube drop-down menu allows you to choose between Flat volatility (manual input) and volatilities from the
Volatility Cube (VCUB) function. By default, the volatility for swaps in arrears and CMS come from VCUB.
SWPM calculates the market value using the selected curve at the market close of the day indicated in the Curve Date
eld. The Valuation date is the date at which future cashows are discounted.
For information about customizing the convexity adjustment, see CMS: Convexity Adjustment.
For information about VCUB, see VCUB <Help>.
219

, Leg2: Leverage
Denitions.
219
220
221
222
225
220
, Notional
, Par Shift...
226
221
, Leg1: Spread
227
, and Z-Spread...
222
, Leg1: Coupon
223
, Leg1: Leverage
, Leg2: Spread
224
. For information about a eld, position your cursor over it or see
224
225
226
223
227
You can further analyze arrears swaps by selecting another tab from the control area. Additionally, you can save your deal
Price.
BASIS SWAP
This topic explain basis swaps and then describes how to use the associated templates in SWPM to price a basis swap.
A basis (oat-oat) swap is when both counterparties make interest payments based on a oating rate index (e.g., Libor,
Treasury bills, commercial paper, or Euribor). A same currency basis swap occurs when both oating indices share the
same currency. For example, one leg may be reset according to the USD three-month Libor while the other leg may be reset
according to the USD commercial paper rate (other basis index rates include, for example, prime rate, fed funds, Euribor 1M
vs. Euribor 3M, and muni index rates). If the two oating indices are in different currencies, it is called a "cross currency basis
swap". When they share the same currency, they are called "basis swaps" or "same currency basis swaps".
You can choose between the following single-currency or cross-currency basis swap templates in SWPM: xed-xed,
xed-oat, or oat-oat. You can use shortcuts (e.g., SWPM -1MLB <Go>) to access basis swap templates from the
SWPM's basis swap templates are organized into eight tabs that allow you to set up and analyze the swap. You can structure
Leg 1/Leg 2: Allows you to congure your settings for the legs of the deal. You can enter, for example, the market side,
notional amount (SWPM supports asymmetric notionals), currency, effective date, maturity, and the index used to calculate
the oating rate for the deal, along with the reset frequency, pay frequency, tenor, and other details. At the bottom of the
section, the market value, accrued interest since the last leg cashow date, premium, and DV01 for each leg appears.
variables: Premium
Shift...
234
228
, Notional
, and Z-Spread...
235
229
, Leg1: Spread
230
231
, Leg1: Leverage
232
, Leg2: Spread
233
, Leg2: Leverage
, Par
You can further analyze basis swaps by selecting another tab from the control area. Additionally, you can save your deal by
Price.
CMS
This topic explains constant maturity swaps (CMS) and describes how to use the associated templates in SWPM to price a
CMS.
There are two types of in-arrears swaps in SWPM: xed-oat (in arrears) and CMS. CMS differ from regular xed-to-oat or
oat-to-oat swaps because the oating leg does not reset periodically to Libor or other short term indices, but resets to a
long-term rate, e.g., the ve-year swap rate. For example, one leg can be a xed rate or a oating Libor rate in exchange for
the ten-year swap rate. For CMS, convexity adjustment and volatility are included in the calculation. The convexity adjustment
applies if the tenor of the reference rate is greater than one year.
You can use shortcuts (e.g., SWPM FXFL CMS <Go> or SWPM FLFL CMS <Go>) to access CMS templates from
the command line, or you can click the Products toolbar button to choose a template from a menu.
232
233
234
228
229
230
231
235
SWPM's CMS templates are organized into nine tabs that allow you to set up and analyze the swap. You can structure and
Leg1, Leg2, and curve data sections, then evaluate the swap in the valuation section.
rate for the deal, along with the reset frequency, pay frequency, tenor, and other details. At the bottom of the section, the
For information about editing leg characteristics such as date generation, amortization, and payoff information, see
calculating the Market Value of the swap. Depending on whether your swap is xed-oat or oat-oat, different settings
appear. The Vol Cube drop-down menu allows you to choose between Flat volatility (manual input) and volatilities from the
Volatility Cube (VCUB) function. By default, the volatility for swaps in arrears and CMS come from VCUB.
SWPM calculates the market value using the selected curve at the market close of the day indicated in the Curve Date
eld. The Valuation date is the date at which future cashows are discounted.
For information about customizing the convexity adjustment, see CMS: Convexity Adjustment.
variables: Premium
236
242
, Notional
243
Leverage
, Par Shift...
Denitions.
237
, Leg1: Spread
, and Z-Spread...
244
238
239
, Leg1: Coupon
240
, Leg1: Leverage
241
, Leg2: Spread
, Leg2:
. For more information about a eld, position your cursor over it or see
You can further analyze CMS by selecting another tab from the control area. Additionally, you can save your deal by selecting
cashow schedule for an individual leg to Microsoft Excel with Bloomberg's API.
Price.
236
237
238
239
241
242
243
240
244
OIS
This topic explains overnight indexed swaps (OIS) and then describes how to use the associated template in SWPM to price
an OIS.
An OIS is similar to a xed vs. oat swap in which the oating index is a one-day rate like the fed funds rate (EONIA or SONIA
in EUR and GBP). The oating index is compounded daily and paid at maturity typically after one year, which is the standard
term for an OIS. An OIS is used to manage deposits, assets and liabilities, liquidity, and investor funds in a brokerage/asset
management account.
You can use shortcuts (e.g., SWPM -OIS <Go>) to access the OIS swap templates from the command line, or you can click
SWPM's OIS template is organized into eight tabs that allow you to set up and analyze the swap. You can structure and value
245

and Z-Spread...
251
246
, Notional
247
, Leg1: Coupon
248
, Leg2: Spread
249
, Leg2: Leverage
, Par Shift...
250
You can further analyze OIS by selecting another tab from the control area. Additionally, you can save your deal by selecting
247
248
249
250
245
246
251
Price.
ZERO COUPON SWAP

This topic describes zero coupon swap templates and then describes how to use the associated template in SWPM to price a
zero coupon swap.
In a plain vanilla swap, counterparties exchange cashows during the life of the swap in the frequency that is pre-established.
For zero coupon swaps, the only change is that there is only one cashow exchange at the maturity date. Although the
payment occurs only at maturity, the rates compound according to the selected compounding frequency.
You can use the shortcut SWPM -ZERO <Go> to access the zero coupon swap template from the command line, or you can
click the Products toolbar button to choose the template from a menu.
SWPM's zero coupon swap template is organized into eight tabs that allow you to set up and analyze the swap. You can
swap in the Leg 1, Leg 2, and curve data sections, then evaluate the swap in the valuation section.
notional amount, currency, effective date, maturity, and compounding frequency for the deal. At the bottom of the section,
the market value, theoretical accrued interest since the last leg cashow date, premium, and DV01 for the xed leg appear.
amount (SWPM supports asymmetric notionals), the index used to calculate the oating rate, along with the compounding
frequency, tenor, and other details. At the bottom of the section, the market value, theoretical accrued interest since the
last leg cashow date, premium, and DV01 for the oating leg appear.
calculating the Market Value of the swap. You can also specify whether credit support annexes are used in the valuation,
and if so, the currency in which the collateral is denominated. SWPM calculates the market value using the selected curve
at the market close of the day indicated in the Curve Date eld. The Valuation date is the date at which future cashows are
discounted.
252

and Z-Spread...
258
253
, Notional
254
, Leg1: Coupon
255
, Leg2: Spread
256
, Leg2: Leverage
, Par Shift...
257
You can further analyze zero coupon swaps by selecting another tab from the control area. Additionally, you can save your deal
254
255
256
257
252
253
258
Price.
TOTAL RETURN SWAP

This topic explains total return swaps (TRS), also known as total rate of return swaps, and then describes how to use the
associated template in SWPM to price a TRS.
Note: This section provides a general overview of the SWPM TRS template. For detailed information regarding the TRS
model and inputs used, see Single-Stock Total Return Swap, Index Total Return Swap, and Bond Total Return Swap.
A TRS, or total rate of return swap, is a bilateral nancial contract in which one party (TR payer) pays the total positive return
of a bond, loan, or other nancial obligation (reference asset), while the other party (TR receiver) pays a xed or oating rate
payment plus any negative total returns on the reference asset.
The TRS then allows one party to derive the economic benet of owning an asset without putting that asset on its balance
sheet, and allows the other (which does retain that asset on its balance sheet) to buy protection against loss in its value.
A TRS has an asset leg and a nancing leg. In SWPM, the asset must be a bond or equity composite index, denominated in
any currency. You can also import your own custom index. The nancing leg is similar to a conventional oating Libor swap leg
and is called a nancing leg because a TRS looks like the synthetic secured nancing of a purchase of the asset. Essentially,
the total economic performance of the asset is exchanged for a stream of LIBOR plus spread payments.
You can use the shortcut SWPM -TRS <Go> to access the TRS template from the command line, or you can click the
SWPM's TRS template is organized into eight tabs that allow you to set up and analyze the swap. You can structure and value
Asset Leg: Allows you to congure your settings for the asset leg of the deal. You can specify the asset, including custom
indexes created in the Custom Index Time Series (CIXI) function, and you can enter, for example, the market side, notional
units or notional amount, currency, effective date, and maturity for the deal. At the bottom of the section, the market value,
accrued interest since the last leg cashow date, premium, and DV01 for the asset leg appear.
For information about a eld, position your cursor over it or see TRS Tabs.
For more information about CIXI, see CIXI <Help>.
For information about how to specify the percentage of dividends included in total return calculations, see Conguring
Leg Details.
Financing Leg: Allows you to congure your settings for the nancing leg of the deal. You can enter the market side, the
notional amount (SWPM supports asymmetric notionals), the index used to calculate the oating rate, along with the reset
frequency, pay frequency, spread, and other details. At the bottom of the section, the market value, accrued interest since
the last leg cashow date, premium, and DV01 for the nancing leg appear.
For information about overriding the initial and/or historical asset/index values, see Managing Resets.
calculating the Market Value of the swap. SWPM allows you to choose a forward curve for each leg of the deal, so you
have exibility when projecting forward values for the asset and nancing legs. SWPM calculates the market value using
the selected curve at the market close of the day indicated in the Curve Date eld. The Valuation date is the date at which
future cashows are discounted.
259
260
Valuation: Allows you to choose the calculation method: projection based

or accrual based
. Once you select the
calculation method, SWPM calculates the market value of the deal (the sum of the present values of the receive leg minus
the sum of the present values of the pay leg) and premium of the deal.
For information about total return calculations, see Total Return Swap.
You can further analyze total return swaps by selecting another tab from the control area. Additionally, you can save your deal
For information about the other tabs that appear on the template, see TRS Tabs.
For detailed information about the models and inputs used, see Single-Stock Total Return Swap, Index Total Return Swap,
and Bond Total Return Swap.
Price.
BASKET TOTAL RETURN

This topic explains equity basket total return swaps and then describes how to use the associated templates in SWPM to price
a basket TRS swap.
An equity basket total return swap (basket TRS) is an agreement between two counterparties to swap the total return of a
basket of assets in exchange for periodic cashows. The payments are made during the life of the swap in the frequency that is
pre-established.
You can use shortcuts (e.g., SWPM -ETRS <Go> and SWPM -ETRS FIX <Go>) to access the basket TRS templates from
SWPM's basket TRS template is organized into ve tabs that allow you to set up and analyze the swap. You can structure and
Leg 1, Leg 2, and curve data sections, then evaluate the swap in the valuation section.
259
260
Indicates that projected revenues and expenses are used in the calculation. The projection method includes all future
projected cashows including the current accrual.
Indicates that revenues and expenses are recorded when they are earned or incurred, even though they may not have
actually been received. The accrual method values the structure based on the current accrual.
Asset Leg: Allows you to congure your settings for the asset leg of the deal. Once you have created a basket of equity
tickers or equity indexes on the Basket tab, the Asset eld displays the word BASKET and the Type, Notional, Prev. Value,
and Latest Value elds deactivate (i.e., you can edit these values from the Basket tab only). From the asset leg section, you
can edit, for example, the market side, currency, effective date, and maturity for the deal. At the bottom of the section, the
market value, accrued interest since the last leg cashow date, and premium for the asset leg appear.
For information about the Basket tab, see Additional Tabs.
For information about how to specify the percentage of dividends included in total return calculations, see Single Leg
Details.
Financing Leg: Allows you to congure your settings for the nancing leg of the deal. You can enter the market side and
the xed coupon or the index used to calculate the oating rate for the deal (along with the reset frequency, pay frequency,
tenor, and other details.) At the bottom of the section, the market value, accrued interest since the last leg cashow date,
and the premium for the nancing leg appear.
Curve Data: Allows you to update the curve date used in the valuation, so you can calculate a mark to market price for
a historical date. SWPM calculates the market value at the market close of the day indicated in the Curve Date eld. The
Valuation date is the date at which future cashows are discounted. For information about a eld, position your cursor over
it or see Denitions.
261
262

or accrual based
You can further analyze basket TRS by selecting another tab from the control area. Additionally, you can save your deal by
Price.
IBOXX TOTAL RETURN SWAP
This topic explains iBoxx total return swaps and then describes how to use the associated template in SWPM to price an iBoxx
TRS.
An iBoxx standardized total return swap is an agreement between two counterparties to swap the total return of the underlying
Markit iBoxx index in exchange for funding based on a oating index (Euribor/Libor) with or without a spread. The asset return
payments are made at maturity and the funding ows are paid periodically during the life of the swap. The standard swap
maturities are CDS IMM dates (20th of the expiry months of March, June, September and December).
In the total return swap format, the index buyer receives the index performance at maturity and pays Libor plus a spread. The
dealer quotes the index initial level (live bid/offer) and the spread on the Libor leg. The nal level is the ofcial closing level on
the maturity of the swap.
Total return swaps provide market participants with an effective way to get direct and standardized exposure to Markits global
iBoxx indices. Total return swaps can bridge the gap between the derivatives and cash world, providing unfunded long/short
exposures to cash benchmarks with no tracking error and potentially no exit costs.
Market participants that can benet from this product include asset managers, hedge funds, insurance companies, private
banks, distributors, retail and bank credit portfolio managers.
Markit iBoxx indices are market leading xed income benchmark indices. The following indices are integrated in SWPM's total
return swap template:
ICPRDOV - iBoxx USD Domestic Corporates
IBOXHY - iBoxx USD Liquid High Yield
QW5A - iBoxx EUR Corporates
IBOXXMJA - iBoxx EUR Liquid High Yield
261
262
IYDU - iBoxx GBP Corporates
You can use shortcuts (e.g., TRSW <Go> or SWPM -CTRS <Go>) to access the iBoxx TRS template from the command
SWPM's iBoxx TRS template is organized into tabs that allow you to set up and analyze the swap. You can structure and value
Asset Leg: Allows you to congure your settings for the asset leg of the deal. You can specify the iBoxx index underlying
the deal and you can enter, for example, the market side, notional units or notional amount, currency, effective date, and
maturity for the deal. At the bottom of the section, the market value, accrued interest since the last leg cashow date,
premium, and DV01 for the asset leg appear.
For more information about iBoxx indices, see IBOX <Go>.
For information about how to specify the percentage of dividends included in total return calculations, see .Conguring
Leg Details
notional amount (SWPM supports asymmetric notionals), the index used to calculate the oating rate, along with the reset
frequency, pay frequency, spread, and other details. At the bottom of the section, the market value, accrued interest since
the last leg cashow date, premium, and DV01 for the nancing leg appear.
calculating the Market Value of the swap. SWPM allows you to choose a forward curve for each leg of the deal, so you
have exibility when projecting forward values for the asset and nancing legs. SWPM calculates the market value using
the selected curve at the market close of the day indicated in the Curve Date eld. The Valuation date is the date at which
future cashows are discounted.
Note: By default, SWPM prices swaps as of today, i.e., the default curve date is the current date. To price swaps as of
a historical date, you must backdate both the Curve Date and Valuation elds. For example, to mark to market at quarter's
end, you can enter the historical quarter-end date in both the Curve Date and Valuation elds. For more information, see
Backdating the Valuation.
263
264

or accrual based
You can further analyze iBoxx total return swaps by selecting another tab from the control area. Additionally, you can save
Price.
PROPERTY DERIVATIVE
This topic explains the rationale for the existence of property derivatives, details popular trading strategies for property total
return swap (PTRS), and then describes how to use the associate template in SWPM to price a PTRS.
Rationale for the Existence of Property Derivatives
Property derivatives can be used in combination with other real estate assets (REA) or as a standalone investment. Examples
of the various rationales behind this derivative product are listed below:
263
264
To gain exposure to REA total return or its components (income appreciation and capital growth), without suffering the
specic risks derived from holding physical properties.
To gain exposure to REA without the time lag and the transaction costs associated with direct investment. For example,
expenses for acquiring and selling REA in the U.K. usually exceed 7%.
To hedge generic REA market performance (beta) of a property portfolio, while retaining excess returns (alpha).
To rebalance an existing REA portfolio by accessing synthetic exposure to individual property sectors.
To hedge specic time periods, using the derivatives term structures.
Trading Strategies
Hedge Property Beta Exposure and Retain Alpha: Investors have the opportunity to lock in the generic property
gains that they have benetted from by taking out a hedge on a commercial property index. The investor continues to have
exposure to the extent that their direct investment does not perform in line with the index. Consequently, the investor is
able to retain the upside. Since it is possible to enter into a swap agreement, market participants have the option of which
property beta they want to hedge. Take the example of an investor who has a direct investment in the ofce sector. The
investor can decide whether to hedge the all property beta or the ofce sector beta while retaining the specic alpha from
the REA portfolio.
Hedge Specic Time Periods: As liquidity develops in the market, it is possible to divide the risk into different maturities
and hedge different property market maturities. For example, to protect against REA exposure for 12 months in two
years time, a property investor could sell a three-year maturity PTRS and buy a two-year PTRS. Or, alternatively, it is also
possible to hedge this position with a forward by selling (shorting) a three year forward and buying (going long) the two
year contract.
Diversication: Diversication benets through using property derivatives can come from:
Geographic Diversication: Assuming that REA investors are signicantly invested in (and they have more expertise
in) one specic property market, they may use property derivatives to diversify their returns. For example, a fund that is
invested exclusively in the U.K. may decide to diversify by taking out a swap linked to another country IPD index, such
as France.
Asset Class Diversication: Over the last decade, institutional investors tend to include REA assets in their portfolio to
better pursue the advantages of diversication. While property indices present an attractive risk/return prole compared
to bonds or equities, they also provide an interesting behavior in terms of correlation and auto-correlation. On the other
hand, derivatives on property provide easy diversication channels.
Tactical Asset Allocation: In circumstances where an investor wants to take immediate advantage of a property
strategy, a derivative improves the speed of implementing over direct investment. The time delay and transaction costs
of entering/exiting directly into property may mean that the opportunity identied may have closed by the time the actual
investment is transacted.
Transaction Costs and Property Derivatives: In commercial real estate, direct investment in property suffers from
transaction costs of between 7-8%. The property derivatives transaction costs are essentially the cost that it takes for
the investor to gain exposure to the property market, which is the margin over Libor that is paid to receive the IPD index
returns, i.e., the offer spread (it is usually less than 7%). Given these signicant transaction cost advantages, it is clear that
investors looking for short-to-medium term exposure to the property sector can better fulll their REA goals through the use
of property derivatives.
SWPM's PTRS Template
SWPM prices property derivatives, in particular property total return swaps. You can use the shortcut SWPM -PTRS <Go> to
access SWPM's total return property swap template from the command line, or you can click the Products toolbar button to
SWPM's property total return swap template is organized into tabs that allow you to set up and analyze the swap. You can
structure and value your swap on the Main tab of the template, which is divided into three sections. You can input details of the
swap in the asset leg, nancing leg, and curve data sections, then evaluate the swap in the valuation section.
Control Area: Allows you to navigate between tabs, analyze deals, and congure your default settings.
Asset Leg: Allows you to congure your settings for the asset leg of the deal. You can specify the underlying property
index (e.g., IPD UK All Property, IPD UK Retail Warehouse, and German IPD indices), and you can enter, for example, the
market side, notional amount, country, effective date, and maturity for the deal. The Leverage eld allows you to leverage
exposure to property returns. The DiscountCrv eld allows you to update the curve that SWPM uses to discount cashows
when calculating the Market Value of the swap.
For information about how to update the curve that appears by default, see Setting a Source Curve.
For denitions of the elds on the template, see Denitions.
notional amount (SWPM supports asymmetric notionals), and the xed coupon or the index used to calculate the oating
rate for the deal (along with the reset frequency, pay frequency, spread, and other details). The DiscountCrv/Forward Crv
elds allow you to update the curve that SWPM uses to discount/project cashows when calculating the Market Value of
the swap. For denitions of the elds on the template, see Denitions.
To edit leg characteristics such as date generation, amortization, and payoff information, select View > Pay/Receive
Leg > Amort Schedule from the toolbar.
To override initial and/or historical asset/index values, select View > Pay/Receive Leg > Reset/Price Schedule from
the toolbar.
Valuation: Allows you to backdate the curve, so you can price swaps as of a historical date. The market value, accrued
interest since the last leg cashow date, and premium/DV01 for each leg of the deal appear on the corresponding side of
the Valuation section. The net market value, premium, and DV01 appear at the bottom of the section. SWPM calculates the
market value using the selected curve at the market close of the day indicated in the Curve eld. The Valuation date is the
date at which future cashows are discounted. For denitions of the elds on the template, see Denitions.
Note: By default, SWPM prices swaps as of today, i.e., the default curve date is the current date. To price swaps as of a
historical date, you must backdate both the Curve and Valuation elds.
To backdate the valuation, enter a historical date in the Curve and Valuation elds. For example, to mark to market at
quarter's end, you can enter the historical quarter-end date in both the Curve Date and Valuation elds.
To visualize, customize, and apply shifts to the selected curve, select View > Curves from the toolbar.
The Valuation section also allows you to select the variable you want to solve for and evaluate the swap. You can calculate
the market value of the deal (the sum of the present values of the receive leg minus the sum of the present values of the pay
leg), or you can customize the valuation by choosing a variable from the Calculate drop-down menu. You can solve for the
265
266
267

, Fin Spread
, Fin Coupon
, Par Shift...
268
269
, and Z-Spread...
You can further analyze PTRS by selecting another tab from the control area. Additionally, you can save your deal by selecting
Price.
ASSET SWAP
This topic explains asset swaps.
An asset swap is an interest rate swap used to convert the cashows of the underlying asset (e.g., a specic bond) into
desired cashows via the swap market. The asset can be xed coupon payments or oating rate payments and can be
converted to either xed or oating in the same or different currency.
The default asset swap template consists of a xed-oat swap in the same currency. You can change the default swap to a
xed-xed cross currency swap if the underlying is a xed coupon bond or a oat-oat cross currency swap if the underlying is
a oater.
266
The spread added to the nancing leg.
267
The xed coupon for the nancing leg.
268
265
269
For sinkable bonds, the swap is constructed with the same amortizing schedule. For step-up coupon bonds, the swap is
constructed with the same customized coupon schedule.
You can add a funding leg (the same as regular oat swap leg) in an asset swap deal to describe the scenario as requiring
funding to buy the asset.
Note: You can use the Asset Swap Calculator (ASW) function to price an asset swap. For more information, see ASW
<Help>.
QUANTO SWAP
This topic explains quanto swaps and then describes how to use the associated template in SWPM to price a quanto swap.
Quanto swaps are interest rate swaps where a oating rate of one currency is applied to an interest payment in another
currency. For instance, a borrower in a high-yielding currency can pay a oating rate index of a low-yielding currency,
calculated over the underlying notional amount. All ows are denominated in the high-yielding (base) currency.
Quantos are popular in Asia where, due to certain currency restrictions, corporations can not transact currency swaps. Quanto
swaps allow customers to convert cash ows to take advantage of lower rates in foreign markets without having to take on
exchange rate risk.
For example, a company in Europe with reporting currency/notional in GBP wants to take advantage of lower funding
(borrowing) costs in Japan. The swap payments are exchanged based on a GBP notional with the customer paying oating
amounts based on a JPY LIBOR index against a xed rate or oating rate GBP index. The advantage of this structure is that
it allows the borrower to benet from the convergence between rates without any exposure to the foreign exchange market. In
this example, the risk is that short-term rates in Japan will rise rapidly relative to short rates in the U.K.
SWPM offers quanto structures for the following types of derivatives:
Vanilla Swap
CMS Spread Range Accrual Swap
CMS Spread Range Accrual
Ratchet Floater
Ratchet Range
Double Range
Snowball
Snowbear
Thunderball
Snowblade
Flip Flop
The structures work in the same way as their non-quanto versions, except:
The oating index is denominated (based) in a different currency than the xed leg.
A quanto adjustment (with correlation) occurs.
You can use the shortcut SWPM -QNTO <Go> to access the quanto swap template from the command line, or you can click
the Products toolbar button to choose the template from a menu.
SWPM's quanto swap template is organized into tabs that allow you to set up and analyze the swap. You can structure and
value your swap on the Main tab of the template, which is divided into three sections. You can input details of the swap in the
xed leg, oating leg, and curve data sections, then evaluate the swap in the valuation section.
Fixed Leg: Allows you to congure your settings for the xed leg of the deal. You can enter, for example, the market side,
notional amount, currency, effective date, maturity, and xed coupon for the deal. The DiscountCrv eld allows you to
update the curve that SWPM uses to discount cashows when calculating the Market Value of the swap.
For information about how to update the curve that appears by default, see Setting a Source Curve.
Floating Leg: Allows you to congure your settings for the oating leg of the deal. You can enter the market side, the
notional amount (SWPM supports asymmetric notionals), the index used to calculate the oating rate, along with the index
currency, reset frequency, pay frequency, tenor, and other details. The DiscountCrv/Forward Crv elds allow you to update
the curve that SWPM uses to discount/project cashows when calculating the Market Value of the swap. For denitions of
the elds on the template, see Denitions.
To edit leg characteristics such as date generation, amortization, and payoff information, select View > Pay/Receive
Leg > Amort Schedule from the toolbar.
To override initial and/or historical asset/index values, select View > Pay/Receive Leg > Reset from the toolbar.
Valuation: Allows you to backdate the curve, so you can price swaps as of a historical date. The market value and
premium/DV01 for the each leg of the deal appear on the corresponding side of the Valuation section, and the net market
value, premium, and DV01 appear at the bottom of the section. SWPM calculates the market value using the selected
curve at the market close of the day indicated in the Curve eld. The Valuation date is the date at which future cashows
are discounted. For denitions of the elds on the template, see Denitions.
historical date, you must backdate both the Curve and Valuation elds.
To backdate the valuation, enter a historical date in the Curve and Valuation elds. For example, to mark to market at
quarter's end, you can enter the historical quarter-end date in both the Curve Date and Valuation elds.
To visualize, customize, and apply shifts to the selected curve, select View > Curve from the toolbar.
the market value of the deal (the sum of the present values of the receive leg minus the sum of the present values of the
pay leg), or you can customize the valuation by choosing a variable from the Calculate drop-down menu. You can solve for
270
the following variables: Premium

Denitions.
, Fixed Coupon
271
272
, and Spread
. For denitions of the elds on the template, see
You can further analyze quanto swaps by selecting another tab from the control area. Additionally, you can save your deal
Price.
DUAL DIGITAL SWAP

This topic explains dual digital swaps and then describes how to use the associated template in SWPM to price a dual digital
swap.
Dual digital payoff securities are very popular nancial instruments that have increasingly been traded in both the OTC version
(dual digital swap) and in the structured note version (dual digital bond). The dual digital feature refers to the receiver of this
exotic payoff obtaining either of two alternative payoffs that are decided upfront. The payoff to be received at each coupon date
depends on the level of the observation index immediately before the coupon payment date:
If the index is above a pre-determined level, an A) payoff is paid.
If the index is below a pre-determined level, an B) payoff is paid.
You can use the shortcut SWPM -DP <Go> to access the dual digital swap template from the command line, or you can click
270
271
272
1) In the Calculate and Solver drop-down menus, solves for the xed coupon based on your inputs. 2) Displays a graph
of the xed coupon.
SWPM's dual digital template is organized into tabs that allow you to set up and analyze the deal. You can structure and value
your deal on the Main tab of the template, which is divided into two sections. You can input details of the deal in the dual
digital leg section, and then evaluate the deal in the valuation section.
Dual Digital Details: Allows you to congure your settings for the deal. You can enter, for example, the notional amount,
currency, effective date, and maturity for the deal, along with the observation index and the threshold (Barrier) that
determines the payoff for the deal. For denitions of the elds on the template, see Denitions.
To customize the deal coupon by coupon, select View > Detail > Custom from the toolbar.
Valuation: Allows you to update the curves that SWPM uses to discount cashows and project forward pricing when
of the day indicated in the Curve eld. The Valuation date is the date at which future cashows are discounted. The deal's
stochastic features are priced using a customized volatility cube. The Vol Cube drop-down menu allows you to choose
between Flat volatility (manual input) and volatilities from the Volatility Cube (VCUB) function. A diagonal calibration
process to quoted swaptions occurs for callability. For denitions of the elds on the template, see Denitions.
a historical date, you must backdate both the Curve and Valuation elds. For example, to mark to market at quarter's end,
you can enter the historical quarter-end date in both the Curve Date and Valuation elds. To visualize, customize, and apply
shifts to the selected curve, select View > Curve from the toolbar.
the market value of the deal (the sum of the present values of the receive leg minus the sum of the present values of the
pay leg), or you can customize the valuation by choosing a variable from the Calculate drop-down menu. You can solve for
273
the following variables: Premium

DV01
280
274
, OAS
, Par Shift...
275
276
, Z-Spread...
. Duration
277
278
, Convexity
279
, Vega
, and
values appear. For denitions of the elds on the template, see Denitions.
You can further analyze dual digital swaps by selecting another tab from the control area. Additionally, you can save your deal
Price.
THREE ZONE DIGITAL SWAP
This topic explains three zone digital swaps and then describes how to use the associated template in SWPM to price a three
zone digital swap.
Three zone digital payoff securities are popular nancial instruments that are traded as both OTC three zone digital swaps with
a funding leg and as structured notes (three zone digital bonds/options).
The receiver of the triple digital exotic payoff obtains one of the determined alternative payoffs. The payoff for each coupon
date depends on the level of the observation index immediately before the coupon payment date:
If the index is above a pre-determined level, an A payoff occurs.
If the index is between the two barriers, a B payoff occurs.
If the index is below a pre-determined level, a C payoff occurs.
273
274
275
276
277
278
279
280
The option-adjusted spread. To value this structure with a spread (OAS), enter an appropriate bps amount in the OAS
cell on the main screen valuation section. When you launch SWPM, the premium should be calculated at an OAS of
zero. When the OAS is changed, the premium is re-computed and the PV of cashows is adjusted accordingly.
The percentage price change of the deal for a given change in yield. The higher the duration of the deal, the higher its
risk.
The percentage duration change of the deal for a given change in yield. The convexity is the second derivation of the
deal's price with respect to yield, divided by the price. The deal exhibits positive convexity when its price rises more for a
downward move in yield than its price declines for an equal upward move in yield.
The vega for the swaptions priced by the HW1F model is the change in market value for a 1% shift in volatilities of the
swaptions to which one calibrates.
You can use the shortcut SWPM -TZD <Go> to access the three zone digital template from the command line. Since three
zone digitals are often traded OTC as a swap and with a funding leg, you can use a two-legged structure as well. You can
use the shortcuts SWPM -TZD -FLT <Go> or SWPM -TZD -FIX <Go> to access the two-leg structure from the command
line. Alternatively, you can click the Products toolbar button to choose a template from a menu.
SWPM's three zone digital template is organized into tabs that allow you to set up and analyze the swap. You can structure
and value your swap on the Main tab of the template, which is divided into two sections. You can input details of the swap in
the three zone digital leg section, and then evaluate the swap in the valuation section.
Three Zone Digital Details: Allows you to congure your settings for the deal. You can enter, for example, the notional
amount, currency, effective date, and maturity, for the deal, along with the observation index and the threshold that
determines the payoff for the deal. The DiscountCrv/Forward Crv elds allow you to update the curve that SWPM uses to
discount/project cashows when calculating the Market Value of the swap. The deal's stochastic features are priced using
a customized volatility cube. The Vol Cube drop-down menu allows you to choose between Flat volatility (manual input) and
volatilities from the Volatility Cube (VCUB) function. You can customize the deal coupon by coupon by selecting View >
Detail > Custom from the toolbar.
Valuation: Allows you to backdate the curve, so you can price swaps as of a historical date. SWPM calculates the market
value using the selected curve at the market close of the day indicated in the Curve eld. The Valuation date is the date at
which future cashows are discounted.
a historical date, you must backdate both the Curve and Valuation elds. For example, to mark to market at quarter's end,
you can enter the historical quarter-end date in both the Curve Date and Valuation elds. You can visualize, customize, and
apply shifts to the selected curve by selecting View > Curve from the toolbar.
The Valuation section allows you to make a note callable, as well as select the variable you want to solve for and evaluate
the swap. You can calculate the market value of the deal (the sum of the present values of the receive leg minus the sum of
the present values of the pay leg), or you can customize the valuation by choosing a variable from the Calculate drop-down
281
menu. You can solve for the following variables: Premium
282
, OAS
283
, Par Shift...
284
, Z-Spread...
. DV01
285
, Delta
286
287
, and Vega
values appear, along with the value of the note without callability and the value of the call option. For
denitions of the elds on the template, see Denitions.
You can further analyze three zone digital swaps by selecting another tab from the control area. Additionally, you can save
Price.
MULTI-LEG SWAP
This topic provides an overview of the functionality available in SWPM for multi-leg structures and then describes how to use
the associated templates in SWPM to price a multi-leg swap.
Multi-leg structures are primarily used for complex trades with non-standard payoffs.
SWPM gives you the exibility to:
Add/delete/duplicate legs within a structure by using the Leg menu, which is available from a broad selection of templates,
including all vanilla templates. The Leg menu allows you to access a multi-leg screen from whichever template you are
285
286
287
The vega for the swaptions priced by the HW1F model is the change in market value for a 1% shift in volatilities of the
swaptions to which one calibrates.
281
282
283
284
using. You can convert any SWPM deal into a multi-leg deal by adding legs. For more information, see Adding a Leg,
Copying a Leg, and Deleting a Leg.
Convert single leg structures to multi-leg structures via the Convert to Multileg option, which appears in the Actions
drop-down menu on almost all SWPM templates.
Switch from one leg type to another (e.g., from xed to oat or cap). You do not have to delete the leg and recreate a new
one to change your strategy.
Choose the multi-leg deal template as your default template in SWPM, so it appears automatically when you access
SWPM. For more information, see Choosing Wakeup Settings.
You can use shortcuts (e.g., SWPM ML, SWPM EUR ML, or SWPM ML FIX FLT CAPFLT <Go>) to access
multi-leg templates from the command line, or you can click the Products toolbar button to choose a template from a menu.
SWPM's multi-leg swap templates are organized into six tabs that allow you to set up and analyze the swap. You can structure
and value your swap on the Main tab of the template, which is divided into at least four sections. You can input details of the
swap in the Leg1, Leg2, Leg 3, etc., sections, and then backdate the valuation and evaluate the swap in the valuation section.
Leg 1/Leg 2/Leg 3/Leg 4: Allows you to congure your settings for an individual leg of the deal. Depending on the leg
types in your structure (e.g., xed or oating), different settings appear. You can add/delete/duplicate legs via the Leg
drop-down menus, and you can choose from over 20 leg types, including zero coupon, IMM, CMS, arrears, etc. For
example, you can include swaptions as part of a multi-leg structure to create strategies such as straddles, strangles, and
even butteries (three swaptions). YoY and zero coupon ination caps/legs can also be created as part of a multi-leg
strategy. For more information about a eld, position your cursor over it or see Denitions.
For each leg, you can enter, for example, the market side, notional amount (SWPM supports asymmetric notionals),
currency, effective date, maturity, and the xed coupon or the index used to calculate the oating rate for the deal (along
with the reset frequency, pay frequency, tenor, and other details.) At the bottom of each leg section, the market value and
DV01 for the leg appears. The Leg Detail option in the Leg drop-down menus allows you to congure additional details,
such as the curves used to discount/project cashows when valuing the swap, unadjusted period end dates, pay delay,
and a variety of compounding methods. You can also use your custom curves for a customized valuation of your multi-leg
strategies.
For information about conguring leg details, see Conguring Leg Details.
For information about customizing curves you want to use to value your strategies, see ICVS <Help>.
value at the market close of the day indicated in the Curve eld. The Valuation date is the date at which future cashows
are discounted.
T+2. To price swaps as of a historical date, you must backdate both the Curve and Valuation elds. For example, to mark to
market at quarter's end, you can enter the historical quarter-end date in both the Curve Date and Valuation elds.
The net market value, premium, accrued interest, and DV01 appear at the bottom of the Valuation section. The Valuation
section also allows you to select the variable you want to solve for and evaluate the swap. You can calculate the market
you can customize the valuation by choosing the leg and then choosing the variable from the Calculate drop-down menu.
288
You can solve for numerous leg-specic variables, including Premium

, Par Shift...
288
289
290
291
292
293
294
293
294
, and Z-Spread...
289
, Spread
, Cap
290
291
, Cap Strike
292
, Leverage
1) In the Calculate drop-down menu, solves for the level at which the oating rate is capped. 2) An option that provides
a payoff when a specied interest rate is above a certain level. The interest rate is a oating rate that is reset periodically.
The strike rate for the cap. The payoff occurs in a spread option cap if the factored spread is above this rate. The payout
is multiplied by the number in the Receive X eld to determine the market value. The risks calculated take this number
into account.
The factor of the oater index in the coupon reset.
For more information about MARS, see MARS <Help>.
For information about performing scenario analysis in SWPM, see Analyzing Scenarios.
For information about assessing risk in SWPM, see Managing Risk.
For information about the Summary tab, see Additional Tabs.
You can further analyze multi-leg swaps by selecting another tab from the control area. Additionally, you can save your deal
download the cashow schedule for an individual leg to Microsoft Excel with Bloomberg's API. Multi-leg structures created in
SWPM are fully supported in functions such as the Multi-Asset Risk System (MARS) function.
Price.
ASIAN SWAP
This topic explains Asian-style xed-oat swaps and then describes how to use the associated templates in SWPM to price an
Asian oater.
An Asian-style xed-oat swap involves the exchange of interest calculated as the average value of a oating rate index over
the accrual period against a xed swap rate. These rates could, for example, reset monthly and pay quarterly. Asian options
like caps/oors give the buyer the right to receive the difference between the strike and the unweighted or weighted average of
the index rate during the averaging period, if the average is less than the strike. An unweighted average is a simple arithmetic
mean of all the reset rates in an averaging period, and a weighted average is the arithmetic average of all the reset rates
weighing in year-fraction of the period to which each reset rate applies. For more information about the methodology used, see
Methodologies and Spreadsheets.
You can use shortcuts (e.g., SWPM -EUR -ASIAN <Go> or SWPM -FLFL -ASIAN <Go>) to access Asian swap
SWPM's Asian swap template is organized into eight tabs that allow you to set up and analyze the swap. You can structure
amount (SWPM supports asymmetric notionals), the index used to calculate the average oating rate, along with the reset
Curve/Volatility Data: Allows you to update the curves and volatilities that SWPM uses to discount cashows and project
forward pricing when calculating the Market Value of the option. The Vol Cube drop-down menu allows you to choose
between Flat volatility (manual input) and volatilities from the Volatility Cube (VCUB) function.
SWPM calculates the market value of the deal using the curve and volatilities selected in this section at the market close of
T+2. To price swaps as of a historical date, you must backdate the Curve Date and Valuation elds. For example, to mark to
market at quarter's end, you can enter the historical quarter-end date in both the Curve Date and Valuation elds. For more
information, see Backdating the Valuation.
For more information about a eld, position your cursor over it or see Denitions.
For information about updating the amortization method and schedule, see Amortization Methods and Amortization
Schedule.
295

Z-Spread...
301
296
, Notional
297
, Leg1: Coupon
298
, Leg2: Spread
299
, Leg2: Leverage
, Par Shift...
300
. For more information about a eld, position your cursor over a eld or see Denitions.
You can further analyze Asian swaps by selecting another tab from the control area. Additionally, you can save your deal
Price.
INFLATION
CUSTOMIZING CPI PROJECTIONS
This topic explains the CPI projections used in ination swaps.
CPI projections are essential to price any ination-based derivative contract, since they determine the cashows from coupons
and principal redemption. Bloomberg allows you to obtain CPI forecasts by:
297
298
299
300
295
296
301
Compounding the base CPI index using market rates for zero coupon ination swaps.
Compounding the base CPI index using customized rates.
Directly entering the value of the CPI projection.
You can customize your CPI projections in the Ination Bond/Swap Settings (SWIL) function. For more information, see SWIL
<Help>.
The following CPI curves are currently supported in SWIL:
CPI Curves
Base Index Ticker
Lag
Interpolation Type
Europe
CPTFEMU <INDEX>
3M
MIR
USA
CPURNSA <INDEX>
3M
DIR
UK
UKRPI <INDEX>
2M
MIR
France
FRCPXTOB <INDEX>
3M
DIR
Italy
ITCPI <INDEX>
3M
MIR
Spain
SPIPC <INDEX>
3M
MIR
Japan
JCPNJGBI <INDEX>
1M
(10th of the month)
Australia
AUCPI <INDEX>
1Q (quarter)
QIR
Sweden
SWCPI <INDEX>
3M
MIR
SWIL also allows you to customize seasonality assumptions. You can:

Switch the seasonality on/off for the generation of forecasts for a specic CPI curve.
Build the seasonality based on a number of historical observations (e.g., the average of ve years of month-on-month CPI
changes).
Build the seasonality based on (normalized) user estimates.
Seasonality as it appears in SWIL has the following characteristics:
All numbers are expressed as integers (not as percentages).
SWIL uses the natural logarithm of CPI changes to promote a consistent compounding methodology (exponential both for
trend and seasonality).
The historical vector refers to the average CPI change during a specic month. For example, -0.003415 means that for a
ve-year sample period, the January contribution to ination is -0.3415%. In this example, the January trend is deationary.
The Normalized column is a different measure of seasonality and measures how much the monthly ination deviates from
the trend. The sum of the normalized seasonality values is zero.
INFLATION ZERO COUPON SWAP
This topic describes how to use the ination zero coupon swap templates in SWPM to price an ination-linked zero coupon
swap.
You can use shortcuts (e.g., SWPM ILFXZC <Go> and SWPM ILFLZC <Go>) to access the ination-linked zero coupon
swap templates from the command line, or you can click the Products toolbar button to choose a template from a menu.
SWPM's ination zero coupon swap template is organized into tabs that allow you to set up and analyze the swap. You can
swap in the ination leg, xed/oating leg, and curve/seasonality data sections, then evaluate the swap in the valuation section.
Ination Leg: Allows you to congure your settings for the ination-linked leg of the deal. You can enter, for example,
the market side, notional amount, country (i.e., the reference ination market), currency, effective date, and maturity. The
country you select determines the reference index used to calculate the ination rate. You can backdate the swap to a past
date or build a forward-starting swap (FSS). SWPM supports broken dates.
The Lag period refers to the difference between the CPI date and the ination leg's effective or maturity date. Since most
CPIs provide only monthly data, the Interpolation method determines the settlement date pattern if the deal starts or ends
302
303
in the middle of one month. SWPM supports monthly

and daily
interpolation methods and defaults to the market
standard for each curve. The Base Index value reects the selected lag and interpolation method.
302
303
The settlement is always set on the 1st of the start and end month, which means CPI values are the direct monthly value
for these particular months. For example, if the lag period is three months, the coupon rate for one period is: (Monthly
CPI on 3 month before next Payment date / Monthly CPI on 3 month before previous payment date 1) x 100%.
The settlement dates are the original dates that can be in the middle of a month. CPI values are the daily weighted
average of that month and next month's CPI values.
The Leverage represents the magnitude of the reection on CPI movements on the ination leg coupons (a value of 1.000
means that a 2% increase in CPI in a year generates a 2% coupon on the ination leg; a value of 2.000 means that a 2%
increase in CPI in a year generates a 3% coupon on the ination leg, etc.)
The Spread is a facultative xed coupon you can add to the CPI appreciation within the ination leg.
At the bottom of the section, the market value, accrued interest since the last leg cashow date, premium, and DV01 for
the ination-linked leg appear.
For information about another eld, position your cursor over it or see Denitions.
Fixed/Floating Leg: Allows you to congure your settings for the xed/oating leg of the deal. You can enter, for example,
the market side, notional amount (SWPM supports asymmetric notionals), currency, effective date, maturity, and xed
coupon or index used to calculate the oating rate for the deal. At the bottom of the section, the market value, accrued
interest since the last leg cashow date, premium, and DV01 for the xed leg appear.
Curve/Seasonality Data: Allows you to update the curves that SWPM uses to discount cashows and project ination
rates when calculating the Market Value of the swap. You can also enable/disable seasonality, which affects the value of
all of the reset CPIs and index factors, and therefore all projected coupons. SWPM calculates the market value of the deal
using the selected curve at the market close of the day indicated in the Curve Date eld. The Valuation date is the date at
which future cashows are discounted.
For information about how to display the real (i.e., ination-adjusted) notional, index ratio, forecast CPI, and present
value for cashows, see Cashows and Resets.
For information about customizing CPI projections, see Customizing CPI Projections.
304
305
306

, Leg1: Spread
, Leg1: Leverage
304
307
, and Leg2: Coupon
. For information about a
Note: In addition to the DV01 (interest rate sensitivity), SWPM calculates the ination DV01, which measures the change
in price of the swap for a parallel shift in the ination curve.
You can further analyze zero coupon swaps by selecting another tab from the control area. Additionally, you can save your deal
Price.
INFLATION YOY SWAP

This topic explains ination year-on-year (YoY) swaps and then describes how to use the associated template in SWPM to
price a YoY ination swap vs. xed or oat.
While the most traded type of ination swap is the zero coupon swap, ination caps and oors are based not on zero coupon
swaps, but on yearonyear coupon swaps. This implies that the underlying of caps/oors (the oating leg of a yearonyear
swap) is largely unobservable in the market place and must instead be built synthetically.
The traditional YoY structure merges a YoY ination leg with a xed leg. The swap coupon is the xed coupon that makes the
swap par at inception.
You can use shortcuts (e.g., SWPM ILFXYOY <Go> and SWPM ILFLYOY <Go>) to access the YoY ination swap
SWPM's YoY ination swap template is organized into tabs that allow you to set up and analyze the swap. You can structure
the ination leg, xed/oating leg, and curve/seasonality data sections, then evaluate the swap in the valuation section.
305
306
307
country you select determines the reference index used to calculate the ination rate.
308
309

and daily
308
309
all of the reset CPIs and index factors, and therefore all projected coupons. While cashows are discounted at Libor, they
are generated using all the ination inputs set in the Ination Bond/Swap Settings (SWIL) function, namely zero coupon
curves, ination volatility surface, convexity adjustment method (putcall parity or JY), and seasonality. The Curves tab in
SWPM summarizes some of this information and allows you to see the shape of the ination curve implied by zero coupon
ination swap quotes. For more information, see SWIL <Help>.
SWPM calculates the market value of the deal using the selected curve at the market close of the day indicated in the
310

Coupon
310
311
312
313
315
, Leg1: Spread
311
312
, Leg1: Leverage
313
, Leg2: Spread
314
, Leg2: Leverage
, and Leg2:
You can further analyze ination YoY swaps by selecting another tab from the control area. Additionally, you can save your deal
Price.
INFLATION YOY CAP/FLOOR
This topic explains ination year-on-year (YoY) caps/oors and then describes how to use the associated template in SWPM to
price a YoY ination cap/oor.
You can use shortcuts (e.g., SWPM ILCAP <Go> and SWPM ILFLR <Go>) to access the YoY ination cap/oor
SWPM's YoY ination cap/oor template is organized into tabs that allow you to set up and analyze the swap. You can
structure and value your deal on the Main tab of the template, which is divided into three sections. You can input details of the
deal in the type/strategy and curve/volatilities data sections, then evaluate the deal in the valuation/greeks section.
314
315
Type/Strategy: Allows you to congure your settings for the deal, including the cap or oor type and the strategy used to
price the deal. You can enter, for example, the market side, notional amount, country (i.e., the reference ination market),
currency, effective date, and maturity. The country you select determines the index underlying the option. Caps default to
a ve-year caplets strip (however, the expiry is customizable) and the caps strike is set at the ATM level for the specic
currency and expiry.
316
317

and daily
all of the reset CPIs and index factors, and therefore all projected coupons. While cashows are discounted at Libor, they
ination swap quotes. The implied volatility used to price the option is derived from the Bloomberg ination volatility surface
(from SWIL) and is always expressed in SWPM as shifted lognormal volatility. For more information, see SWIL <Help>.
For information about how to visualize, customize, and apply shifts to the selected curve, see Customizing Curves.
316
317
318
319
320
321
322
323
variables: Premium
, Implied Vol
, Spread
, Leverage
, Cap Strike
, and Floor Strike
. The Yield Value
represents the premium translated into running yield, based on the deal frequency and daycount bases. For information
You can further analyze ination YoY caps/oors by selecting another tab from the control area. Additionally, you can save
to download the cashow schedule for a deal to Microsoft Excel with Bloomberg's API.
Price.
INFLATION LPI SWAP

This topic explains limited price indexation (LPI) swaps and then describes how to use the associated templates in SWPM to
price an LPI swap.
LPI swaps are a type of exotic ination derivative. LPI is very common in the U.K. due to the U.K. pension fund paying structure
and is more liquid than vanilla ination caps/oors.
Zero-coupon LPI swaps consist of two legs, for example, where one is xed (equivalent to the swap par coupon rate) and the
other is ination linked, where the nal payment is based on the LPI index times the leg's notional.
319
The single volatility that can be used in the Black-Scholes model so that the price reproduces the market price.
320
321
318
322
323
into account.
The strike rate for the oor.
The payoff occurs in a oor if the xing is below this rate. For combination deals (collar, straddle, cap spread, oor
spread), you can specify the position for each part of the combination by entering a number in the Rcv X or Pay X elds.
The payout of each part of the combination is multiplied by this position in determining the market value. The risks
calculated take the positions into account.
You can use shortcuts (e.g., SWPM ILFXLPI <Go>) to access the ination LPI templates from the command line, or you
can click the Products toolbar button to choose a template from a menu.
SWPM's ination LPI swap template is organized into tabs that allow you to set up and analyze the swap. You can structure
country you select determines the index used to calculate the ination rate.
324
325

and daily
interpolation methods, and defaults to the market
324
325
At the bottom of the section, the market value, accrued interest since the last leg cashow date, premium and DV01 for the
ination-linked leg appear.
rates when calculating the Market Value of the swap. You can also enable/disable seasonality, which affects the value of all
of the reset CPIs and index factors, and therefore all projected coupons. While cashows are discounted at LIBOR, they
curves, ination volatility surface, convexity adjustment method (putcall parity or JY), and seasonality. The model chosen
for the LPI pricing is a Jarrow-Yildirim plus Skew, with the calibration of the JY model (which has implied Black-like at
volatility) to the YoY ination swap option surface. The Curves tab in SWPM summarizes some of this information and
allows you to see the shape of the ination curve implied by zero coupon ination swap quotes. For more information, see
SWIL <Help>.
326

Coupon
331
, Leg1: Spread
327
328
, Leg1: Leverage
329
, Leg2: Spread
330
, Leg2: Leverage
, and Leg2:
in price of the swap for a parallel one basis point shift in the zero coupon ination-linked curve.
You can further analyze ination LPI swaps by selecting another tab from the control area. Additionally, you can save your deal
Price.
INFLATION BOND SWAP

This topic explains ination bond swaps and then describes how to use the associated template in SWPM to price an ination
bond swap.
Ination linked bonds (also known as linkers) are bonds in which either the principal or/and the coupons are indexed to an
ination index.
The issuance increased notably during the last 30 years since the U.K. starting issuing ination linked Gilts. The ination linked
market consists of both sovereign and corporate bonds, with the sovereign being the most representative by far in terms of
outstanding notional and size of the programs. The corporate market has a higher number of bonds, but with much smaller
sizes.
Currently the biggest sovereign markets are:
Treasury Ination Protected Securities (TIPS) with more than $500 billion in issuance.
U.K. linked Gilts, with more than $300 million in issuance.
French OATi, with about $200 million outstanding.
Italy, Sweden, Australia, and others.
329
330
331
326
327
328
All of the sovereign securities mentioned have a similar structure in terms of coupon payments/calculation and redemption. This
includes:
A zero coupon strip structure, where the focus is the ination accumulated/compounded from the base date (time zero) to
the relevant payment date, not the ination strictly accrued from period to period; this is also one of the reasons why the
most liquid ination swap market is not the YoY (year on year), but the zero coupon market.
The indexation of coupons by the index factor (i). Normally linkers pay a low (compared to nominal treasuries) xed coupon,
which is multiplied by the index factor.
The indexation of principal by the index factor (T).
A CPI oor that guarantees that at maturity of the debenture, the bondholder receives back at least par. In most cases the
CPI oor is so far out-of-the-money that its value is negligible, but this is not always the case.
You can use shortcuts, e.g., SWPM ILFXBOND <Go> or SWPM ILFLBOND <Go>, to access the ination bond swap
SWPM's ination bond swap template is organized into tabs that allow you to set up and analyze the swap. You can structure
332
333

and daily
interpolation methods, and defaults to the market
332
333
334

Coupon
339
, Leg1: Spread
335
336
, Leg1: Leverage
337
, Leg2: Spread
338
, Leg2: Leverage
, and Leg2:
You can further analyze ination bond swaps by selecting another tab from the control area. Additionally, you can save
Price.
INFLATION REAL RATE SWAP
This topic explains ination real rate swaps and then describes how to use the associated templates in SWPM to price an
ination real rate swap.
The traditional real rate structure merges a real rate leg with a xed leg. SWPM solves for the swap coupon that makes the
swap par at inception. SWPM functionality for ination real rate swaps is analogous to that for ination zero coupon swaps;
however, for ination real rate swaps, SWPM uses real rates to forecast the CPI vector.
You can use shortcuts (e.g., SWPM -ILFXREAL <Go> and SWPM -ILFLREAL <Go>) to access the ination real rate
swap templates from the command line, or you can click the Products toolbar button to choose a template from a menu.
337
338
339
334
335
336
SWPM's ination real rate swap template is organized into tabs that allow you to set up and analyze the swap. You can
swap in the ination leg, xed/oating leg, and curve/seasonality data sections, then evaluate the swap in the valuation section.
340
341

and daily
340
341
342

Coupon
342
343
347
, Leg1: Spread
343
344
, Leg1: Leverage
345
, Leg2: Spread
346
, Leg2: Leverage
, and Leg2:
in price of the swap for a parallel shift in the ination curve, as well as the BR01 or basis swap sensitivity.
You can further analyze ination real rate swaps by selecting another tab from the control area. Additionally, you can save
Price.
EXOTICS
FIXED COUPON RANGE ACCRUAL
This topic explains xed coupon range accrual structures, and then describes how to use the associated template in SWPM to
create and value xed coupon range accrual structures.
You can use SWPM to display a range accrual structure with a xed complex coupon that accrues on a daily basis when an
index resets within a specic range. You can also make the coupon callable.
You can use shortcuts (e.g., SWPM -RACL <Go>, SWPM -RAFIX -FIX <Go>, and SWPM -RAFIX -FLT <Go>) to
access xed coupon range accrual templates from the command line, or you can click the Products toolbar button to choose
a template from a menu.
SWPM's xed coupon range accrual template is organized into tabs that allow you to set up and analyze the deal. You can
structure and value your deal on the Main tab of the template, which is divided into ve sections. You can input details of the
deal in the Leg 1, Leg 2, Option, and curve/volatilities data sections, then evaluate the deal in the valuation/Greeks section.
345
346
347
344
Control Area: Allows you to navigate between the tabs, analyze deals, set up scenarios, manage risk, generate trade
tickets, and congure your default settings. For more information, see Control Area.
notional amount, currency, effective date, maturity, and xed coupon for the deal. Additionally, the Daily Range elds allow
you to specify the index, along with the oor and the ceiling, that determines whether the xed coupon accrues; when the
specied index resets within a range, the xed coupon accrues on a daily basis. For information about further customizing
the range from the Details tab, see Conguring Leg Details. At the bottom of the section, the market value and accrued
interest since the last leg cashow date appear. For information about a eld, position your cursor over it or see Denitions.
Leg 2: Allows you to add a xed/oating funding leg to the deal to convert the structure to a swap with a xed or oating
funding leg. If you add a xed/oating leg, the Leg 2 section allows you to congure your settings for the xed/oating leg.
You can enter the market side, the xed coupon or, for a oating leg, the reset frequency, pay frequency, spread, and other
details. At the bottom of the section, the market value and the accrued interest since the last leg cashow date appear.
Option: Allows you to make the structure callable. If you make the structure callable, the Option section allows you to
348
congure your settings for the option, including the position

348
349
and style
, along with the option expiration and the
The long or short option position. Choices include:

Long Receiver: The option buyer is long and receives Fixed/Pay Float on a swap, if exercised.
Short Receiver: The option seller is short and pays Fixed/Receive Float on a swap, if exercised.
Long Payer: The option buyer is long and pays Fixed/Receive Float on a swap, if exercised.
period of time for which the swap is not cancellable (NC). For Bermudan options, the First Call eld allows you to enter the
rst call date. For forward-starting swaptions, the Settlement eld allows you to enter the forward start date.
Note: For callable structures, the Option tab displays call dates, customizable exercise points, and exercise amounts. For
more information, see Additional Tabs.
Curve/Volatilities Data: Allows you to update the curves and volatilities that SWPM uses to discount cashows and
project forward pricing when calculating the Market Value of the option. The Vol Cube drop-down menu allows you to
choose between Flat volatility (manual input) and volatilities from the Volatility Cube (VCUB) function.
Schedule.
Valuation/Greeks: Allows you to analyze the sensitivity of the deal and select the variable you want to solve for. You
can calculate the market value of the deal or you can customize the valuation by choosing a variable from the Calculate
drop-down menu. You can solve for the following variables: Premium
Z-Spread...
354
350
351
, OAS
352
, Coupon
, Par Shift...
353
, and
You can further analyze xed coupon range accrual structures by selecting another tab from the control area. Additionally,
you can save your deal by selecting Actions > Save from the toolbar. Once you save the deal, you can access it from other
349
350
351
352
353
354
Short Payer: The option seller is short and receives Fixed/Pay Float on a swap, if exercised.
The option exercise style. For example: European, Bermudan, American.
The xed rate of interest paid/received over the life of the leg.
Bloomberg functions or through Bloomberg's API by entering the deal number followed by the <CORP> key. For example,
this allows you to download the cashow schedule for an individual leg to Microsoft Excel with Bloomberg's API.
Price.
FLOATER RANGE ACCRUAL
This topic explains oater range accrual structures, and then describes how to use the associated template in SWPM to create
and value oater range accrual structures.
You can use SWPM to display a range accrual structure with a complex coupon for a oating index. You can leverage the
coupon, increase the coupon with a spread, or make the coupon callable. The range accrual structure accrues a daily coupon
if the index resets within a range.
You can use shortcuts (e.g., SWPM -FRACL <Go>) to access xed coupon range accrual templates from the command line,
or you can click the Products toolbar button to choose a template from a menu.
SWPM's oater range accrual template is organized into nine tabs that allow you to set up and analyze the deal. You can
Leg 1: Allows you to congure your settings for the oating leg of the deal. You can enter, for example, the market side,
notional amount, currency, effective date, maturity, and oat index for the deal. Additionally, the Daily Range elds allow
you to specify the index, along with the oor and the ceiling, that determines whether the oating rate accrues; when the
specied index resets within a range, the oating rate accrues on a daily basis. For information about further customizing
the range, leverage, and spread from the Details tab, see Conguring Leg Details. At the bottom of the section, the market
value and accrued interest since the last leg cashow date appear. For information about a eld, position your cursor over it
or see Denitions.
355
356

and style
Schedule.
355

356
can calculate the market value of the deal, or you can customize the valuation by choosing a variable from the Calculate
357
358
, OAS
information about a eld, position your cursor over it or see Denitions.
359
, Par Shift...
360
, and Z-Spread...
. For
You can further analyze oater range accrual structures by selecting another tab from the control area. Additionally, you
can save your deal by selecting Actions > Save from the toolbar. Once you save the deal, you can access it from other
Price.
FIXED IN/OUT RANGE ACCRUAL
This topic explains xed in/out range accrual structures, and then describes how to use the associated template in SWPM to
create and value xed in/out range accrual structures.
You can use SWPM to display a range accrual structure with a xed complex coupon that accrues on a daily basis when a
specic index resets within a range. You can use SWPM to structure a xed coupon range accrual with two different coupons:
one accrued if the index falls within the specied range, the other paid if the index falls outside of the specied range.
You can use shortcuts (e.g., SWPM -INOUT <Go>, SWPM -INOUT -FIX <Go>, and SWPM -INOUT -FLT <Go>) to
access xed coupon in/out range accrual templates from the command line, or you can click the Products toolbar button to
SWPM's oater range accrual template is organized into nine tabs that allow you to set up and analyze the deal. You can
357
358
359
360
notional amount, currency, effective date, maturity, and the in-range and out-of-range coupons for the deal. Additionally,
the Daily Range elds allow you to specify the index, along with the oor and the ceiling, that determines the coupon that
accrues; when the specied index resets within a range, the in-range coupon applies. Otherwise, the out-of-range coupon
applies. For information about further customizing the range from the Details tab, see Conguring Leg Details. At the
bottom of the section, the market value and accrued interest since the last leg cashow date appear. For information about
361
361
362
and style

Schedule.
Z-Spread...
367
363
364
, OAS
365
, Coupon
, Par Shift...
366
, and
362
363
364
365
366
367
Note: If you change the corresponding range and adjust the xed rate in line with the current market coupon, this structure
prices like a regular callable xed rate note.
You can further analyze xed in/out range accrual structures by selecting another tab from the control area. Additionally, you
Price.
CMS SPREAD RANGE ACCRUAL

This topic explains xed coupon CMS spread range accrual structures.
For information about how to value xed coupon CMS spread range accrual notes/swaps, see BVIP <Go>.
Spread options and spread range accruals are part of a broader group of structures called callable exotics. They typically start
as a bond or note, sold by banks to investors. These notes generally pay a high initial coupon and after that a coupon linked to
an index with a spread that may be capped for each period. In return for the high coupon upfront, the investors give the issuing
bank an option to call the note at certain dates in the future.
Spread option is a structure where the complex coupon is based on the difference of two underlying assets. This could be two
tenors (CMS 30y CMS 10y) on a curve. The coupon can be levered and/or increased with a spread. Investors use products
like spread options to take a view of the curve if they feel that the spreads between two points are going to tighten or widen, as
the case may be for their respective valuations.
Whether the motivation comes from speculation, basis risk mitigation, or even asset valuation, the use of spread options is
widespread even though the development of pricing and hedging techniques has not followed at the same pace. Spread
options are designed to mitigate adverse movements of several indexes, hence their popularity. Because of their generic
nature, spread options are used in markets as varied as xed income, currency and foreign exchange.
Spread option range accruals combine the features of both the range accruals and spread options. The most common are
CMS spread range accruals. These structures pay a coupon if the spread between the two tenors are within a specied range
over the life of the trade. As these structures are complex, users in the trading, risk, and valuation areas like to compare prices
from different models. To this end, Bloomberg offers multiple models to price this structure. Calculators are available in SWPM
with both in house (LGM 1 and 2 Factor) and Numerix (HW 2F) models.
You can use shortcuts (e.g., SWPM NRACL CMSSPRD <Go>, SWPM FRACL CMSSPRD <Go>, or SWPM
RAFL CMSSPRD) to access xed coupon CMS spread range accrual templates from the command line, or you can click
POWER REVERSAL DUAL CURRENCY
This topic explains power reversal dual currency notes (PRDCs) and then describes how to use the associated template in
SWPM to create and value PRDCs.
PRDCs are principal-protected notes that pay a high initial coupon, ranging from 4%-7%. Subsequent coupons are linked,
for example, to the USD/JPY exchange rate, so payments rise if the Yen depreciates. Most are also callable with Bermudan
option dates. Coupons are also typically oored at zero. Popular in Japan, PRDCs have been offered to investors looking for
high yield in the midst of a prolonged low rate environment. They are also used extensively in the carry trade, where banks and
large institutions borrow in Yen to invest in other high-yielding countries.
Typically, the rst coupon of a PRDC structure is xed and subsequent coupons are proportional to an FX rate (domestic
currency per one unit of foreign currency). Therefore, the coupon is larger if FX is higher on the coupon date and vice versa.
Issuers are effectively short FX options with strikes lower down in FX.
Most PRDCs are sold to Japanese investors, who want to earn higher yields available in other currencies without taking
currency risk. On the other side, interest in PRDCs is shown by institutions in high-interest rate countries who want to borrow
at low JPY interest rates without taking currency risk. If you look at both sides of the transaction, you can see the basic
structure. Say a bank in Europe borrows ten billion JPY from Japanese investors. The bank swaps its interest payments into
USD and appears to lock in a JPY interest rate on a USD borrowing. On the other side, the Japanese investor swaps the JPY
interest rate for a USD interest rate, but it is still paid in JPY. The investor earns a USD rate paid in JPY.
Consider the following structure as an example. There is a notional of 3.5 MMM JPY. Currency 1 is JPY. Currency 2 is USD.
The intro coupon is 2.35% and the intro end date is 08/25/07 (one year from the effective date). The Currency 1 coupon is
10.00% and the Currency 2 coupon is 12.35%. Most PDRCs are callable Bermudan style. In this example, the PDRC is
callable on each payment date (semi-annual). Coupons are also oored at zero.
Structured products provide investors the opportunity to outperform traditional investment products by embedding
derivative structures within the product. As structured notes are xed income products, they offer capital preservation. Yield
enhancement products allow investors to potentially obtain higher returns, by embedding an option strategy into a xed income
product. The additional risk generated is tailored to t your clients market view and risk appetite.
The advantages of PRDCs are:
100% principal guaranteed
Suitable for investors/ borrowers in low rate markets
Simplicity
You can use shortcuts (e.g., SWPM PRDC <Go>) to access the structured note template from the command line, or you
can click the Products toolbar button to choose a template from a menu. The Main tab can be dynamically resized using the
zoom slider or by using Ctrl or Shift and scrolling your mouse wheel.
SWPM's PRDC template is organized into seven tabs that allow you to set up and analyze the deal. You can structure and
value your deal on the Main tab of the template, which is divided into two sections. You can input details of the deal in the deal
parameters section, then evaluate the deal in the valuation section.
Control Area: Allows you to navigate between the tabs, analyze deals, set up scenarios, manage risk, and congure your
default settings. For more information, see Control Area.
Deal Parameters: Allows you to congure your contract parameters. By default, a ve-year structure with an intro coupon
of 5% appears. For example, you can enter:
Deal Parameters: The notional amount, currencies, effective date, and maturity.
Option: Optionality details. The issuer in most cases has the right to call the note at 100% on each coupon payment
date. You can congure your deal to include this optionality by selecting Bermudan from the Option drop-down. If your
deal includes an option, you can congure the option details, including the rst call date and the call price.
Schedule: Cap/oor rates and the amortization schedule. The Schedule eld allows you to fully customize the schedule.
Coupon Parameters: The initial coupon and the exchange rate to which subsequent coupons are linked.
Valuation: Allows you to select the variable you want to solve for and evaluate the deal. You can customize the valuation
by choosing a variable from the Calculate drop-down menu. You can solve for the following variables: Price (%)
Funding Spread (bp)
369
368
and
. You can also choose the model used to price the deal.
SWPM calculates the market value of the deal at the market close of the day indicated in the Market Data eld. The
Note: By default, SWPM prices deals as of today. To price deals as of a historical date, you must backdate both the
Market Data and Valuation elds. For example, to mark to market at quarter's end, you can enter the historical quarter-end
date in both the Market Data and Valuation elds. For example, to mark to market at quarter's end, you can enter the
historical quarter-end date in both the Curve Date and Valuation elds. For more information, see Backdating the Valuation.
368
The price in percentage terms.
369
Flat spread added to the free risk curve, used only for discounting projected cashows.
You can further analyze PRDCs by selecting another tab from the control area. Additionally, you can save your deal by
Price.
TARGET ACCRUAL REDEMPTION NOTE

This topic explains target accrual redemption notes (TARNs) and then describes how to use the associated template in SWPM
to create and value TARNs.
TARNs are a type of exotic structure with redemption triggers. TARNs are an index linked note that provides a guaranteed
sum of coupons (target cap) with the possibility of early termination. A target redemption note is similar to an inverse oating
rate note, embedded with additional features, such as the possibility of early termination and a guaranteed sum of coupon
payments. This structure has the cashow characteristics of an inverse oater after the initial coupon period. For example, the
inverse oater formula is:
max {11% -2 x 6-month Libor (in arrears), 0}
The lure of a high initial coupon combined with the perception that the par may be received within a short span of time made
these notes attractive to Asian retail investors in the early 2000s when the interest rates were at a low level. These products
have become popular in Europe and in the Americas as a way of targeted payouts on certain investments. There are some
risks involved with these notes. For the investor, the initial coupon in the rst year may be followed by very low returns and the
note may not redeem for the next 10 years. For the issuer, after they pay a high initial coupon, the complex formula may pay the
remaining coupons (up to the target cap) in the following year and be forced to redeem and return the money to the investor in
a relatively short time.
You can use the shortcut SWPM TARN <Go> to access the TARN template from the command line, or you can click the
SWPM's TARN template is organized into tabs that allow you to set up and analyze the deal. You can structure and value
your deal on the Main tab of the template, which is divided into two sections. You can input details of the deal in the deal
parameters section, then evaluate the swap in the valuation section.
Control Area: Allows you to navigate between the tabs, analyze deals, and congure your default settings.
Deal Parameters: Allows you to congure your contract parameters. By default, a 5-year structure with a target coupon of
12% appears. You can enter, for example, the notional amount, currency, target coupon, effective date, and maturity.
To display details of the cashows for the deal, including the cumulative coupon at each payment date, click the
Cashow tab.
To display and update additional deal parameters, such as curves, date generation, and calendar settings, click the
Detail button.
value at the market close of the day indicated in the Curve eld. The Valuation date is the date at which future cashows
are discounted.
T+2. To price swaps as of a historical date, you must backdate both the Curve and Valuation elds. For example, to mark to
market at quarter's end, you can enter the historical quarter-end date in both the Curve Date and Valuation elds.
To backdate the valuation, enter a historical date in the Curve and Valuation elds.
The Valuation section also allows you to select the variable you want to solve for and evaluate the deal. You can customize
the valuation by choosing a variable from the Calculate drop-down menu. You can solve for the variables Premium
OAS
370
371
370
and
You can further analyze TARNs by selecting another tab from the control area. Additionally, you can save your deal by selecting
Price.
FIXED-FLOAT
This topic explains "ip op" (xed to oat) notes, which switch from a oating coupon to a xed coupon or vice versa, and
then describes how to use the associated template in SWPM to create and value ip ops.
Fixed to oat is a type of exotic structure that switches between two types of securities, i.e., converts xed-rate debt to
oating-rate debt or vice versa. The date at which conversion takes place generally coincides with the securitys call date.
Investors and borrowers may be interested in these securities. In a Fed tightening posture, oat to xed structures appeal
to investors as they attempt to capture the benet of the Feds interest rate hikes before locking in a xed rate for a longer
period of time. Borrowers are interested in the oat to xed security as they lock in current rates as xed, anticipating further
increases in their costs. Borrowers could also make the case for going xed to oat in a declining interest rate environment for
issuers/borrowers. Investors may determine the length of time the coupon rate oats to reect their expectations for the end of
the Feds tightening cycle.
Consider ISIN US869099AE12 as an example. As indicated on the Description (DES) function, most details are standard,
except for the following: it is xed for the initial (rst year) period with 4.75% as the xed rate and then converts to USD 3M
Libor plus 182bps. Fixed payments are semi-annual 30/360 and oating payments are quarterly ACT/360.
You can use the shortcuts SWPM -FLP <Go> to access the ip op template from the command line, or you can click the
Products toolbar button to choose a template from a menu. The Main tab can be dynamically resized using the zoom slider or
by using Ctrl or Shift and scrolling your mouse wheel.
SWPM's ip op template is organized into six tabs that allow you to set up and analyze the deal. You can structure and value
your deal on the Main tab of the template, which is divided into two sections. You can input details of the deal in the deal
371
Deal Parameters: Allows you to congure your contract parameters. By default, a ve-year structure with a xed coupon
of 5% and a oating index of USD 3M Libor appears. The structure starts out with a xed rate coupon and then converts to
a oating rate security. The switch date is normally one year from the effective date. For example, you can enter:
Deal Parameters: The notional amount, currency, and effective date.
Flip Flop Parameters: The initial coupon and the switch date (i.e., Float End Date or Fixed End Date).
Option: Optionality details. You can congure your deal to include optionality by selecting an option type from the
Option drop-down. If your deal includes an option, you can congure the option details, including the rst call date and
the call price.
Fixed/FloatSchedule: Cap/oor rates and the amortization schedule. The Schedule eld allows you to fully customize
the schedule.
Fixed/Float Coupon Parameters: The xed coupon, along with the index and spread used to calculate the oating rate
and other details.
372
by choosing a variable from the Calculate drop-down menu. You can solve for the variables: Price (%)
and Funding
373
Spread (bp)
. You can also choose the model used to price the deal. For information about a eld, position your cursor
over it or see Denitions.
Valuation date is the date at which future cashows are discounted.
372
373
date in both the Market Data and Valuation elds. For more information, see Backdating the Valuation.
You can further analyze ip op notes by selecting another tab from the control area. Additionally, you can save your deal
Price.
SNOWBALL
This topic explains snowballs and then describes how to use the associated template in SWPM to create and value snowballs.
Snowballs are a type of structured (exotic) product that are hybrid securities combining xed income elements with derivative
instruments. The coupon varies depending on movements the specied underlying index. The note has a high rst coupon
of 8%, for example, in the rst year. After the initial period, coupons are linked to the previous coupon, plus a spread or
factor and less the oating index times a leverage. Snowballs correspond to an investor taking the view that interest rates will
increase less aggressively than is being priced in the market. If the view is correct, the coupon increases during the life of the
structure, i.e., snowballing.
Consider a ve-year structure with an intro coupon of 5% as an example. For the rst year, the coupon remains constant. For
the second year and each remaining year, the coupon is as follows: Previous Coupon + Y% - Libor, with a oor of 0 % and Y
increases on a regular basis. The issuer has the right to call the note at 100% on each coupon payment date.
ISIN XS0206799727 is another example. As indicated on the Description (DES) function, most details are standard, except
for the following: the spread is 250 bps until 12/14/2006 and steps up by 50 bps annually. The coupon factor remains at
145% for the remaining years until maturity.
Structured products provide investors the opportunity to outperform traditional investment products by embedding derivative
structures in the product. As structured notes are xed income products, they offer capital preservation. Yield enhancement
products allow investors to potentially obtain higher returns by embedding an option strategy in a xed income product. The
additional risk generated is tailored to t the clients market view and risk appetite.
You can use shortcuts (e.g., SWPM SBL <Go>) to access the snowball template from the command line, or you can click
the Products toolbar button to choose a template from a menu. The Main tab can be dynamically resized using the zoom slider
or by using Ctrl or Shift and scrolling your mouse wheel.
SWPM's snowball template is organized into six tabs that allow you to set up and analyze the deal. You can structure and
Deal Parameters: Allows you to congure your contract parameters. For example, you can enter:
Deal Parameters: The notional amount, currency, effective date, and maturity.
the call price.
Coupon Parameters: The intro coupon, the intro coupon end date, and the spread, leverage, and other inputs used to
calculate coupons after the intro coupon end date.
by choosing a variable from the Calculate drop-down menu. You can solve for the following variables: Price (%)
374
375
Funding Spread (bp)

. You can also choose the model used to price the deal. For information about a eld, position your
cursor over it or see Denitions.
374
375
You can further analyze snowballs by selecting another tab from the control area. Additionally, you can save your deal by
Price.
SNOWBEAR
This topic explains snowbears and then describes how to use the associated template in SWPM to create and value
snowballs.
Snowbears are an interest rate-linked structured product. They are exotic products that combine xed income elements with
derivatives. The coupon varies depending on movements in certain specied underlying indices. The note has a high rst
coupon in the rst year, or intro period. After the intro period, the coupon is calculated in the following way: a factor multiplied
by the difference between the reference index and a spread is added to the coupon that was previously paid out. A snowbear
is similar to a snowball, except snowbears ip around the xed and oating elements in the payoff formula. Snowbears
correspond to the investor taking the view that interest rates will increase more than is being priced in the market. If the view is
correct, the coupon increases during the life of the structure.
Consider ISIN XS0218830007 as an example. As indicated on the Description (DES) function, most details are standard,
except for the following: there is a leverage of four for the index and a negative spread needs to be entered starting from year
two after multiplying by four for the next three years. The spread starts at 3.75% and steps up by 30 bps and 20 bps for the
third and fourth year.
Structured products give you the opportunity to outperform traditional investment products by embedding derivative structures
within the product. As structured notes are xed income products, they offer capital preservation. Yield enhancement products
allow investors to potentially obtain higher returns by embedding an option strategy into xed income product. The additional
risk generated is tailored to t the clients market view and risk appetite.
You can use shortcuts (e.g., SWPM SBR <Go>) to access the snowball/snowbear template from the command line, or you
can click the Products toolbar button to choose a template from a menu. The Main tab can be dynamically resized using the
zoom slider or by using Ctrl or Shift and scrolling your mouse wheel.
SWPM's snowbear template is organized into six tabs that allow you to set up and analyze the deal. You can structure and
parameters section, then evaluate the deal in the valuation section. For denitions of the elds in the template, see Denitions.
You can also position your cursor over a eld on the template to display additional information.
the call price.
376
and Funding
377
Spread (bp)
376
377
You can further analyze snowbears by selecting another tab from the control area. Additionally, you can save your deal by
Price.
THUNDERBALL
This topic explains thunderballs and then describes how to use the associated template in SWPM to create and value
thunderballs.
In effect, thunderballs are a leveraged version of a snowball. They are structured (exotic) products that combine xed income
elements with derivatives. The coupon varies depending upon movements in the specied underlying index. The note has a
high rst coupon of 7%, for example, in the rst year. After the initial period, coupons are linked to the previous coupon times
a factor less the oating index times a leverage. The investor is taking the view that interest rates will increase less aggressively
than is being priced in the market. If the view is correct, the coupon will increase during the life of the structure.
Consider a ve-year structure with an intro coupon of 5% as an example. For the rst year, the coupon remains constant. For
the second year and each remaining year, the coupon is as follows: Previous Coupon * Leverage (Y) Leverage * Libor, with
a oor of 0 % and Y increases on a regular basis. The issuer has the right to call the note at 100% on each coupon payment
date.
ISIN FR0010225508 is another example. As indicated on the Description (DES) function, most details are standard, except
for the following: the previous coupon factor is 125% in year two and steps up by 10% for the next two years. The coupon
factor remains at 145% for the remaining years until maturity.
Structured products afford investors the opportunity to outperform traditional investment products by embedding derivative
structures within the product. As structured notes are xed income products, they offer capital preservation. Yield
enhancement products allow investors to potentially obtain higher returns by embedding an option strategy into xed income
product. The additional risk generated is tailored to t the clients market view and risk appetite.
You can use shortcuts (e.g., SWPM TBL <Go>) to access the thunderball template from the command line, or you can click
the Products toolbar button to choose a template from a menu. The Main tab can be dynamically resized using the zoom slider
or by using Ctrl or Shift and scrolling your mouse wheel.
SWPM's thunderball template is organized into ve tabs that allow you to set up and analyze the deal. You can structure and
the call price.
378
and Funding
379
Spread (bp)
378
379
You can further analyze thunderballs by selecting another tab from the control area. Additionally, you can save your deal by
Price.
KNOCK IN/OUT
This topic explains knock in/knock out (KIKO) options/swaps/swaptions and then describes how to use the associated
template in SWPM to create and value KIKO structures.
Knock-in/knock-out options/swaps/swaptions are part of a group of structures that are broadly classied as barrier options.
Also known as trigger options, they are path-dependent structures that are either activated (knocked in) or terminated
(knocked out) if a (index) rate reaches a specied trigger level between inception and expiry.
Knock in options activate when the barrier is reached and knock out options terminate when the barrier is reached. The barrier
can be any tradable variable and may or may not be directly related to the underlying of the original option. Most available
options can be adapted to be barrier options.
Termination knock out options behave identically to standard European-style options, but carry lower initial premiums because
they may be extinguished before reaching maturity. In contrast, knock in options behave identically to European-style options
only if they are activated/knocked in and also command a lower premium. The standard barrier options have barrier levels
that are monitored continually during the lifetime of the option. Single barrier options that have a level above the spot rate are
classied as up and out or up and in. Single barrier options that have levels below the spot rate are known as down and out
and down and in. They can also be discrete monitoring options with a barrier that can be either knocked in or knocked out on
rollover/reset dates.
The price of a barrier option depends on the probability of the barrier being reached and the value of the underlying option, if it
is reached. Barrier options are therefore very sensitive to volatility. Both receiver and payer swaptions can be knocked in with
reference to a wide range of underlyings, including Libor, FX, commodity, and equity levels.
Target Market
Barrier options can be useful for an investor or borrower when the underlying view of interest rates is dependent on a trigger
level in the same or a different market being reached. Knock-in/knock-outs are suitable for any borrower whose need for
interest rate protection is contingent on another underlying, corporates that are funding their expansion and growth, and
borrowers in native or international capital markets. Knock-in/knock-outs are also suitable for asset/liability managers who
target certain interest rate levels and want to pay a xed rate at a subsidized rate, lowering the funding cost. Knock in/knock
out structures give the holder the option to get out of or into trades based on a specic underlying index reaching a specic
barrier. For example, a company wants to borrow money (with a rate protection) and wants to pay oating, but not if the rates
go above a certain level at different annual intervals. It is considerably cheaper to buy barrier options than traditional options, as
barrier options are auto terminated or started based on triggers.
Advantages:
Cheaper than standard options
Flexibility in setting the barrier level and thus the cost of the option
Can be linked to any underlying

Customized to client exposures
Disadvantages:
Rate protection is contingent upon an independent event.
Discrete Barrier Options in SWPM
SWPM offers the following discrete barrier options:
Knock-in/knock-out on caps/oors
Knock-in/knock-out on swaptions
These include barrier options where the trigger is only valid on certain xing dates.
You can use shortcuts (e.g., SWPM KKCAP KI <Go> or SWPM KKFLR KI <Go>) to access the knock-in/knock-out
SWPM's knock in/knock out template is organized into tabs that allow you to set up and analyze the deal. You can structure
and value your deal on the Main tab of the template, which is divided into two sections. You can input details of the deal in the
deal parameters section, then evaluate the deal in the valuation section.
Control Area: Allows you to navigate between the tabs, analyze deals, and congure your default settings.
Deal Parameters: Allows you to congure your contract parameters. By default, a three-year structure with a knock
in/knock out level of 5.75% on the oating index of USD 3M Libor appears. You can enter, for example, the notional
amount, currency, effective date, and maturity, as well as your custom knock in/knock out level. For KIKO swaps/swaptions,
the underlying swap oating index and swaption barrier index can be either Libor or CMS rates. For denitions of the elds
in the template, see Denitions.
To further customize the knock level, click the Knock Schedule tab. The barrier level can be stepped up or down
according to the structure details.
To display and update additional deal parameters, such as curves, date generation, and calendar settings, click the
Detail button.
Valuation: Allows you to backdate the curve, so you can price the deal as of a historical date. SWPM calculates the
market value at the market close of the day indicated in the Curve eld. The Valuation date is the date at which future
cashows are discounted.
historical date, you must backdate both the Curve and Valuation elds. For example, to mark to market at quarter's end, you
can enter the historical quarter-end date in both the Curve Date and Valuation elds.
To backdate the valuation, enter a historical date in the Curve and Valuation elds.
The Valuation section also allows you to select the variable you want to solve for and evaluate the deal. You can customize
the valuation by choosing a variable from the Calculate drop-down menu. You can solve for the variables: Premium
OAS
381
380
and
. For denitions of the elds in the template, see Denitions.
You can further analyze KIKOs by selecting another tab from the control area. Additionally, you can save your deal by selecting
Price.
NIKKEI LINKED NOTES
This topic explains Nikkei linked notes and then describes how to use the associated template in SWPM to create and value
Nikkei linked notes.
Nikkei linked notes are a very popular type of equity index linked structure in Asia-Pacic; the common feature of all types
of Nikkei linked notes is the presence of a knock-out feature, also known as autocallability. While the autocallable feature
depends on the behavior of the underlying equity index, the hard call feature is an early redemption dependent on the behavior
of interest rates.
The intro coupon is a feature of the Nikkei linked note callable knock-out, since after the intro coupon, the coupon usually
becomes digital. After the intro coupon period, the coupon paid depends on the level reached by the Nikkei index throughout
the remaining life of the bond. At each observation date, if the index is greater than a trigger level, the buyer of the bond
380
381
receives the rst coupon. Otherwise, the buyer receives the second. The digital serial coupon is paid following the general pay
frequency, day-count and business day adjustment settings for the bond.
The knock-out feature is the most distinctive aspect of a Nikkei linked note and is common to both the callable knock-out
and the down-in knock-out subtypes. Knock-out options are part of a group of options that are broadly classied as "barrier
options." Also known as "trigger options," they are path-dependent and terminated (knocked-out) if the Nikkei index reaches
a specied trigger level between inception and expiry. Before termination, knock-out options behave identically to standard
European-style options, but carry lower initial premiums because they may be extinguished before reaching maturity.
The down-in feature is an additional condition to redemption and is found only in the down-in Nikkei subtype. In the down-in
subtype, knocking the barrier does not cause early redemption. Rather, it determines the value of the redemption price if the
bond reaches maturity. If the bond does not knock out before maturity, the redemption price is dependent on the down-in
feature/level; the nal redemption is the "protection" price if the Nikkei index is never below the down-in level at any of the
observation dates. If the Nikkei index is below the down-in level at least on one of the observation dates, the nal payoff is
(Nikkei Final Price / Nikkei Spot Price) x 100) %, also depending on a cap and a oor. If the bond knocks out prior to maturity,
the redemption is at the autocall level instead.
The price of a barrier option depends upon the probability of the barrier being reached and the value of the underlying option
if it is reached. This autocallable early redemption feature is therefore very sensitive to volatility. Interest-rate volatility affects
multiple aspects of the valuation of Nikkei linked notes, namely:
The model used for the evaluation of the rate portion is a Hull-White 1-factor model where the diffusion process of the short
rate is governed by the applicable set of volatilities.
The callability feature requires a thorough calibration process to the market prices of swaptions.
A volatility cube, capable of generating a four-dimensional volatility space for different strike levels is necessary.
For information about the model used for the valuation of the rate portion, see Nikkei Linked Notes: Volatility.
You can use shortcuts (e.g., SWPM NLNHC <Go> and SWPM NLNDI <Go>) to access the Nikkei linked note template
from the command line, or you can click the Products toolbar button to choose a template from a menu. The Main tab can be
dynamically resized using the zoom slider or by using Ctrl or Shift and scrolling your mouse wheel.
SWPM's Nikkei linked note template is organized into seven tabs that allow you to set up and analyze the deal. You can
structure and value your deal on the Main tab of the template, which is divided into two sections. You can input details of the
deal in the deal parameters section, then evaluate the deal in the valuation section.
Deal Parameters: Allows you to congure your contract parameters. By default, a 5-year structure with an intro coupon of
5% appears. For example, you can enter:
Deal Parameters: The notional amount, effective date, and maturity.
Early Redemption: The settings for the knock-out optionality. The Knock Level is the barrier price for the underlying
Nikkei index that triggers the early redemption (autocallable) feature. The Frequency determines the frequency of
observation for the knock-out feature. The Redemption Rate is the redemption price of the bond; when the barrier is
breached, the redemption rate is paid at the next coupon payment date.
Coupon Parameters: The initial coupon and the condition (Nikkei index level) to which subsequent coupons are linked.
Option: The type of call, either none, European, or Bermudan. If your deal includes an option, you can congure the
option details, including the rst call date and the call price. Callability can begin at any time during the life of the bond.
The Notication Days eld allows you to enter the number of business days prior to settlement dates. Settlement dates
coincide with coupon payment dates.
Call Custom Schedule/Coupon Schedule/Early Redemption Schedule: Allows you to fully customize the corresponding
schedules.
382
and Funding
383
Spread (bp)
. You can also choose the model used to price the deal. For more information about the models use in the
valuation, see Nikkei Linked Notes: Volatility.
382
383
You can further analyze Nikkei linked notes by selecting another tab from the control area. Additionally, you can save your deal
Price.
OPTIONS
SWAPTION
This topic describes different types of swaptions and then describes how to use the associated template in SWPM to create
and value swaptions.
For a brief video on structuring swaptions, see Structuring Swaptions.
SWPM allows you to price different types of swaptions:
Libor Rates: European, Bermudan, American swaptions and Libor Forward (European).
Libor Rates: European, Bermudan knock-in/knock-out swaptions and quanto knock-in/knock-out.
Bermudan and American swaptions differ from European swaptions because the option can be exercised at a set of dates
(Bermudan) or any day (American). Bermudan and American swaptions can be priced directly from the main swaption pricing
screen. American swaptions are available only for Libor-based swaps.
You can use shortcuts (e.g., SWPM -OV <Go>) to access the swaption template from the command line, or you can click the
For more information on shortcuts, see Shortcuts.
For information on how to load templates from the toolbar, see Choosing a Template.
SWPM's swaption template is organized into eight tabs that allow you to set up and analyze the deal. You can structure and
value your deal on the Main tab of the template, which is divided into six expandable sections. By default, when you access the
swaption template in SWPM, the Option and Valuation Settings sections expand, spotlighting the elds most relevant to the
swaption structure. For information on customizing your default view, see Swaption/Cancellable Swap.
Note: This topic describes the Main tab of the swaption template. For information on the other tabs, see
Swaption/Cancellable Swap.
You can expand any section by clicking the plus sign (+) to the left of its heading. For example, you can click the plus sign (+)
to the left of Underlying to display the elds related to the swap underlying the deal.
You can input details of the deal in each of the expandable sections in the swaption template, then evaluate the deal in the
Results section.
Note: When you update a default value, the updated value appears in blue.
and congure your default settings. The Views toolbar button allows you to dene your view of the swaption template. For
example, if you want all sections to expand by default when you access the swaption template, you can choose the Full
Data view. For more information, see Dening Your View.
The Solver drop-down menu at the top of the screen allows you to customize your valuation.
384
You can update your deal inputs and solve for the following variables: Premium
Z-Spread...
384
385
386
387
387
388
, Fixed Coupon
, and Spread
, Implied Vol
385
386
, Par Shift...
389
. The value of the currently selected variable appears in green.
Deal: Allows you to specify a counterparty and a central counterparty. Furthermore, the Deal section displays the deal ID,
which you can use to access saved deals or download swap data to Microsoft Excel. For more information, see Saving
Deals. Finally, you can access deal properties such as privileging data, creation date, date of last update, and notes via the
Properties button.
Option: Allows you to congure your settings for the option, including the style
, position
, swaption expiration, and
tenor of the underlying swap, along with details such as the notional amount, currency, effective date, maturity, notication
dates, and exercise fees. The expanded Option section appears below:
390
391
The Type eld converts text inputs (e.g., 1 Y [to expiration] x 5 Y [swap tenor]) into the Expiration, Swap Start, and Swap
End dates for ease of use. For out of the money (OTM) options, the Strike eld allows you to enter a strike in the following
format: at the money (ATM) plus or minus a basis point spread. For example, you can enter ATM + 20. The Fee eld allows
you to specify a fee/premium, which is then integrated into the market value and the Greeks. The Delivery drop-down menu
allows you to choose a settlement method, which are described in detail in Swaption Settlement Methods. You can also
access the option schedule via the Option Schedule button. For information on a eld, see Denitions.
389
of the xed coupon.
390
391
388
Underlying: Allows you to congure the terms for the swap underlying the deal. The expanded Underlying section appears
below:
For the xed leg, you can enter, for example, the market side and xed coupon (i.e., the strike) for the deal. For the oating
leg, you can enter the market side, the index used to calculate the oating rate, the reset frequency, pay frequency, spread,
and other details. The Amortize and Details buttons allow you to quickly access the amortization method and schedule as
well as detailed leg characteristics.
For information on a eld, see Denitions.
For information on updating the amortization method and schedule, see Amortization Wizard.
For information on updating detailed leg characteristics, see Details.
Market: Allows you to update the curves and volatilities that SWPM uses to discount cashows and project forward
pricing when calculating the Market Value of the swaption. The expanded Market section appears below:
The Vol Cube drop-down menu allows you to choose between Flat volatility (manual input) and volatilities from the Volatility
Cube (VCUB) function. You can select the desired volatility cube and create/customize cubes from VCUB.
For information on how to update the curves that appear by default, see Setting a Source Curve.
For information on VCUB, see VCUB <Help>.
Valuation Settings: Allows you to update the dates and models used in the valuation. The expanded Valuation Settings
section appears below:
The Model drop-down menu allows you to choose the model used in the valuation of European swaptions: HW1F
393
Black-Scholes
, Normal (Bachelier)
394
392
. Each model recalculates the price and risk sensitivities of the swaption. The
395
model drives the outputs of the Greeks in the Results section in normal
the models, see Volatility.
396
or lognormal
. For more information about

397
Note: For Bermudan and American swaptions, the Calibration tab appears in SWPM when you select the HW1F
model. The Calibration tab displays the Bermudan instruments the structure is using for calibration on each option date. For
historical date, you must backdate the Curve Date and Valuation elds. For example, to mark to market at quarter's end, you
can enter the historical quarter-end date in both the Curve Date and Valuation elds. For more information, see Backdating
the Valuation. You can adjust the closing market for each currency from the Swap Curve Defaults (SWDF) function. For
more information, see SWDF <Help>.
Results: Allows you to analyze the market value and sensitivity of the deal. Only risk management Greeks appear in the
Results section; however, you can click the More Greeks button to display additional sensitivity measures, including the
underlying DV01, option DV01, and option norm DV01. For more information on a eld, position your mouse over it or see
Denitions.
392
393
394
395
396
397
The Hull & White 1 Factor model is a short-rate model where the short rate is assumed to follow a mean-reverting
Brownian-motion process. The short rate volatility is assumed to be time dependent, while its mean reversion is
assumed constant. European swaptions can be priced efciently in terms of the mean reversion and short-rate-volatility
function by methods such as the so-called Jamshidian decomposition, which consists of dividing the bond (or swap) into
a set of zero-coupon bonds with strikes, so all are exercised under the same conditions.
The Black-Scholes model assumes that the underlying swap rate follows a geometric Brownian motion with no drift and
constant volatility. This assumption implies that the underlying forward swap rate has a lognormal distribution. European
swaption prices can be obtained analytically. The Black-Scholes-implied volatility is dened as the volatility to be used in
the option-pricing formula to reproduce the swaption market price.
This model assumes that the underlying swap rate follows a Brownian motion with no drift and constant volatility. This
assumption implies that the underlying forward swap rate has a normal distribution. European swaption prices can be
obtained analytically. The normal implied volatility is dened as the volatility to be used in the option pricing formula to
reproduce the swaption market price.
Deals with basis point changes in rates rather than, as in lognormal volatility, with percentage changes in rates. Volatility
is not related to the level of the rate, and volatilities are quoted on an absolute basis. The single volatility that can be
used in the Normal (Bachelier) model so that the price reproduces the market price.
Deals with percentage changes in rates rather than, as in normal volatility, with basis points changes in rates. Volatility is
proportional to the level of the interest rate, and implied volatilities are quoted as this relative volatility. Often called the
Black volatility.
You can further analyze a swaption by selecting another tab from the control area, such as the Details, Curves, or Cashow
tab. Additionally, you can save your deal by selecting Actions > Save from the toolbar. Once you save the deal, you can
access it from other Bloomberg functions or through Bloomberg's API by entering the deal number followed by the <Corp>
key. For example, this allows you to download the cashow schedule for an individual leg to Microsoft Excel with Bloomberg's
API.
For information on the other tabs that appear on the template, see Swaption/Cancellable Swap.
For more information on saving deals, see Saving Deals.
Price.
For sample deal terms for a swaption, see Sample Deal Terms (Swaption).
CANCELLABLE SWAP
This topic explains cancellable swaps and then describes how to use the associated template in SWPM to create and value
cancellable swaps.
For a brief video on structuring cancellable swaps, see Structuring Cancellable Swaps.
A cancellable swap is a vanilla swap where one of the counterparties has the right, but not the obligation, to terminate the
swap on one or more pre-determined dates during the life of the swap. The price of this swaption includes the swap value and
the value of a cancellation option. This swap has two types, depending on who has the right to terminate the underlying swap:
Callable: In a callable swap, the xed rate payer has the right to terminate the swap. This is a combination of a vanilla
swap and a receiver swaption.
Puttable: In a puttable swap, the xed rate receiver has the right to terminate the swap. This is a combination of a vanilla
swap and a payer swaption.
The advantages of a cancellable swap include the following:
The right to cancel effectively limits downside.
There is no premium to be paid upfront.
The swap is customizable (one contract and not swap plus swaption).
The swap is exible.
The disadvantage of a cancellable swap is that it has a higher swap rate than the traditional swap.
Callable swaps are suitable for any xed rate payer where there is a desire to protect against adverse rate movements in
the future, or where there is a business reason why the swap may need to be cancelled at some point in the future and the
company wishes to protect itself against the potential costs of unwind. There is also a demand for callable swaps from buyers
of callable bonds if they wish to hedge or asset swap the bonds.
You can use shortcuts (e.g., SWPM CS <Go>) to access the callable swap template from the command line, or you can
click the Products toolbar button to choose a template from a menu.
SWPM's cancellable swap template is organized into eight tabs that allow you to set up and analyze the deal. You can
structure and value your deal on the Main tab of the template, which is divided into six expandable sections. By default, when
you access the cancellable template in SWPM, the Swap, Option and Valuation Settings sections expand, spotlighting the
elds most relevant to the cancellable swap structure. For information on customizing your default view, see Dening Your
View.
Note: This topic describes the Main tab of the cancellable swap template. For information on the other tabs, see
Swaption/Cancellable Swap.
You can expand any section by clicking the plus sign (+) to the left of its heading. For example, you can click the plus sign (+)
to the left of Market to display the curves and volatilities that SWPM uses to value the cancellable swap.
You can input details of the deal in each of the expandable sections in the swaption template, then evaluate the deal in the
Results section.
Note: When you update a default value, the updated value appears in blue.
and congure your default settings. The Views toolbar button allows you to dene your view of the cancellable swap
template. For example, if you want all sections to expand by default when you access the cancellable swap template, you
can choose the Full Data view. For more information, see Dening Your View.
The Solver drop-down menu at the top of the screen allows you to customize your valuation.
398
You can update your deal inputs and solve for the following variables: Premium
Z-Spread...
398
399
400
401
402
401
402
, Fixed Coupon
, and Spread
, Implied Vol
399
400
, Par Shift...
403
. The value of the currently selected variable appears in green.
of the xed coupon.
Deal: Allows you to specify a counterparty and a central counterparty. Furthermore, the Deal section displays the deal ID,
which you can use to access saved deals or download swap data to Microsoft Excel. For more information, see Saving
Deals. Finally, you can access deal properties such as privileging data, creation date, date of last update, and notes via the
Properties button.
Swap: Allows you to congure your settings for both legs of the deal. For the xed leg, you can enter, for example, the
market side, notional amount, currency, effective date, maturity, and xed coupon (i.e., the strike) for the deal. For the
oating leg, you can enter the market side, the index used to calculate the oating rate, the reset frequency, pay frequency,
spread, and other details. The Amortize and Details buttons allow you to quickly access the amortization method and
schedule as well as detailed leg characteristics.
For information on updating the amortization method and schedule, see Amortization Wizard.
For information on updating detailed leg characteristics, see Details.
404
405
Option: Allows you to congure your settings for the option, including the position
and style
, along with the
swaption expiration and the period of time for which the swap is not cancellable (NC). For Bermudan or American
swaptions, the First Call eld allows you to enter the rst call date. You can also access the option schedule via the Option
Schedule button. For information about a eld, see Denitions.
Market: Allows you to update the curves and volatilities that SWPM uses to discount cashows and project forward
pricing when calculating the NPV of the cancellable swap. The expanded Market section appears below:
The Vol Cube drop-down menu allows you to choose between Flat volatility (manual input) and volatilities from the Volatility
Cube (VCUB) function. You can select the desired volatility cube and create/customize cubes from VCUB.
403
404
405
For information on how to update the curves that appear by default, see Setting a Source Curve.
For information on VCUB, see VCUB <Help>.
Valuation Settings: Allows you to update the dates and models used in the valuation. The Model drop-down menu
allows you to choose the model used in the valuation of European swaptions: HW1F
408
(Bachelier)
406
407
, Black-Scholes
, Normal
. Each model recalculates the price and risk sensitivities of the swaption. The model drives the outputs of the
409
Greeks in the Results section in normal
or lognormal
410
. For more information about the models, see Volatility.

411
Note: For Bermudan and American swaptions, the Calibration tab appears in SWPM when you select the HW1F
model. The Calibration tab displays the Bermudan instruments the structure is using for calibration on each option date. For
the Valuation. You can adjust the closing market for each currency from the Swap Curve Defaults (SWDF) function. For
more information, see SWDF <Help>.
Results: Allows you to analyze the market value and sensitivity of the deal. Only risk management Greeks appear in the
Results section; however, you can click the More Greeks button to display additional sensitivity measures, including the
underlying DV01, option DV01, and option norm DV01. For more information on a eld, position your mouse over it or see
Denitions.
406
407
408
409
410
411
This model assumes that the underlying swap rate follows a Brownian motion with no drift and constant volatility. This
assumption implies that the underlying forward swap rate has a normal distribution. European swaption prices can be
obtained analytically. The normal implied volatility is dened as the volatility to be used in the option pricing formula to
reproduce the swaption market price.
Deals with basis point changes in rates rather than, as in lognormal volatility, with percentage changes in rates. Volatility
is not related to the level of the rate, and volatilities are quoted on an absolute basis. The single volatility that can be
used in the Normal (Bachelier) model so that the price reproduces the market price.
Deals with percentage changes in rates rather than, as in normal volatility, with basis points changes in rates. Volatility is
proportional to the level of the interest rate, and implied volatilities are quoted as this relative volatility. Often called the
Black volatility.
You can further analyze cancellable swaps by selecting another tab from the control area. Additionally, you can save your deal
by selecting Actions > Save from the toolbar. Once you save the deal, you can access it from other Bloomberg functions or
through Bloomberg's API by entering the deal number followed by the <Corp> key. For example, this allows you to download
the cashow schedule for an individual leg to Microsoft Excel with Bloomberg's API.
For information about the other tabs that appear on the template, see Swaption/Cancellable Swap.
Price.
CAP/FLOOR/COLLAR/STRADDLE
This topic explains interest rate caps, oors, collars, and straddles, and then describes how to use the associated templates in
SWPM to create and value vanilla call/put options on a oating index.
An interest rate cap is a derivative where the buyer receives payments at the end of each period in which the interest rate
exceeds the agreed upon strike price. An example of a cap would be an agreement to receive a payment for each month the
Libor rate exceeds 2.5%. Similarly, an interest rate oor is a derivative contract where the buyer receives payments at the end
of each period in which the interest rate is below the agreed upon strike price.
Caps and oors can be used to hedge against interest rate uctuations. For example, a borrower paying the Libor rate on a
loan can protect himself against a rise in rates by buying a cap at 2.5%. If the interest rate exceeds 2.5% in a given period,
the payment received from the derivative can be used to help make the interest payment for that period. Thus, the interest
payments are effectively "capped" at 2.5% from the borrower's point of view.
You can use shortcuts (e.g., SWPM -CAP <Go>, SWPM -COLLAR <Go>, and SWPM -STRDL <Go>) to access
cap/oor/collar/straddle templates from the command line, or you can click the Products toolbar button to choose a template
from a menu.
SWPM's cap/oor/straddle template is organized into eight tabs that allow you to set up and analyze the deal. You can
deal in the type/strategy and curve/volatilities data sections, then evaluate the deal in the valuation/greeks section.
Type/Strategy: Allows you to congure the deal, including the interest rate option type and the strategy. You can enter,
for example, the market side, notional amount, currency, effective date, maturity, and index underlying the option. If the
tenor of the reference rate is a swap rate, the convexity adjustment applies to the deal, the swaption volatility applies to the
valuation, and the deal type changes to the corresponding CMS type. For information about a eld, position your cursor
information, see Backdating the Valuation. You can adjust your default interest rate curves from the Swap Curve Defaults
(SWDF) function. For more information, see SWDF <Help>.
Schedule.
416
Strike
, Floor Strike
see Denitions.
417
, Par Shift...
418
419
, and Z-Spread...
412
, Implied Vol
413
, Spread
414
415
, Leverage
, Cap
. For information about a eld, position your cursor over it or
You can further analyze interest rate caps, oors, collars, and straddles by selecting another tab from the control area.
Additionally, you can save your deal by selecting Actions > Save from the toolbar. Once you save the deal, you can access
it from other Bloomberg functions or through Bloomberg's API by entering the deal number followed by the <CORP> key. For
example, this allows you to download the cashow schedule for an individual leg to Microsoft Excel with Bloomberg's API.
Price.
Sample Deal Terms for a Cap

Below are sample deal terms for a ve-year plain vanilla cap, which you can price using the cap template in SWPM. You can
input the terms in the type/strategy section of the cap template and press <Go> to price the deal.
Type/Strategy
Input
Type
Cap
413
414
415
412
416
417
418
419
into account.
Type/Strategy
Input
Notional
10 MM
Currency
EUR
Effective
04/19/2010
Maturity
10/19/2014
Index
EUR006M
Reset Frequency
Semiannual
Day Count
ACT/360
Modied Following
Strike
3% p.a.
DIGITAL CAP/FLOOR
This topic explains digital caps/oors. For information about how to use the associated template in SWPM to create and value
digital caps, see Cap/Floor/Collar/Straddle.
A digital cap/oor is similar to a plain vanilla cap/oor except for the payoff. Digitals provide the buyer with a xed payout
prole. This means that the buyer receives the same payout irrespective of how far above or below the strike the index reaches.
Digitals are very simple to understand and are cheaper to buy than standard options.
ASIAN CAP/FLOOR
This topic explains Asian caps/oors and then describes how to use the associated templates in SWPM to price an Asian
cap/oor.
Asian options, like caps/oors, give the buyer the right to receive the difference between the strike and the unweighted or
weighted average of the index rate during the averaging period, if the average is less than the strike. An unweighted average
is a simple arithmetic mean of all the reset rates in an averaging period, and a weighted average is the arithmetic average of
all the reset rates weighted according to the fraction of the year that each reset rate applies to. For more information about the
methodology used, see Methodologies and Spreadsheets.
You can use shortcuts (e.g., SWPM -CAP -ASIAN <Go> or SWPM -FLR -ASIAN <Go>) to access Asian cap/oor
SWPM's Asian cap/oor template is organized into seven tabs that allow you to set up and analyze the deal. You can structure
and value your deal on the Main tab of the template, which is divided into three sections. You can input details of the deal in
the type/strategy and curve/volatilities data sections, then evaluate the deal in the valuation/greeks section.
for example, the market side, notional amount, currency, effective date, maturity, and index underlying the option. For
Schedule.
424
Strike
, Floor Strike
see Denitions.
425
426
Par Shift...
427
, and Z-Spread...
420
, Implied Vol
421
, Spread
422
423
, Leverage
, Cap
. For information about a eld, position your cursor over it or
You can further analyze Asian caps/oors by selecting another tab from the control area. Additionally, you can save your deal
Price.
CROSS-CURRENCY SWAPTION
This topic explains cross-currency swaptions and then describes how to use the associated template in SWPM to create and
value cross-currency swaptions.
A cross currency swaption is an option to enter into a cross-currency swap, where one counterparty sells/buys the right to
enter into a currency swap with another counterparty on a pre-determined date(s), in which the rst counterparty pays a preset
xed or oating rate in another currency. The principal amount for nal exchange is set for both currencies.
421
422
423
420
424
425
426
427
into account.
You can use shortcuts (e.g., SWPM -XCOVFXFL <Go>, SWPM -XCOVFXFX <Go>, or SWPM -XCOVFLFL <Go>) to
access the cross currency swaption template from the command line, or you can click the Products toolbar button to choose
a template from a menu.
SWPM's cross-currency swaption template is organized into tabs that allow you to set up and analyze the deal. You can
structure and value your deal on the Main tab of the template, which is divided into four sections. You can input details of the
deal in the Fixed Leg, Floating Leg, and option/curve/volatilities data sections, then evaluate the deal in the valuation section.
Fixed Leg: Allows you to congure your settings for the xed leg of the deal. You can enter, for example, the market
side, notional amount, currency, effective date, maturity, and xed coupon (i.e., the strike) for the deal. From the xed
leg section, you can click the Detail button to display and update details such as the discount curve, roll convention, rst
payment, the amortization schedule, and calculations calendar for the xed leg. For denitions of the elds, see Denitions.
Floating Leg: Allows you to congure your settings for the oating leg of the deal. You can enter the market side,
currency, notional amount (SWPM supports asymmetric notionals), and index used to calculate the oating rate, along
with the reset frequency, pay frequency, spread, and other details. From the oating leg section, you can click the Detail
button to display and update details such as the discount curve, forward curve, roll convention, rst payment, amortization
schedule, and calculations calendars for the oating leg of the deal. For denitions of the elds, see Denitions.
Option/Curve/Volatilities Data: Allows you to congure your settings for the option,(e.g., the type
and rst call date),
along with the curves and volatilities that SWPM uses to discount cashows and project forward pricing when calculating
the Market Value of the swaption. The Vol Cube drop-down menu allows you to choose between Flat volatility (manual
input) and volatilities from the Volatility Cube (VCUB) function. From the option/curve/volatilities data section, you can click
the Correlation button to display and update the correlation between the two short rates and the correlations of each short
rate with the FX spot rate.
428
428
The option exercise type: European, Bermudan, or American.
historical date, you must backdate the Curve and Valuation elds. For example, to mark to market at quarter's end, you can
enter the historical quarter-end date in both the Curve Date and Valuation elds. For more information, see Backdating the
Valuation.
For denitions of the elds, see Denitions.
Valuation: Allows you to analyze the sensitivity of the deal and calculate the market value of the deal. At the top of the
section, the market value and accrued interest since the last leg cashow date for the individual legs appear. The Currency
drop-down menu allows you to choose the leg currency that is the report currency for the deal. For denitions of the elds,
see Denitions.
You can further analyze cross-currency swaptions by selecting another tab from the control area. Additionally, you can save
Price.
CROSS-CURRENCY CANCELLABLE SWAP

This topic explains cross-currency cancellable swaps and then describes how to use the associated template in SWPM to
create and value cross-currency cancellable swaps.
A callable cross-currency swap is a cross currency swap with an option to cancel, where one party pays xed/oating on a
currency and receives a xed/oating on another currency. The xed payer also has the option (long) to call/cancel the swap at
pre-determined date(s).
You can use shortcuts (e.g., SWPM -XCCSFXFL<Go>) to access the cross-currency cancellable swap template from the
SWPM's cross-currency cancellable swap template is organized into tabs that allow you to set up and analyze the deal. You
can structure and value your deal on the Main tab of the template, which is divided into four sections. You can input details
of the deal in the Fixed Leg, Floating Leg, and option/curve/volatilities data sections, then evaluate the deal in the valuation
section.
Fixed Leg: Allows you to congure your settings for the xed leg of the deal. You can enter, for example, the market
side, notional amount, currency, effective date, maturity, and xed coupon (i.e., the strike) for the deal. From the xed
leg section, you can click the Detail button to display and update details such as the discount curve, roll convention, rst
payment, the amortization schedule, and calculations calendar for the xed leg. For denitions of the elds, see Denitions.
Floating Leg: Allows you to congure your settings for the oating leg of the deal. You can enter the market side,
currency, notional amount (SWPM supports asymmetric notionals), and index used to calculate the oating rate, along
with the reset frequency, pay frequency, spread, and other details. From the oating leg section, you can click the Detail
button to display and update details such as the discount curve, forward curve, roll convention, rst payment, amortization
schedule, and calculations calendars for the oating leg of the deal. For denitions of the elds, see Denitions.
Option/Curve/Volatilities Data: Allows you to congure your settings for the option,(e.g., the type
, position, and rst
call date), along with the curves and volatilities that SWPM uses to discount cashows and project forward pricing when
calculating the Market Value of the swaption. The Vol Cube drop-down menu allows you to choose between Flat volatility
(manual input) and volatilities from the Volatility Cube (VCUB) function. From the option/curve/volatilities data section, you
can click the Correlation button to display and update the correlation between the two short rates and the correlations of
each short rate with the FX spot rate.
429
Note: By default, SWPM prices swaps as of today, i.e., the default curve date is the current date and the valuation date
is T+2. To price swaps as of a historical date, you must backdate the Curve and Valuation elds. For example, to mark to
For denitions of the elds, see Denitions.
429
Valuation: Allows you to analyze the sensitivity of the deal and calculate the market value of the deal. At the top of the
section, the market value and accrued interest since the last leg cashow date for the individual legs appear. The Currency
drop-down menu allows you to choose the leg currency that is the report currency for the deal. For denitions of the elds,
see Denitions.
You can further analyze cross-currency cancellable swaps by selecting another tab from the control area. Additionally, you
Price.
CAPPED FLOATER
This topic explains capped oaters and then describes how to use the associated template in SWPM to create and value
capped oaters.
A capped oater is similar to a regular oater or a oating leg of a swap, except that the rate is capped. In addition, the rate
can be oored, multiplied by a scaling factor, or a spread can be added. Capped oaters can be structured with an initial
coupon (intro coupon). The structure can also be callable.
You can use shortcuts (e.g., SWPM -CAPFLT <Go>) to access the capped oater template from the command line, or you
can click the Products toolbar button to choose a template from a menu.
SWPM's capped oater template is organized into eight tabs that allow you to set up and analyze the swap. You can structure
the cap details and curve/volatilities data sections, then evaluate the swap in the valuation/greeks section.
Cap Details: Allows you to congure your settings for the deal, including the oater type (capped, oored, collared) and
the option type (cancellable or not cancellable). You can enter, for example, the notional amount, currency, effective date,
430
maturity, and cap. For cancellable caps, you can congure the option details, including the style
, the expiration, and the
rst call date. For forward-starting options, the Settlement eld allows you to enter the forward start date. For information
Note: The Details tab allows you to further congure the structure; you can manually enter, for example, coupon rates or
drag and drop the schedule from Microsoft Excel into SWPM. For more information, see Importing Data from Excel.
Curve/Volatilities Data: Allows you to update the curves and volatilities that SWPM uses to discount cashows
and project forward pricing when calculating the Market Value of the deal. The Vol Cube drop-down menu allows you
to choose between Flat volatility (manual input) and volatilities from the Volatility Cube (VCUB) function. From the
option/curve/volatilities data section, you can click the Correlation button to display and update the correlation between the
two short rates and the correlations of each short rate with the FX spot rate.
Note: By default, SWPM prices swaps as of today, i.e., the default curve date is the current date and the valuation date
is T+2. To price swaps as of a historical date, you must backdate the Curve and Valuation elds. For example, to mark to
430
Valuation/Greeks: Allows you to analyze the sensitivity of the deal (including the underlying DV01 and option DV01)
and select the variable you want to solve for. You can calculate the market value of the deal, or you can customize the
valuation by choosing a variable from the Calculate drop-down menu. You can solve for the following variables: Premium
432
433
434
435
, OAS
, Spread
, Leverage
, Cap
, Floor
436
437
, Par Shift...
438
, and Z-Spread...
431
. For information about a eld,
You can further analyze capped oaters by selecting another tab from the control area. Additionally, you can save your deal
download the cashow schedule for an individual leg to Excel with Bloomberg's API.
Price.
CMS SPREAD CAPPED FLOATER

This topic explains CMS spread capped oaters and then describes how to use the associated template in SWPM to create
and value CMS spread capped oaters.
Spread option is a structure where the complex coupon is based on the difference of two underlying assets. This could be
two tenors (CMS 30y CMS 10y) on a curve. The coupon can be levered and / or increased with a spread. Investors use
433
434
431
432
435
436
437
438
1) In the Calculate drop-down menu, solves for the level at which the oating rate is capped. 2) An option that provides
a payoff when a specied interest rate is above a certain level. The interest rate is a oating rate that is reset periodically.
1) In the Calculate drop-down menu, solves for the level at which the oating rate is oored. 2) A oor is an option that
provides a payoff when a specied interest rate is below a certain level. The interest rate is a oating rate that is reset
periodically.
products such as spread options to take a view of the curve if they feel that the spreads between two points are going to
tighten or widen, as the case may be for their respective valuations.
widespread even though the development of pricing and hedging techniques has not followed at the same pace. Spread
options are designed to mitigate adverse movements of several indexes, hence their popularity. Because of their generic
nature, spread options are used in markets as varied as xed income, currency, and foreign exchange.
Spread options are similar to a regular oating leg of a swap, except that the coupon is based on a spread between two tenors
on a curve. In addition, the rate can be capped, oored, or collared and may be multiplied by a scaling factor with a spread
added. The structure can also be callable.
You can use shortcuts (e.g., SWPM -CAPFLT -CMSSPRD <Go>) to access the CMS spread oater template from
the command line, or you can click the Products toolbar button to choose a template from a menu. The Main tab can be
dynamically resized using the zoom slider or by using Ctrl or Shift and scrolling your mouse wheel.
SWPM's spread capped oater template is organized into six tabs that allow you to set up and analyze the swap. You can
structure and value your deal on the Main tab of the template, which is divided into two sections. You can input details of the
deal in the deal parameters section, then evaluate the swap in the valuation section.
Deal Parameters: Allows you to congure your settings for the deal, including the oater type (capped, oored, collared)
and the option type (cancellable or not cancellable). You can enter, for example, the notional amount, currency, effective
date, maturity, and cap. For cancellable options, you can congure the option details, including the rst call date and the
call price. For information about a eld, position your cursor over it or see Denitions.
Note: The Schedule eld allows you to further congure the structure; you can manually enter, for example, cap rates
and the amortization schedule, or drag and drop the values from Microsoft Excel into SWPM. For more information, see
Importing Data from Excel.
Valuation/Greeks: Allows you to select the variable you want to solve for and evaluate the deal. You can customize the
valuation by choosing a variable from the Calculate drop-down menu. You can solve for the variables: Price (%)
439
and
440
Funding Spread (bp)

. You can also choose the Hull-White model used to price the option. For information about a eld,
You can further analyze CMS spread capped oaters by selecting another tab from the control area. Additionally, you can save
Price.
CAP/FLOOR SPREAD
This topic describes how to use the cap/oor spread templates in SWPM to create and value cap/oor spreads.
A spread option is a structure in which the complex coupon is based on the difference between two underlying assets, for
example, two tenors (CMS 30y CMS 10y) on a curve. The coupon can be levered and/or increased with a spread. Investors
use products like spread options to take a view of the curve if they feel that the spreads between two points are going to
tighten or widen as the case may be for their respective valuations.
widespread despite the fact that the development of pricing and hedging techniques has not followed at the same pace. They
are designed to mitigate adverse movements of several indexes, hence their popularity. Because of their generic nature, spread
options are used in markets as varied as xed income, currency, and foreign exchange markets.
You can use shortcuts, e.g., SWPM -CAPSPRD <Go> and SWPM -FLRSPRD <Go>, to access cap/oor spread
SWPM's cap/oor spread template is organized into seven tabs that allow you to set up and analyze the deal. You can
deal in the type/strategy and curve/volatilities data sections, then evaluate the deal in the valuation/Greeks section.
439
440
for example, the market side, notional amount, currency, effective date, maturity, and index underlying the option. For
Schedule.
445
446
447
Cap B Strike
, Floor A Strike
, Floor B Strike
441
448
, Par Shift...
442
, Spread
, Leverage
449
, and Z-Spread...
443
444
, Cap A Strike
. For information about a eld,
You can further analyze cap/oor spreads by selecting another tab from the control area. Additionally, you can save your deal
Price.
SWAPTION STRADDLE
This topic explains swaption straddles and then describes how to use the associated template in SWPM to create and value
swaption straddles.
Strategies are combinations of two swaptions. Creating a strategy is similar to creating a portfolio of two swaptions to enhance
return or hedge using a particular strategy.
A long straddle is the purchase of a put option and a call option on the same underlying with the same strike (xed coupon)
and the same time to expiry. Typically, the position is initially delta neutral since it is commonly struck at the forward rate. The
position (which can also be constructed from two long puts and a long position in the underlying or two long calls and a short
position in the underlying) makes money if volatility is high. A short straddle is the sale of a put option and a call option on the
same underlying with the same strike price and the same maturity. A short straddle exposes the holder to unlimited downside,
442
443
444
The cap strike of the rst cap in a cap spread.
445
The cap strike of the second cap in a cap spread.
446
The oor strike of the rst oor in a oor spread.
447
The strike rate of each oor in oor B.
448
441
449
but makes money if volatility is low. Since the strategy, when struck at-the-money-forward, has a large vega position and zero
delta, it is the most common way to trade volatility used by interbank and other sophisticated players.
You can use shortcuts (e.g., SWPM -OVSTRDL <Go>) to access the swaption straddle template from the command line, or
SWPM's swaption straddle template is organized into ve tabs that allow you to set up and analyze the deal. You can structure
the strategy and curve/volatilities data sections, then evaluate the deal in the valuation section.
Strategy: Allows you to congure your settings for the deal, including the strategy
, notional amount, currency, strike,
effective date, the swaption expiration and the tenor of the underlying swap (e.g., 1 YR [to expiration] x 5 YR [swaption
tenor]). The straddle template launches with a long receiver and long payer swaption straddle strategy, using ATM rates
as the strike for the underlying 5Y swap. You can click the Detail eld to see the conguration of the underlying swap. For
Curve/Volatility Data: Allows you to update the curves and volatilities that SWPM uses to discount cashows and
project forward pricing when calculating the Market Value of the deal. The Vol Cube drop-down menu allows you to choose
450
450
Applies to caps and oors. Strategies are combinations of two swaptions. It is similar to creating a portfolio of two
swaptions to enhance return or hedge using a particular strategy.
the Valuation.
Valuation: Allows you to analyze the market value and sensitivity of the deal. For information about a eld, position your
You can further analyze swaption straddles by selecting another tab from the control area. Additionally, you can save your deal
Price.
SWAPTION STRANGLE
This topic explains strangles and then describes how to use the associated template in SWPM to create and value strangles.
Strangles are similar to straddles except that the strike of the call lies above the strike of the put. A long/short strangle is
the purchase/sale of a put option and a call option on the same underlying with the same expiry date, but with different
strike prices. The short strangle generates less premium than the straddle because options sold are out-of-the-money and,
as such, cheaper. This is compensated for by the wider break-even range of the position. Straddles and strangles involve
combinations of two options, which differentiates them from, say, butteries, which involve combinations of four options, and
can be constructed by combining a strangle and short straddle, and vice versa. The one month 25 strangle is the standard
strangle trade and a common market indicator of the amount of leptokurtosis or "extreme event probability" in that asset class.
This is sometimes used to hedge second-order vega risk in certain barrier options.
You can use shortcuts (e.g., SWPM -OVSTRANGLE <Go>) to access the swaption straddle template from the command
SWPM's swaption strangle template is organized into tabs that allow you to set up and analyze the deal. You can structure and
value your deal on the Main tab of the template, which is divided into three sections. You can input details of the deal in the
strategy and curve/volatilities data sections, then evaluate the deal in the valuation section.
Control Area: Allows you to navigate among the tabs, analyze deals, set up scenarios, manage risk, generate trade
effective date, the swaption expiration and the tenor of the underlying swap (e.g., 1 YR [to expiration] x 5 YR [swaption
tenor]). The strangle template wakes up to a long receiver and long payer swaption strangle strategy using ATM rates
as the strike for the underlying 5Y swap. You can click the Detail eld to see the conguration of the underlying swap in
SWPM. For information about a eld, position your cursor over it or see Denitions.
451
the Valuation.
Valuation: Allows you to analyze the market value and sensitivity of the deal. For information about a eld, position your
451
You can further analyze swaption strangles by selecting another tab from the control area. Additionally, you can save your deal
Price.
SWAPTION RISK REVERSAL

This topic explains swaption risk reversals and then describes how to use the associated template to create and value
swaption risk reversals in SWPM.
A swaption risk reversal is the simultaneous purchase of an out-of-the-money call/put and sale of an out-of-the-money put/call
usually with zero upfront premiums. To a trader, the term means more specically the purchase of a less than 50% delta ()
call/put nanced by the sale of a similar delta put/call for zero upfront cost. The options being bought and sold typically have
the same notional size and pre-specied maturity and the deltas are typically set to 25%. According to Black-Scholes, the
purchase and sale of options with similar deltas (and, as such, out-of-the-money forward to the same extent) should be zero
cost. In practice the market favors one side versus the other. In the simplest case, the implied volatilities of out-of-the-money
puts and calls of the same strike and maturity are different, and the extra cost of the favored side is commonly known as the
risk reversal spread. This reects the market's perception that the relevant probability distribution is not symmetrical around the
forward, but skewed in the direction of the favored side.
You can use shortcuts (e.g., SWPM -OVRISKREV <Go>) to access the swaption straddle template from the command line,
SWPM's swaption risk reversal template is organized into ve tabs that allow you to set up and analyze the deal. You can
deal in the strategy and curve/volatilities data sections, then evaluate the deal in the valuation section.
452
effective date, swaption expiration, and tenor of the underlying swap (e.g., 1 YR [to expiration] x 5 YR [swaption tenor]).
The risk reversal template launches with a long receiver and short payer swaption risk reversal strategy, using ATM rates
as the strike for the underlying 5Y swap. You can click the Detail eld to see the conguration of the underlying swap in
SWPM. For information about a eld, position your cursor over it or see Denitions.
the Valuation.
Valuation: Allows you to analyze the market value and sensitivity of the deal.
You can further analyze swaption risk reversals by selecting another tab from the control area. Additionally, you can save
452
Price.
SWAPTION CALL SPREAD
This topic explains swaption call spreads and then describes how to use the associated template in SWPM to create and value
swaption call spreads.
As the name suggests, a bull call spread is an option strategy designed to work when the prevailing trend is higher. The bull
call spread is effective in allowing you to take part in a bullish move by reducing your risk and breakeven points, while at the
same time, providing considerable returns. The bullish call spread can be created by buying lower strike calls and selling,
or shorting, the same number of higher strike calls with the same expiration. Bullish call spreads cap your prot potential,
but limit your downside at the same time if the stock does not go up as you expected. Since you do not need to own the
underlying swap in this strategy, the risk involved with putting on a bull call spread is simply the net debit that is paid to initiate
the strategy. At the same time, there is prot potential above the breakeven point up until the strike price of the out of the
money call that was shorted.
You can use shortcuts (e.g., SWPM -OVCALLSPR <Go>) to access the swaption straddle template from the command line,
or you can click the Products tool bar button to choose a template from a menu.
SWPM's swaption call spread template is organized into ve tabs that allow you to set up and analyze the deal. You can
453
The call (payer) spread template launches with a long receiver and short payer swaption call spread strategy using ATM
rates as the strike for the underlying 5Y swap. You can click the Detail eld to see the conguration of the underlying swap
in SWPM. For information about a eld, position your cursor over it or see Denitions.
the Valuation.
You can further analyze swaption call spreads by selecting another tab from the control area. Additionally, you can save
Price.
SWAPTION CALENDAR SPREAD
This topic explains swaption calendar spreads and then describes how to use the associated template in SWPM to create and
value swaption calendar spreads.
A calendar spread is an option strategy that involves buying and selling options on the same security with different maturities.
Using calls, the calendar spread strategy can be set up by buying long term calls and simultaneously writing an equal number
of near-month at-the-money, or slightly out-of-the-money, calls of the same underlying security with the same strike price.
The idea behind the calendar spread is to sell time, which is why calendar spreads are also known as time spreads. The
options trader hopes that the price of the underlying remains unchanged at expiration of the near month options, so that they
453
expire worthless. As the time decay of near month options is at a faster rate than longer term options, the trader's long term
options still retain much of their value. The trader can then either own the longer term calls for less or write more calls and
repeat the process.
If the trader is bullish for the long term and is selling the near month calls with the intention to ride the long call for free, the
trader is implementing the bull calendar spread strategy.
If the trader is neutral on the underlying security and is selling the near month calls primarily to earn from time decay, the trader
is implementing the neutral calendar spread strategy.
You can use shortcuts (e.g., SWPM -OVCDRSPR <Go>) to access the swaption straddle template from the command line,
SWPM's swaption calendar spread template is organized into ve tabs that allow you to set up and analyze the deal. You can
The calendar spread template launches with a long receiver and short payer swaption calendar spread strategy, using ATM
rates as the strike for the underlying 5Y swap. You can click the Detail eld to see the conguration of the underlying swap
in SWPM. For information about a eld, position your cursor over it or see Denitions.
454
454
the Valuation.
You can further analyze swaption calendar spreads by selecting another tab from the control area. Additionally, you can save
Price.
EMERGING MARKETS
NON-DELIVERABLE CROSS CRNCY SWAP/IRS
This topic explains non-deliverable swaps and then describes how to use the associated templates in SWPM to price a
non-deliverable swap.
A non-deliverable swap (NDS) is an agreement between two parties to exchange a stream of interest payments and the
notional principal in one currency for another currency on a non-deliverable basis. An NDS is a synthetic instrument used to
replicate the net cash ows of a currency coupon swap or cross-currency swap when one of the currencies is thinly traded,
subject to exchange restrictions, or even non-convertible. Like a non-deliverable forward (NDF), the settlement value at each
payment date is based partly on an agreed posted or dealer exchange rate.
An NDS is conceptually similar to a cross currency swap, except that there is no physical transfer of the underlying currency.
A swap that is similar to an NDS is a non-deliverable forward, with the only difference being that settlement for both parties is
done through a major currency. Non-deliverable swaps are used when the swap includes a major currency, such as the U.S.
dollar, and a restricted currency, such as the Philippine peso or South Korean won. For example, if two companies enter into
a currency swap for $1 million and one company is located in a country with a restricted currency, it means that payments due
to the company in the restricted currency are converted into the major currency at the prevailing spot rate on each interest
payment date and at maturity.
Advantages include the following:
An NDS may be the only viable option where one leg of the swap has a currency which is restricted, e.g., PHP, KRW,
TWD, etc.
The NDS market is often more liquid in the longer tenors than the forward market.
An NDS can be customized to suit individual objectives, e.g., reducing principal during the life of the contract.
An NDS can be used to:

Synthetically convert a loan (xed or oating) in a major currency to a loan with xed payments in a restricted currency.
Allow the borrower to better match assets and liabilities in different currencies and with different cashows and timing.
Allow the borrower to fund in the most efcient currency (USD or other major currency) but synthetically convert their ability
to match their asset/earnings.
Synthetically convert an asset with earnings in a restricted currency into a major currency.
Allow an asset manager to invest in an overseas market, where the asset has a known payout, and hedge the currency risk
from the investment.
Suit individual objectives with customization, thereby lowering the risk associated with running mismatches.
Non-deliverable swaps are available as cross currency (NDS) and local interest rate swaps (NDIRS) with xed/oat, xed/xed
and oat/oat.
You can use shortcuts (e.g., SWPM -NDS <Go>, SWPM -NDSFX <Go>, and SWPM -NDSFL <Go>) to access
non-deliverable templates from the command line, or you can click the Products toolbar button to choose a template from a
menu.
SWPM's non-deliverable swap templates are organized into seven tabs that allow you to set up and analyze the swap. You can
Leg 1/Leg 2: Allows you to congure your settings for the legs of the deal. Depending on whether your swap is xed-xed
or xed-oat, different settings appear. You can enter, for example, the market side, notional amount (SWPM supports
Single Leg Details.
FX/Curve Data: Allows you to specify the delivery currency, FX xing days, and FX rate used to price the swap. You
can also update the curves that SWPM uses to discount cashows and project forward pricing when calculating the
Market Value of the swap. Depending on whether your swap is xed-xed or xed-oat, different settings appear. SWPM
calculates the market value using the selected curve at the market close of the day indicated in the Curve Date eld. The
variables: Premium
Shift...
461
455
, Notional
, and Z-Spread...
462
456
, Leg1: Coupon
457
458
, Leg2: Coupon
Leg2: Spread
459
460
, Leg2: Leverage
, Par
457
458
459
460
461
455
456
462
You can further analyze non-deliverable swaps by selecting another tab from the control area. Additionally, you can save
Price.
PRE - DI ONSHORE BRAZILIAN SWAP
This topic explains Pre - DI onshore Brazilian swaps and then describes how to use the associated template in SPWM to price
a Pre - DI Onshore Brazilian swap.
The Pre x DI swap is the Brazilian x-to-oat zero coupon swap in which one side pays (receives) the x rate (Pre-xada) and
receives (pays) the oating rate CDI index: BZDIOVRA <INDEX>. The Pre x DI swap is the equivalent of entering into a DI
future contract. However, no daily settlement occurs and the user can customize the percentage of CDI, the coupon and
dates. The Pre x DI swaps settle on a net basis at the maturity date. The maturities of these swaps primarily follow the BM&F
maturities, which are always the rst business day of the month (also called head of the month). The swap calculator follows
all the local conventions.
You can use the shortcut SWPM BRL <Go> to access the Pre x DI swap template from the command line, or you can click
SWPM's Pre x DI swap template is organized into six tabs that allow you to set up and analyze the swap. You can structure
463
notional amount, FV notional

amount, effective date, maturity, and xed coupon for the deal. The currency BRL appears
by default. At the bottom of the section, the market value, accrued interest since the last leg cashow date, premium, and
DV01 for the xed leg appear. For information about a eld, position your cursor over it or see Denitions.
Leg 2: Allows you to congure your settings for the oating leg of the deal. You can enter the market side, as well as
464
specify the leverage (Brazilian)

and spread above the BZDIOVRA index used to calculate the oating rate payments. At
the bottom of the section, the market value, accrued interest since the last leg cashow date, premium, and DV01 for the
oating leg appear. The non-editable elds are pre-populated with the appropriate values for the swap type.
Curve Data: Allows you to update the curves that SWPM uses to discount cashows when calculating the Market Value
of the swap. SWPM calculates the market value using the selected curve at the market close of the day indicated in the
variables: Premium
Z-Spread...
471
465
, Notional
466
, Leg1: Coupon
467
468
, Leg2: Coupon
469
, Leg2: Leverage
470
, Par Shift...
, and
467
The nal notional amount in a zero-coupon swap where the interest (coupon) is compounded and added to the starting
notional. It is the nal, at-maturity payment of the zero-coupon swap (specically, the xed-leg payment).
The factor of the oater index in the coupon reset. The default for the leverage is 1.0000 which equates to 100% of the
BZDIOVRA index. This value is also known as "Percentage of DI."
468
469
463
464
465
466
You can further analyze cross-currency swaps by selecting another tab from the control area. Additionally, you can save
Price.
CDI ONSHORE SWAPTION

This topic explains CDI onshore swaptions and then describes how to use the associated template in SWPM to price a CDI
onshore swaption.
CDI swaption is an option on the Pre x DI swap. In SWPM, you may choose either a long or short position in a Pre x DI
swap. For CDI onshore swaptions, SWPM supports European style options only. The party that is long the option pays the
premium to have the right to enter in the Pre x DI swap at a future date. The option expiry and underlying swap maturity of
these structures typically follows BM&F dates for the option expiry and for the underlying swap maturity.
You can use shortcuts (e.g., SWPM -OV BRL <Go>) to access the CDI onshore swaption template from the command line,
SWPM's CDI onshore swaption template is organized into seven tabs that allow you to set up and analyze the deal. You can
structure and value your deal on the Main tab of the template, which is divided into four sections. You can input details of the
deal in the Leg 1, Leg 2, type/curve/volatilities data sections, then evaluate the deal in the valuation/greeks section.
470
471
472

amount, effective date, maturity, and xed coupon (i.e., the strike) for the deal. The
currency BRL appears by default. At the bottom of the section, the market value and accrued interest since the last leg
cashow date for the xed leg appear. For information about a eld, position your cursor over it or see Denitions.
Leg 2: Allows you to congure your settings for the oating leg of the deal. You can enter the market side and the index
used to calculate the oating rate. The notional, currency, pay frequency, and other details are pre-populated based on the
deal type and your xed leg inputs. At the bottom of the section, the market value and accrued interest since the last leg
cashow date for the oating leg appear.
Single Leg Details.
473
Option: Allows you to congure your settings for the option, including the position
, along with the swaption expiration
and the tenor of the underlying swap (e.g., 4 MO [to expiration] x 1 YR [swap tenor]).
project forward pricing when calculating the Market Value of the swaption. For CDI onshore swaptions, the template
472
473
474
is pre-populated with a Flat volatility (manual input) and the Black-Scholes

swaption appears.
model. By default, the most liquid CDI
the Valuation.
For more information about the Black-Scholes model, see Volatility.
Valuation/Greeks: Allows you to analyze the sensitivity of the deal (including the underlying DV01, option DV01, and
option norm DV01) and select the variable you want to solve for. You can calculate the market value of the deal, or you
can customize the valuation by choosing a variable from the Calculate drop-down menu. You can solve for the following
475
476
variables: Premium
, Implied Vol
, Leg1: Coupon
477
478
, Par Shift...
479
, and Z-Spread...
. For information about a
You can further analyze CDI onshore swaptions by selecting another tab from the control area. Additionally, you can save
Price.
476
477
478
474
475
479
CUPOM CAMBIAL SWAP

This topic explains Cupom Cambial swaps and then describes how to use the associated templates in SWPM to price a
Cupom Cambial swap.
A Cupom Cambial swap is a zero-coupon swap that is the most liquid of the three types of local, non-deliverable Brazilian
cross-currency swaps supported in SWPM: Cupom Cambial Swap, USD Fixed vs. %CDI Swap, and USD LIBOR vs. %CDI
Swap. Each Cupom Cambial xed rate reects the local (in Brazil) USD interest rate calculated from the difference between
the BRL interest rate and the variation of the (local) USD/BRL forward exchange rate. For each Cupom Cambial rate, there is a
USD/BRL forward exchange rate called Par USDBRL Fwd.
You can use shortcuts (e.g., SWPM -ZERO USD BRL <Go>) to access Cupom Cambial swap templates from the
SWPM's Cupom Cambial swap template is organized into six tabs that allow you to set up and analyze the swap. You can
480

, effective date, maturity, and compounding frequency for the deal. By default, the FV
notional amount 5MM appears and SWPM solves for a xed Coupon Cambial rate that is equivalent to 100% of the CDI
index for a given maturity. You can customize the values that appear, using either the BM&F dates or custom dates. At the
480
bottom of the section, the market value, theoretical accrued interest since the last leg cashow date, and DV01 for the xed
leg appear. For information about a eld, position your cursor over it or see Denitions.
Leg 2: Allows you to congure your settings for the oating leg of the deal. You can enter the market side, CDI index
leverage, and spread over the CDI index. At the bottom of the section, the market value, theoretical accrued interest since
You can also display values in USD, although the delivery currency is always BRL.
For information about Cupom Cambial curves, see Cupom Cambial Curves.
481
482
483
484
variables: Premium
, Notional
, Leg1: Coupon
, Leg2: Spread
485
, Leg2: Leverage
486
, and Par Shift...
. For
You can further analyze Cupom Cambial swaps by selecting another tab from the control area. Additionally, you can save
483
484
485
486
481
482
Price.
USD FIXED VS. %CDI SWAP

This topic explains USD xed vs. %CDI swaps and then describes how to use the associated templates in SWPM to price a
USD xed vs. %CDI swap.
In a USD xed vs. %CDI swap, the user receives/pays a xed USD rate and pays/receives a oating CDI index rate, using
the BZDIOVRA index for the Brazilian overnight interbank rate. This type of swap can have multiple coupons and allows for
amortization. The swap is traded locally (in Brazil) and uses the local USD/BRL forward exchange rates from the Cupom
Cambial curve to bring the USD cashows back to Brazilian Reals. With this swap, you can add/subtract a spread over the
CDI index.
You can use shortcuts (e.g., SWPM -FXFL USD BRL <Go>) to access cross-currency templates from the command line, or
SWPM's USD xed vs. %CDI swap template is organized into six tabs that allow you to set up and analyze the swap. You can
notional amount, effective date, maturity, and xed coupon for the deal. At the bottom of the section, the market value,
accrued interest since the last leg cashow date, and DV01 for the xed leg appear. For information about a eld, position
amount (SWPM supports asymmetric notionals), pay frequency, CDI index leverage, and spread over the CDI index. At
the bottom of the section, the market value, accrued interest since the last leg cashow date, premium, and DV01 for the
oating leg appear.
487
488
489
490
variables: Premium
, Notional
, Leg1: Coupon
, Leg2: Spread
491
, Leg2: Leverage
492
, and Par Shift...
. For
You can further analyze USD xed vs. %CDI swaps by selecting another tab from the control area. Additionally, you can save
489
490
491
492
487
488
Price.
USD LIBOR VS. %CDI SWAP

This topic explains USD Libor vs. %CDI swaps and then describes how to use the associated templates in SWPM to price a
USD Libor vs. %CDI swap.
In a USD Libor vs. %CDI swap, the user receives/pays the Libor USD rate and pays/receives a oating CDI index rate, using
the BZDIOVRA index for the Brazilian overnight interbank rate. This type of swap can have multiple coupons and allows for
amortization. The swap is mainly traded locally (in Brazil) and uses the local USD/BRL forward exchange rates from the Cupom
Cambial curve to bring the USD cashows back to Brazilian Reals. The Libor forward rates are obtained from the S23 USD
swap curve. With this swap you can add/subtract a spread over the CDI index. The USD Libor vs. %CDI swap supports the
following Libor indices: weekly, monthly, quarterly, semi-annual and annual.
You can use shortcuts (e.g., SWPM -FLFL USD BRL <Go>) to access cross-currency templates from the command line, or
SWPM's Libor vs. %CDI swap template is organized into six tabs that allow you to set up and analyze the swap. You can
Leg 1/Leg 2: Allows you to congure your settings for the legs of the deal. You can enter, for example, the market side, the
notional amount (SWPM supports asymmetric notionals), effective date, maturity, pay frequency, CDI index leverage, and
spread over the CDI index. At the bottom of the section, the market value, accrued interest since the last leg cashow date,
and DV01 for the oating leg appear.
variables: Premium
Par Shift...
499
493
, Notional
494
, Leg1: Spread
495
496
, Leg1: Leverage
497
, Leg2: Spread
498
, Leg2: Leverage
, and
497
498
499
493
494
495
496
You can further analyze USD Libor vs. %CDI swaps by selecting another tab from the control area. Additionally, you can save
Price.
CLP FIXED FLOAT SWAP

This topic explains CLP xed oat swaps and then describes how to use the associated templates in SWPM to price a CLP
xed oat swap.
A CLP xed vs oat swap is a nancial instrument where an investor receives or pays a oating leg indexed to the ndice de
Cmara Promedio (CLICP <Index>) and in exchange pays or receives a xed rate.
ndice de Cmara Promedio (ICP) is an index calculated using the overnight interbank lending rate (Cmara rate) (CHIBNOM
<Index>). The Cmara rate is xed every trading session and published in the afternoon by the Central Bank of Chile.
The ICP was initially set at 10,000.00 on September 2, 2002, and increases daily. For information on the methodology used to
calculate the index value and swap rates, and for market conventions, see Chilean Swaps: CLP Fixed Float Swap.
You can use shortcuts (e.g., SWPM CLP <Go> and SWPM CLP 18MO <Go>) to access the CLP xed oat swap
SWPM's CLP xed oat swap template is organized into nine tabs that allow you to set up and analyze the swap. You can
notional amount, effective date, maturity, and xed coupon for the deal. By default, a swap with a ve-year Maturity and
semi-annual PayFreq appears; however, you can specify an 18-month swap with payment at maturity. At the bottom of the
section, the market value, accrued interest since the last leg cashow date, premium, and DV01 for the xed leg appear.
amount (SWPM supports asymmetric notionals), pay frequency, CLICP index leverage, and spread over the CLICP index.
the oating leg appear.
500

,and Z-Spread
506
501
, Notional
502
, Leg1: Coupon
503
, Leg2: Spread
504
, Leg2: Leverage
, Par Shift...
505
You can further analyze CLP xed vs oat swaps by selecting another tab from the control area. Additionally, you can save
functions or through Bloomberg's API by entering the deal number followed by the <Corp> key. For example, this allows you
Price.
CLF CLP X-CRNCY FIXED FLOAT SWAP

This topic explains CLF CLP cross-currency xed oat swaps (offshore) and then describes how to use the associated
templates in SWPM to price a CLF CLP cross-currency xed oat swap.
502
503
504
505
The number of basis points to add to the spot curve in order to make the bond net present value equal to its market
price. The bond's market price is an indication of the value assigned to the bond's cash ows by the bond market. The
swap markets implied zero curve is used to determine the swap market's value for that same set of cashows. To the
extent that there is a discrepancy, the gross spread is viewed as the coupon of a swap market annuity whose value
equals the magnitude of this discrepancy. Most importantly, all cashow valuations are done at a zero spread to the
implied zero curve.
500
501
506
The z-spread quanties the difference of opinion about the bond's cash ows in the two markets using an approach
similar to that of an OAS model. In the z-spread calculation, the cashows are again valued using the zero rates implied
from the swap curve. The single spread added to each zero rate is solved for, in turn solving for the bond's market
price. When the gross spread/z-spread is small, the two spreads are close. The spreads diverge for bonds from weaker
credits, with the z-spread tending to be the higher of the two. While the calculation of the spread requires building a
multi-legged structure, the z-spread of the structure of the bond alone and the structure of zero coupon rates sufce for
the calculation.
A CLF CLP cross-currency xed oat swap is a nancial instrument in which an investor receives or pays a oating leg indexed
to the ndice de Cmara Promedio (CLICP <Index>) and in exchange pays or receives a xed CLF rate. Both legs settle in
CLP.
The ndice de Cmara Promedio (ICP) is an index calculated using the overnight interbank lending rate (Cmara rate)
(CHIBNOM <Index>). The Cmara rate (overnight interbank lending rate) is xed every trading session and published in the
afternoon by the Central Bank of Chile (www.bcentral.cl).
For information on the elds for conguring the CLP oating leg indexed to the ICP, see CLP Fixed Float Swap.
The Unidades de Fomento (UF) (CHUF <Index>) is an ination-linked accounting unit used in Chile. Another way to describe
it is as an ination-linked non-deliverable currency that always settles in Chilean Pesos (CLP). The standard ISO currency
code for UF is CLF.
CHUF <Index> is a month-on-month (MOM) inationary indicator that represents ination from the ninth day of the current
month to the ninth day of the next month. It is derived using the previous months Actual MOM Consumer price index
(CNPINSMO <Index>), and is ofcially announced by Instituto Nacional de Estadsticas (www.ine.cl), usually on the
business day preceding the ninth day of the current month.
CLUFUF <Index> represents todays UF value. Once the INE announces the UF index value for the ninth day of the month,
the Central Bank of Chile (www.bcentral.cl) publishes daily UF values.
UF (CLF) ination forwards (CFNP1 <Crncy>) behave in the same way as a non-deliverable forward (NDF) where market
players can buy/sell at a future date at an agreed-upon amount of UF (CLF) units at a given CLP price. On the maturity date,
the contract is closed by exchanging the difference between the agreed-upon value and the actual value of the UF (CLF). The
key difference between these ination forwards and other NDF products is these have a xed end date of the ninth day of the
corresponding month and always adjust based on the preceding business day. Generally these are traded from 1 to 18 months
out in the future. The rst ination forward represents the projected ination from the ninth day of the last known UF (CLF)
month to the ninth day of the following month. These ination forwards are the key curve objects used to construct the short
end of the CLF curve.
For more information on the valuation of the CLF xed rate and for market conventions, see CLF CLP Cross Currency
Fixed Float Swap (Offshore).
For information on cross-currency swaps, see Cross-Currency.
You can use shortcuts (e.g., SWPM CLF CLP <Go>) to access the CLF CLP xed oat cross-currency swap templates from
SWPM's CLF CLP xed oat cross-currency swap template is organized into eight tabs that allow you to set up and analyze
the swap. You can structure and value your swap on the Main tab of the template, which is divided into four sections. You can
input details of the swap in the Leg1, Leg2, and curve data sections, then evaluate the swap in the valuation section.
Leg 1/Leg 2: Allows you to congure your settings for the legs of the deal. You can enter, for example, the market side,
notional amount (SWPM supports asymmetric notionals), effective date, maturity, the xed coupon and the index used to
calculate the oating rate for the deal (along with the pay frequency, spread above the index, and other details.) At the
bottom of the section, the market value, accrued interest since the last leg cashow date, premium, and DV01 for each leg
appears. The DV01 represents the dollar value of 10 bp up and down shifts on both curves (CLF curve 317 and CLP curve
193).
Note: Even though the CLF curve relies on CLP discount factors, any curve shifting of CLP 193 does not impact curve
317 to allow independent analysis of both curves. For more information, see CLF CLP Cross Currency Fixed Float Swap
(Offshore).
Note: By default, SWPM prices swaps as of today, i.e., the default curve date is the current date and the valuation date is,
e.g., T+2. To price swaps as of a historical date, you must backdate both the Curve Date and Valuation elds. For example,
to mark to market at quarter's end, you can enter the historical quarter-end date in both the Curve Date and Valuation
elds. For more information, see Backdating the Valuation.
variables: Premium
Shift...
513
507
, Notional
, and Z-Spread...
514
508
, Leg1: Coupon
509
510
, Leg2: Coupon
,Leg2: Spread
511
512
, Leg2: Leverage
, Par
You can further analyze CLF CLP cross-currency xed oat swaps by selecting another tab from the control area. Additionally,
you can save your deal by selecting Actions > Save from the toolbar. Once you save the deal, you can access it from other
Bloomberg functions or through Bloomberg's API by entering the deal number followed by the <Corp> key. For example, this
allows you to download the cashow schedule for an individual leg to Microsoft Excel with Bloomberg's API.
Price.
509
510
511
512
513
507
508
514
CALCULATIONS
The following topics describe calculations, models, and methodologies used in SWPM.
CASHFLOWS
PAYMENT DATES
You can display both the nominal and actual business-adjusted payment dates on the Cashow tab.
The rst payment date is the nominal date on which the rst coupon payment is scheduled. The rst payment date appears as
a nominal date and should be entered as a nominal date without business adjustment.
When the coupon payment dates for the swap generate, nominal dates appear according to the roll-date convention and the
specied payment frequency.
For example, if the roll-date convention is to "roll dates forward" and the payment frequency is quarterly, then starting from
the rst payment date (which should not be business-adjusted), nominal dates generate forwards iteratively by adding three
months to the previous date. The process ends just before the date exceeds the next payment date. When rolling dates
forward, you can set both the rst payment date and the next to last payment date. However, the next to last payment date is
adjusted to fall on the nearest generated periodic nominal date.
If, instead, the roll-date convention is to "roll dates backward," then starting from the next to last payment date, nominal dates
generate backward iteratively by subtracting three months from the last payment date. The process ends before the date
precedes the rst payment date. When rolling dates backward, you can set both the rst payment date and the next to last
payment date. However, the rst payment date is adjusted to fall on the nearest periodic nominal date.
Note: SWPM uses business-adjusted dates in calculations.
DAY COUNT
SWPM uses the following day count conventions:
Number of Days in One Month:
ACT: Actual number of days in the month
30: SIA 30 days per month
NL: No Leap Year
30E: ISMA 30 days per month
30I: ISDA 30 days per month
30U: ISDA 30 days per month (European)
Note: 30I and 3OU have different rules for end-of-month adjustments. Under 3OU, when the payment day is the end
of the month on the calendar, it is adjusted to 30 (end-of-month). This includes February 28th (for No Leap Year) and
February 29th (for Leap Year). For example, the payment period between 2/28/11 and 2/29/12 has a total of 30X12 days.
Under 30I, February 28th and 29th are not adjusted, even though they are end-of-month.
Number of Days in One Year:
ACT: Actual number of days in the year

360: 360 days per year
365: 365 days per year
RISK ANALYTICS
DEAL RISK
SWPM risk analytics involve shifting the entire curve or specic term points on the curve by one basis point.
The risk for each leg and the deal is calculated according to the following equations:
For a cross-currency swap, where the leg notionals may be different, an average notional amount is used in the equations.
The average notional is determined in the following way:
Average Notional = [Pay Notional in Report Currency + Receive Notional in Report Currency] / 2
Deal Risk = [ DV01 / Average Notional ] x 10,000
GREEK METHODOLOGIES
Listed below are the methodologies used in SWPM to measure risk sensitivity.
Delta = Sensitivity to curve shift (upPrincipal - downPrincipal) / (2 * shiftInPercent)
Note: shiftInPercent is 0.1 for the default of 10 basis points. shiftInPercent is the shift used to generate the upPrincipal
and downPrincipal. The resulting delta is for a 1% shift.
Gamma = Second order sensitivity to curve shift (upPrincipal + downPrincipal - 2 * basePrincipal) / (shiftInPercent ^ 2)
Note: The resulting gamma is for a 1% shift (so with the default shift value of 10 basis points, the denominator is 0.1^2).
The value in the Gamma (1bp) eld is scaled for a 1 bp shift.
Vega = Sensitivity to volatility shift (upPrincipal - basePrincipal) / (shiftInPercent)
Note: shiftInPercent is 0.1 for the default of 10 basis points. shiftInPercent is the shift used to generate the upPrincipal.
The resulting vega is for a 1% shift.
Theta = Sensitivity to time shift tomorrow'sMarketValue + realizedPayments - today'sMarketValue
Note: realizedPayments are the payments that occur on the shifted date. This calculation must use market value (all others
may use either principal (clean) or market value (dirty) because the accrued changes with time shift. SWPM increments one
calendar day to determine tomorrow'sMarketValue.
DV01 = Sensitivity to curve shift (downPrincipal - upPrincipal) / (2 * shiftInPercent)
Note: shiftInPercent is 0.1 for the default of 10 bps. shiftInPercent is the shift used to generate the upPrincipal and
downPrincipal. The resulting DV01 is for a 1 bp shift. Bloomberg has switched the sign from delta to support the bond
convention for quoting DV01.
Deal Modied Duration = DV01 / (PV + Notional) * 10,000 Leg Modied Duration = Leg DV01 / (Leg PV) * 10,000
Convexity = Second order sensitivity to curve shift (upPrincipal + downPrincipal - 2 * basePrincipal) / ((shiftInPercent ^ 2)
* market value)
Note: shiftInPercent is 0.1 for the default of 10 bps. shiftInPercent is the shift used to generate the upPrincipal and
downPrincipal. The resulting convexity is for a 1% shift.
DELTA HEDGE
Delta is the change in the value of an option for each dollar change in the market price of the underlying asset. For example,
a cap with a delta of 0.50 means a half-point rise in premium for every dollar that the underlying asset goes up. For a oor
option, the premium rises as the underlying asset's price falls.
The underlying for the caps and oors is a forward rate agreement (FRA) set up appropriately. The underlying of the caps and
oors is the series of FRAs that match the caps/oors in the deal. The underlying for combination deals is the underlying for
any of the caps or oors in the deals. The following calculations apply:
Caplets:
Delta = change in value of the caplet for 1every bp shift, divided by the change in PV of the underlying swaplet.
PV of caplet = Notional*(F*N(d1)- K*N(d2))* df
Where:
dcf = day count fraction
df = discount factor
F = forward rate
PV of swaplet = Notional*dcf*F*df
Note: The above equation is the same as N(d1) in the Black formula.
Cap: Delta is the change in the PV of the cap by shifting each forward rate (without adjusting the discount factor) divided
by the change in the pv of the swap by shifting each forward rate (without adjusting the discount factor).
MODELS
BLACK-SCHOLES
swaption prices can be obtained analytically. The Black-Scholes-implied volatility is dened as the volatility to be used in the
option-pricing formula to reproduce the swaption market price.
HULL & WHITE 1 FACTOR (HW1F)
The HW1F model is a short-rate model where the short rate is assumed to follow a mean-reverting Brownian-motion process.
The short rate volatility is assumed to be time dependent, while its mean reversion is assumed constant. European swaptions
can be priced efciently in terms of the mean reversion and short-rate-volatility function by methods such as the so-called
Jamshidian decomposition, which consists of dividing the bond (or swap) into a set of zero-coupon bonds with strikes, so all
are exercised under the same conditions.
For more information, see Hull-White Models.

CALIBRATION PROCEDURE
Calibration allows you to choose the functions (t) and H(T), so the model prices match the actual market prices for a selected
set of swaptions, caplets, and oorlets.
The calibration procedure consists of three steps:
1. Characterize the deal by extracting its essential features.
2. Select a set of vanilla calibration instruments based on the characterization and an over-all calibration strategy.
3. Apply the algorithms that choose (t) and H(T) to match the model and market prices of the calibration instruments.
Careful inspection shows that only the characterization step depends on the exotic being a Bermudan; the remaining two steps
depend only on the features extracted by the characterization step. This means that to handle the calibration step for other
deal types (callable inverse oaters, callable capped oaters, callable range notes, etc.), you just need to re-write the deal
characterization part of the routine.
DIAGONAL SWAPTIONS
Once you have constructed the universe of possible calibration instruments, you follow the calibration strategies and
algorithms one by one. Pricing Bermudans accurately requires calibrating the model to the diagonal swaptions. For instruments
other than Bermudans, it may be appropriate to calibrate to other series of vanilla instruments. Because the model has two
"parameters," (t) and H(T), you can calibrate jointly two distinct series of vanilla instruments.
DIAG. SWAPTIONS WITH CONSTANT
For this calibration strategy, you supply the mean reversion coefcient constant. Empirically, is usually between 1% and
+5% .
ONE-FACTOR LGM MODEL
The one-factor LGM (linear, Gauss, Markov) model is the Hull-White model written in HJM form.
The essence of this model is that at any time t, the forward rate for time T, is calculated as:
f (t, x; T) = f0(T) + x(t) * H(T) + cc.
Where:
f0(T ) is today's forward rate curve
H(T) is the shift, or reversion curve
x(t) is a Gaussian random variable with mean zero and variance (t)
TWO-FACTOR LGM MODEL
H(T) has two factors: (h1(T), h2(T))
The last term is a much smaller convexity correction needed to keep the model arbitrage-free.
Apart from this convexity correction, LGM models all future yield curves as today's curve plus a random amount of the curve
H(T). For example, if you use a constant h, for example, H(T) = 1, you are modeling future yield curves as random parallel
shifts of today's curve. Alternatively, using a constant mean reversion coefcient in the Hull-White model leads to an
exponentially decaying shift curve:
H(T) = e-T -- OR -- h1(T) = e-T , h2(T) = e-2T (for the Two-Factor LGM model)
POPULAR CALIBRATION STRATEGIES
The following are popular calibration strategies:
Constant : Here, you select a constant , usually in the range .01% - - 4. This determines H(T).
A set of vanilla swaptions and/or caplets are selected, and the values of (t) are determined so that the LGM model's price
for these vanilla instruments match their market values. Each vanilla instrument determines (t) at the instruments exercise
date, so it is important that the set of chosen instruments, the calibration set, have distinct exercise dates.
Linear (t): Here, you set (t) = alpha^*t for some constant alpha (the value of alpha chosen makes no difference). Then
H(T) is determined by matching the LGM price to the market price for a chosen set of vanilla instruments.
Two Series Matches: Here, neither H(T) nor (t) has any assumed shape, and calibration against two sets of vanilla
instruments is used to determine both H(T).
Empirically, it is important to choose vanilla instruments that match as closely as possible the original deal being priced. For
callable swaps, these are the diagonal swaptions that for each exercise date match the exercise date, end date, and strike
of the Bermudan. For a 10 NC 3 Bermudan struck at 7%, for example, a good choice are the diagonal swaptions; the 3
into 7, the 4 into 6, the 5 into 5, ..., and 9 into 1 swaptions all struck at 7%.
For a callable amortizing swap, the diagonal swaptions consist of swaptions with the same exercise dates, but with the
strike and tenor chosen to match the PV, duration, and convexity of the original instrument. For two series calibrations, you
normally choose the diagonal and either a column or row of other vanilla deals. For example, for deals that have caplet risks,
you can choose a column of caplets as well as diagonals. Once the calibration procedure determines (t) and H(T) , the
LGM model can be used to price the exotic deal. Currently, convolution and backward induction are used in the evaluation
step.
BRAZILIAN SWAPS
BRAZILIAN SWAP TYPES
SWPM supports three types of local, non-deliverable Brazilian cross-currency swaps: Cupom Cambial Swap, USD Fixed vs.
%CDI Swap, and USD LIBOR vs. %CDI Swap. The following topics describe the above swap types, as well as the Cupom
Cambial curves.
CUPOM CAMBIAL CURVES
The Cupom Cambial curve represents the term structure of the Cupom Cambial. It reects the local US dollar interest rate
calculated from the difference between the BRL interest rate and the variation of the (local) USD/BRL forward exchange rate.
In our main screen for the Cupom Cambial curve in (the Swap Curve Builder (ICVS) function and the curve tab of SWPM),
we also display the implicit value of the (local) USD/BRL forward rate for each Cupom Cambial term. The GDA crncy (Cupom
Cambial FRA futures) are Cupom Cambial FRAs that are traded like futures in the BM&F exchange.
There are two types of Cupom Cambial curves, both of which are zero-coupon:
Clean Curve: The Cupom Cambial clean curve uses the synthetic spot for todays value of the USD/BRL exchange rate in
the calculation of the Cupom Cambial interest rate.
In Brazil, the most liquid FX instrument is the USD/BRL future, the second most traded future on the BVMF exchange. For
that reason, the synthetic spot uses the most liquid USD/BRL future contract (usually the closest contract to expiry), and
computes the spot FX rate against the "Casado" (USDBRL Future Contract USDBRL Spot).
For more information on the USD/BRL future contract table, enter UCA <CRNCY> CT <Go>.
For more detailed information on the Casado type, enter CASADO <INDEX> DES <Go>.
Dirty Curve: The Cupom Cambial dirty curve uses PTAX for the USD/BRL spot exchange rate in the calculation of the
Cupom Cambial interest rate.
PTAX is the ofcial exchange rate released by the Brazilian Central Bank at the end of each business day. When displaying
a Cupom Cambial dirty curve during Brazilian trading hours, the curve can have very high or very low values, depending on
the direction the USD/BRL spot has moved that day since the prior days close.
For more detailed information on PTAX, enter BZLABZLA <INDEX> DES <Go>.
The Cupom Cambial curve is built with tenors from BM&F exchange tenors (also called "head-of-the-month"). Each tenor
expires on the rst business day of each month, according to the BM&F exchange calendar. To display the calendar, enter
CDR B3 <Go>.
For information about setting a source curve, see Setting a Source Curve.
For information about ICVS, see ICVS <Help>.
DEAL-SPECIFIC CALCULATIONS
CMS: CONVEXITY ADJUSTMENT
A constant maturity swap (CMS) differs from a regular xed-to-oat or oat-to-oat swap in that the oating leg does not reset
periodically to Libor or other short-term indices but resets to a long-term rate like a ve-year swap rate. For example, one leg
can be a xed rate or a oating Libor rate in exchange for the ten-year swap rate.
For CMS swaps, convexity adjustment and volatility are included in the calculation. The convexity adjustment applies in this
case if the tenor of the reference rate is greater than one year.
You can choose the convexity adjustment methodology applied for underlying CMS rates and corresponding derivatives.
For CMS, the reset rate for each period is the forward constant maturity rate adjusted for convexity. For swaps in arrears, the
reset rate for each period is set toward the end of the period preceding the payment date by the number of days to accrual.
Hence, the reset rate is applied retroactively to the period just ended. An adjustment for convexity is also applied for swaps in
arrears.
In the Market section on the Main tab, choose one of the following from the Conv Adj drop-down menu, then press <Go>:
Note: Depending on the swap type you are pricing, the drop-down menu displays any of the following choices.
Custom: Allows you to select custom convexity congured in the Ination Bond/Swap Settings (SWIL) function. For
more information, see SWIL <Help>.
Hull: A parametric computation based on the Hull model to approximate the difference between the expected rate and
the forward rate using Martingale theory and a no-arbitrage relationship.
Jarrow-Yildirim: A model used to determine ination and nominal rates. What is modeled is the evolution of the
instantaneous nominal and real rates and the CPI, which is interpreted as the exchange rate between the nominal and
real economies.
The real rate that one models must be intended as the expected real rate for the related future interval, which you can
lock in. The true real rate is only known at the end of the corresponding period, as soon as the value of the CPI at the
time is known.
Lognormal: Simplies the replicate strategy by taking only the ATM volatility and the volatility at Strike . This allows the
replicate strategy to be much faster.
Put-Call Parity: The valuation of year-on-year ination swaps is equivalent to calculating the expected value of the
relevant future year-on-year ination rates. The put-call parity result allows you to iteratively infer the ination swap prices
implied by the market quotes of caps and oors with the same strike.
In practice, cap and oor quotes can have more than one overlapping strike. In this case, SWPM calculates the implied
convexity adjustments by taking the average of the convexity adjustments obtained for each one of the overlapping
strikes.
Replicate: Approximate the payoff by using caplets/oorlets with different strikes to replicate the value. Volatility smile is
considered at different strikes and is relatively slow as it integrates over the strike ranges.
SWPM applies the selected convexity adjustment methodology.
NIKKEI LINKED NOTES: VOLATILITY

Nikkei Linked Notes are popular equity-index-linked structures in the Asia-Pacic region. While the autocallable feature
depends on the behavior of the underlying equity index, the Hard Call feature is an early redemption dependent on the behavior
of interest rates.
Interest-rate volatility affects multiple aspects of the valuation of Nikkei linked notes.
The model used for the valuation of the rate portion is a Hull-White 1-factor model, where the diffusion process of the short
rate is governed by the applicable set of volatilities.
The callability feature requires a thorough calibration process to market prices of swaptions.
A volatility cube capable of generating a four-dimensional volatility space for different strike levels is necessary.
Equity volatility defaults extract volatility levels from the following:
At-the-Money Nikkei Implied Volatility levels, until the one-year term.
After the one-year term, volatilities are extrapolated. An example of the corresponding extrapolation is as follows:
Let t1<t2; the implied.vol(t1) is the observed Implied vol. in the market at t1.
The implied.vol(t2) satises:
implied.vol(t2)^2*t2=implied.vol(t1)^2*t1+implied.vol(t1t2)^2*(t2-t1)
Implied.vol(t1t2) from implied.vol(t1) is calculated as follows:

implied.vol(t1)^2*t1=implied.vol(t0)^2*t0+implied.vol(t1)^2*(t1-t0)
Correlation is calculated as follows:

Where:
* : Standard deviation of Nikkei
* : Standard deviation of interest rate in HW1F
* T: total running time (>=6M) of historical data
* Si: daily index closing level
* N: the number of observations
* ri: short rate. The rate used is JY0006M Index, the six-month LIBOR for Japanese Yen.
Output values: The signicant values from the calculation appear in the Valuation section.
TOTAL RETURN SWAP

Total Return Calculations
In general, the total return of the asset index leg comprises the sum of two parts, dividend accrual and capital accrual.
Dividend Accrual: The dividends or coupon interest accrued during the payment period. To understand this in more detail,
suppose that the asset index is the SPX. Assume also that the payment accrual start date for the period is T1; the end date
for the period is T2; and the valuation date is T, where T lies between T1 and T2, that is, T1 < T < T2. Therefore, T1 is
prior to T and T2 is in the future relative to T.
Between T1 and T, the actual daily dividends paid out by the stocks in the index during the period are summed up,
without reinvestment. The dividend data used is the same that feed the pages in the Dividend/Split Summary (DVD)
function, which provides stock dividend information, including dividend ex-dates and amounts. For more information
about DVD, see DVD <Help>.
Between T and T2, the dividend payout for the period is projected to be at the same rate for the past year. The total
dividend payout going back one year from T is obtained from historical dividend data, then applied to the period T to T2,
using the appropriate day count fraction.
The total dividend accrual for the period T1 to T2 is the sum of the two amounts above, multiplied by the dividend
payout factor. You can vary the dividend payout factor by inputting your own value in the Div Payout eld on the Details
tab. This total dividend accrual amount for the period is paid out on the payment date.
Capital Accrual: The change in the value of the index. This change is equal to any appreciation (positive) or depreciation
(negative) in the market value of the index during the payment period. Similar to dividend accruals, there are two
sub-periods.
Between T1 and T, the realized capital accrual is simply the price difference in the index between T1 and T.
Between T and T2, the capital accrual is projected in the following way: Starting with the index price at T, apply the
stub LIBOR rate for the sub-period (T1,T) plus the market spread (that is, the market spread associated with a zero
value "par" swap) to get projected value for the index that includes dividends. Next, from this projected value, subtract
the dividend accrual between T toT2 projected, using the market dividend payout congured on the Details tab.
The total capital accrual for the period T1 to T2 is the sum of the two amounts described above.
FX Adjustment
When the settlement currency of the asset leg is different from the index currency, then all historical index prices are converted
based on the FX rates on the relevant dates. All values are also displayed in the settlement currency. The payout of the
dividend accrual will be converted into the settlement currency based on the end of accrual date T2. The projection of the
asset price movement will be based on Libor plus the spread, with settlement currency Libor rate.
SWAPTION SETTLEMENT METHODS
This topic details the swaption settlement methods supported by SWPM.
Note: You can use the shortcut SWPM -OV <Go> to access the swaption template.
A swaption traded in the market can have different settlement methods, in general, either cash settlement or physical
settlement. In a cash settlement, a net cash payment is made when the option is exercised if the option is in the money.
Different currencies have different cash settlement conventions, namely, cash price, par yield curve-unadjusted, and zero
coupon yield-adjusted. In a physical settlement, a swap is delivered when the option is exercised. The swap being delivered
can be cleared or not cleared, depending on the contract agreement.
SWPM -OV supports four cash settlement methods:
Cash Price
Par Yield Curve-Unadjusted
Physical Bilateral
Physical Cleared
You can select a settlement method from the Dlvry drop-down menu in the Option section of the Main tab on SWPM -OV, as
shown below:
SWPM values the cash price and physical (including bilateral and cleared) methods, in the same way:
P = D(t0, e) * Ae * [FN(d1) - KN(d2)]

where
Ae = D(e,t1) * dcf(t1) + D(e, t2) * dcf(t2)
So, equivalently:
P = [ D(t0, t1) * dcf(t1) + D(t0, t2) * dcf(t2) ] * [FN(d1) - KN(d2)]
= At0 * [FN(d1) - KN(d2)]
For cash par yield curve-unadjusted, the forward annuity is calculated by discounting payment cashows to the option expiry
date using the par rate:
P = D(t0, e) * A'e * [FN(d1) - KN(d2)]
where
A'e = 1/(1+F/freq)^(Years(e, t1)*freq) + 1/(1+F/freq)^(Years(e, t2)*freq)
F is par fwd swap rate
freq is payment frequency
Instead of the whole term structure, only the par yield is used, resulting in a at yield curve and one single discount factor. This
slight difference in valuation affects the MV of the deal.
Note: This single discount factor is used only to value the underlying at the expiry date when settling options.
New deals wake up with one of the four settlement methods in SWPM -OV, depending on the currency. The following
currencies wake up to the cash par yield curve-unadjusted settlement convention: AUD, CHF, DKK, EUR, GBP, NOK, NZD,
SEK, ZAR. For example, when you enter SWPM EUR -OV, by default the Dlvry eld is populated by Par Yield (Cash). All
other currencies wake up to Price (Cash).
DOCUMENTS AND VIDEOS

This section includes links to documents and spreadsheets providing detailed information and methodologies related to the
following topics:
VOLATILITY
The following documents provide additional volatility-related information.
ATM Normalized Swaption Volatility
Bloomberg Generic Interest Rate Option Volatility: BVOL and BBIR
Bloomberg Volatility Cube
Vega Bucketing
Volatility Cube: Construction and Use
STRATEGIES
The following documents provide examples of strategies used in conjunction with SWPM.
Bloomberg Markets Strategies: Betting on Rates With Options
Swaption Strategies
COUNTERPARTY VALUATION
The following documents provide additional information about counterparty valuation.
Single-Security Level CVA
Counterparty Valuation Adjustment Spreadsheet
Counterparty Valuation Adjustments Technical Report
Counterparty Valuation Adjustments User Guide
Judging Default Risk
Portfolio CVA
Portfolio CVA in MARS
Credit Valuation Adjustments for OTC Derivatives in MARS
METHODOLOGIES AND SPREADSHEETS

The following methodologies and spreadsheets provide additional insight into the SWPM pricer.
Chilean Swaps: CLP Fixed Float Swap
Daily Discount Factors for ALL currencies based on the Swap Curve
Discount Factors and Zero Rate Tickers
Discount Factor Calculation (Simple Piecewise Linear Interpolation)
DV01 Calculation Method
Euro Dollar Future Convexity Adjustment Calculation
LIVE Zero Coupon/Discount Factors with TICKER SYMBOLS in Excel
Methodologies for Greeks in SWPM
Pricing Asian Swaps and Options Using One-Factor Hull-White Model
Pricing Ination Derivatives
Swap Amortization
Zero Coupon and Discount Factor Calculator for EUR Swap Rates
HULL-WHITE MODELS
The following documents provide detailed information regarding the one-factor (HW1F) and two-factor (HW2F) Hull-White
models.
Two-Factor Hull-White Model for Interest Rate Derivative Products in Bloomberg
A Hybrid Credit-Rates Model With Applications
SWPM TUTORIALS
The following videos provide brief introductions to structuring swaptions and cancellable swaps in SWPM.
Structuring Swaptions (4:53)
Structuring Cancellable Swaps (4:29)
EXCEL INTEGRATION
You can transfer data between SWPM and a Microsoft Excel spreadsheet in several ways. You can import data into SWPM
from Excel, export data from SWPM to Excel, or create your own API formulas to customize your download of swap and
interest rate curve data.
IMPORTING/EXPORTING
IMPORTING DATA FROM EXCEL
You can drag and drop data from a Microsoft Excel spreadsheet into SWPM.
From Excel, select the data, then drag and drop the data to the SWPM table to which you want to add the data.
The screen updates based on your column inputs. In the above example, rate shift data is copied from Excel to the Shifted
Rate column.
UPLOADING DEALS
The swap uploader allows you to upload multiple interest rate derivatives at once to Bloomberg. You can create a spreadsheet
containing deal data and then upload it to Bloomberg as a comma separated (.csv) le.
For more information, see SWPM Upload Instructions.
EXPORTING TO EXCEL
You can export swap data to a Microsoft Excel spreadsheet on your desktop.
Choose from the following export options:
If you want to export live deal data for analysis in Excel via the Bloomberg API, from the toolbar, select Actions >
Export > Excel. For more information about the API, see DAPI <Help>.
Note: To use this option, you must save the swap deal. For more information about saving deals, see Saving Deals.
If you want to export data from a table on a specic tab to Excel, click the Export to Excel button, which appears on
multiple tabs.
Swap data appears in an Excel spreadsheet on your desktop.

EXPORTING TO FPML
You can export swap data to FpML (Financial Products Markup Language) format. FpML is a well-known, widely accepted
standard for the electronic processing of complex derivative instruments.
To export the current swap data to FpML:
From the toolbar, select Actions > Export > FpML.
FpML data appears in an Excel spreadsheet on your desktop.
API FORMULAS
FORMULA CONSTRUCTION
You can create custom API formulas within Microsoft Excel, so you can analyze one or more swap deals at once in a
spreadsheet as you would on SWPM. Custom formulas allow you to tailor the data to only the most relevant information for
your analysis.
SWPM uses the following formula types to import data into Excel:
BDP
BDH
BDS
Curves Toolkit
For more information about constructing API formulas, see DAPI <Help> and the Bloomberg API - Tutorial with Examples
template.
For more information about the Curves Toolkit, which allows you to download and manipulate interest rate curves in Excel, see
the Curves Toolkit section of DAPI <Help> and the Curves Toolkit Tutorial spreadsheet.
For more information about searching for data elds to use in formulas, see Finding Data Fields.
For examples of formulas you can create, see Example: Cashow Schedule and Example: Interest Rate Curves.
DEAL IDS
When you save an interest rate swap in SWPM, SWPM generates unique IDs for the swap, including one for the entire deal
and one for each leg. You can use the Deal ID and the Leg ID in API formulas to import data for the deal.
FINDING DATA FIELDS

API formulas are created with data elds from the Field Search (FLDS) function.
To search for data elds:
1. In Bloomberg, load a saved deal.
For example, SL5S2YZ5 <CORP> is a ticker for a saved deal.
Note: For information about locating the identier for a saved deal, see Deal IDs.
2. Enter FLDS <Go>.
FLDS appears.
3. In the Enter Query eld at the top left of the screen, enter "SW", then press <Go>.
Note: For information about searching on FLDS, see FLDS <Help>.

The elds available for swaps appear in the search results. You can use any eld that displays a value in the Value column.
4. In the search results, click a eld.
The eld's denition appears.

Note: Some eld denitions also include a list of override elds that allow you to provide inputs to recalculate the value of
the eld. In the middle of the screen, you can select Override to see the corresponding override elds. The eld and its
override elds can be used in BDP or BDS override formulas (for example, see Example: Historical Net Payments).
EXAMPLE: CASHFLOW SCHEDULE
This topic provides a practical example for creating a formula to import the cashow schedule for the pay leg of a saved
interest rate swap into an Excel spreadsheet.
Steps:
1. Load the deal ID.
For example, enter SL5S2YZ5 <Corp> <Go>.
2. On FLDS, search for "SW cashow" by following the steps in Finding Data Fields.
In the search results, you see the eld SW_PAY_CASH_FLOW.
3. In a cell on your spreadsheet, use the eld to create a BDS formula:
=BDS("SL4K2XYC Corp","SW_PAY_CASH_FLOW")
Note: You must replace the deal ID in the formula with your own deal ID.
The cashow schedule for the pay leg of the deal is imported to your spreadsheet.
EXAMPLE: HISTORICAL NET PAYMENTS
This topic provides a practical example for creating a formula to import the historical net cashow of a saved interest rate swap
into an Excel spreadsheet.
Steps:
1. Load the deal ID.
For example, enter SL5S2YZ5 <Corp> <Go>.
2. On FLDS, search for "SW cashow" by following the steps in Finding Data Fields.
In the search results, you see the eld SW_NET_CASH_FLOW.
3. Click the eld to display the eld's denition.
You see that multiple elds, including SETTLE_DT, can be used as overrides.
4. In a cell on your spreadsheet, use the eld to create a BDS override formula:
=BDS("SL4K2XYC Corp","SW_NET_CASH_FLOW","SETTLE_DT=20130628")
Note: You must replace the deal ID in the formula with your own deal ID. Also, when specifying a settle date, the date
must be in the following format: YYYYMMDD.
Historical net cashows for the deal are imported to your spreadsheet.
EXAMPLE: INTEREST RATE CURVES
This topic provides a practical example for creating a formula to import a forward Euro vs. 6-Month Euribor curve into an Excel
spreadsheet using formulas from the Curves Toolkit.
For more information about the Curves Toolkit, which allows you to download and manipulate interest rate curves in Excel, see
the Curves Toolkit section of DAPI <Help> and the Curves Toolkit Tutorial spreadsheet.
Steps:
1. In a cell on your spreadsheet, create a BCurveStrip formula to create a curve object:
=BCurveStrip("EUR.6M", "CurveDate", "05/16/2012")
A curve object is created by stripping the market rates of the Euro vs. 6-Month Euribor curve and the object id appears in
your spreadsheet.
2. In a cell on your spreadsheet, use the object ID to create a BCurveFwd formula using the object id from the BCurveStrip
formula to pull forward rates into your spreadsheet:
=BCurveFwd("EUR.6M:BLOOMBERG DC 26612","Zc.Mid","Tenor","6 MO","Interval","6 MO","UpTo","10YR")
Forward rates appear in your spreadsheet.
LEARN MORE
SWPM TABS
ADDITIONAL TABS
In addition to the tabs that appear for a plain vanilla swap in SWPM, the following tabs may appear, depending on the swap
structure:
Pricing/Greeks: Allows you to display a calculator for determining the Price (%)515 or the funding spread (in bps)
using greek sensitivity measures, so you can see the dimensions of risk involved in taking a position in an option or other
derivative. The top half of the screen displays pricing settings and a detailed pricing output. The bottom half of the screen
displays Greeks results if available.
For more information, see Greek Methodologies.

Option: Allows you to adjust the exercise options for the deal, including the type (European, Bermudan), position
(long/short), notication calendar, and settlement date, so you can see the effects on the security price.
For more information, see Swaption.
Basket: Appears for total return swaps and total return swap baskets. Allows you to display the contents of the basket,
which can include individual equities and equity indices, so you can see the performance of the basket and determine the
cashows. Equity baskets can only be created with equities from a single country or ADRs listed in the same currency.
For more information, see Total Return Swap.
Equity: Appears for total return swaps, total return swap baskets, and other deals with equity underlyings. Allows you
516
to calculate the Dividend Yield
, so you can see the current and forecasted stream of dividend payments calculated
517
from the deal. You can select the Source

of the dividend data (either Bloomberg or implied), as well as adjust the
corresponding sensitivity measures. You can also edit equity market data such as spots, dividends, market data sources,
etc.
For more information, see Total Return Swap.

Correlation: Appears when correlation data is needed to price a deal. Allows you to correlate price movements between
securities, so you can determine whether they move in tandem or inversely and detect possible trading opportunities arising
from the differences. The Correlation tab supports full customization of correlation parameters. You can update correlation
settings as well as actual correlation values, and you can choose from a set of algorithms (e.g., Rolling Window, Spot) to
calculate correlation data.
For more information, see Nikkei Linked Notes: Volatility.
Calibration: Allows you to adjust your model inputs, including the instruments, market data, and interpolation method, so
you can calibrate a security's dynamic implied volatilities in the market with its entire volatility surface, resulting in a more
accurately priced deal. The prices of the exotic coupons required for such calibration are estimated using historic values of
515
516
The dividend yield calculated for the swap.
517
Applies to the Equity tab. The source of dividends data, either Bloomberg or implied.
the spread volatility. The left side shows the list of instruments to be used for calibration. The right side shows the result of
the calibration.
For more information, see Models.
Fixings: Appears when historical data is needed to price the deal. Allows you to update historical rates, giving you control
over pricing.
Summary: Appears for multi-leg structures, and provides each individual leg valuation and risk with totals for the multi-leg
structure on one screen.
PRICING A SWAP
CHOOSING A TEMPLATE
The standard xed-oat swap template appears by default in SWPM. However, you can choose from a comprehensive list of
templates, ranging from simple vanilla swaps to the most exotic structured notes.
SWPM provides more than 100 templates that allow you to structure different types of products. For a list of interest rate
swaps supported in SWPM, see the Interest Rate Derivatives (IRDD) function or IRDD <Help>. If a specic swap type is not
supported in SWPM, Bloomberg's in-house team of nancial engineers can structure a deal for you. For more information, see
BVIP <Help>.
To load a specic structure, select the template:
To choose a specic structure, from the toolbar, select Products > (Swap Category) > (Swap Type).
To browse a list of all deal types, from the toolbar, select Products > Browse All....
The SWPM Deal Browser window appears. You can enter a structure in the Search eld, or use the data tree to browse
structures, then select a structure.
The selected swap structure appears. For information about how to price the selected structure, see Supported Structures.
Note: For information about keyboard shortcuts you can use to load a swap structure, see Shortcuts.
ADDING A LEG
On the Main tab, you can add one or more trade legs to the current swap.
Steps:
1. From the Leg (number) button, select Add Leg.
The Add Leg section appears to the right of the existing legs.
Note: You can also quickly convert to a single-leg deal to a multi-leg deal by selecting Actions > Convert to MultiLeg
from the toolbar.
2. Add a leg to the swap:
To add a leg by type, select By Type, then update the Type and Currency elds.
To add a leg by deal ID, select By Deal ID, enter the ticker of an existing swap or leg in the Deal ID eld, then click
Import.
The leg appears with the data for the selected swap type and currency or deal ID.
COPYING A LEG
On the Main tab, you can copy an existing leg, then customize its characteristics.
From the Leg (number) button, select Duplicate Leg.
A copy of the leg appears to the right of the existing leg(s).

DELETING A LEG
On the Main tab, you can delete individual legs from your deals.
Steps:
1. From the Leg (number) button, select Delete Leg.
The Conrm window appears.

2. Click Yes.
The leg deletes.
SCALING RESET RATES
On the Main tab, for the oating leg of a swap, you can enter the factor by which the reset rate is scaled and the spread over
the scaled rates.
Steps:
1. In the Leg (number) (oating leg) section, in the Leverage518 eld, enter the factor by which you want to multiply the
519
index
518
519
The index on which the oating rate/payment/barriers are based. The default value is determined by the ForwardCrv
eld. It can also be the LIBOR or CMS swap rate.
2. In the Spread520 eld, enter the basis point shift to add to or subtract from the scaled rate.
Note: The spread only applies to the corresponding coupon payment period.
3. Press <Go>.
The screen updates.
The nal rate used to calculate the coupon payment for a particular oating rate period equals (Reset Rate * Factor) +
Spread / 100.0. If the reset frequency is more frequent than the payment frequency, the spread is not applied to each reset
subinterval, but only to the nal compounded rate.
MANAGING DEALS
EDITING DEAL PROPERTIES
You can edit a deal's properties, including access to the deal and additional deal parameters.
Steps:
1. From the control area, click Properties.
520
The Deal Properties window appears.

2. If you want to edit the deal's privileging properties, at the top of the window, update the elds:
To assign access privileges to the deal, update User/Firm Sharing521 .
522
To share the deal with an individual or contact list, update the SPDL Sharing
eld.
To create a contact list or SPDL ID, click Create New Group (SPDL). The Speed Dial (SPDL) function appears on
another screen. For more information on contacts lists, see SPDL <Help>.
3. Edit the deal's additional properties:
To specify when the principal amount is exchanged (e.g., on the effective date or the maturity date), update Principal
523
Exchange
.
524
To assign custom IDs to the deal and/or its legs, update the Custom Id
elds.
To calculate the notional amount using foreign exchange rates, update Convert Notional by FX
4. Click the Apply button.
The properties save.
525
TRADING TOOLS
From the Ticket menu on the gray toolbar, you can access external portfolio, pricing, and trading tools. You must have the
appropriate privileging to access Bloomberg trading systems. For more information, contact your Bloomberg representative.
To access trading tools from SWPM, select Ticket > (trading option):
521
522
524
Date, etc.).
525
Allows you to convert the notional amount to the current FX rate for the selected currency.
523
Add to Portfolio: Allows you to book the deal to a portfolio in the Mult Asset Risk System (MARS) function. The Add
to Portfolio window appears. For more information, see Booking Deals.
Add to BVAL OTC Valuation: Allows you to price the deal using Bloomberg's proprietary BVAL service. The Adding
Deal to BVAL window appears. For more information, see BVIP.
RFQ > Request for Quote: Allows you to send an RFQ to your broker. The Request a Quote window appears. For
more information, see VCON <Help>.
RFQ > Send a Recap: Allows you to send a recap to VCON. The Send a Recap to VCON window appears. For more
information, see VCON <Help>.
CALCULATING MARGIN
LCH MARGIN SIMULATOR
LCH.Clearnet
The LCH.Clearnet Group is a leading multi-national clearing house, serving major exchanges and platforms as well as a range
of OTC markets. It clears a broad range of asset classes, including securities, exchange-traded derivatives, commodities,
energy, freight, foreign exchange derivatives, interest rate swaps, credit default swaps and Euro and Sterling denominated
bonds and repos. LCH.Clearnet works closely with regulators and clients to identify and develop innovative clearing solutions.
LCH.Clearnet Group Ltd is majority (approximately 58%) owned by the London Stock Exchange Group, with the remainder
being owned by its clients and other exchanges. SwapClear is a LCH.Clearnet Ltd and LCH.Clearnet LLC clearing platform for
interest rate swaps.
Purpose of the SMART Tool
The SwapClear Margin Approximation Risk Tool (SMART) is used to approximate the initial margin for a portfolio of swaps
margined at SwapClear. Initial margin (IM) is the returnable deposit required when opening new positions at the clearing
house. It is held in case of default in which LCH would inherit the defaulting positions, and therefore would have the potential
to incur losses while transferring the defaulting portfolio. By using SMART it is possible to approximate the IM requirement of a
SwapClear portfolio.
The initial release of SMART on Bloomberg allows you to assess margin requirements for a single swap transaction only in
SWPM. The ability to assess margin for a portfolio of swaps within the Bloomberg terminal will be implemented at a later
stage.
Portfolio netting across an entire SwapClear portfolio is a critical component of the capital efciency delivered by the
SwapClear service. Therefore, in most cases an IM calculation for a single swap is likely to result in a higher IM estimate than
an IM calculation for the same swap in the context of a portfolio cleared at SwapClear.
Initial Margin Calculations in SwapClear
SwapClear uses its proprietary "Portfolio Approach to Interest Rate Scenarios" (PAIRS) methodology to calculate the
required IM to be paid on a portfolio. PAIRS calculates the expected shortfall by averaging over six worst-case losses over a
ve-business-day holding period based on the volatility-ltered historical simulation of a rolling ten year history of interest rate
data. This is designed to give the clearing house a ve day period to neutralize the risk of a members positions in the event of
default. The scenarios that SwapClear utilizes to calculate IM for client positions are scaled by (7/5) to take into account an
additional two day holding period to allow for the expected time taken to transfer the clients portfolio to a surviving clearing
member. For more information about the PAIRS methodology, please contact the SwapClear Sales team.
Initial Margin calculations in SMART
SwapClear performs a full cash ow revaluation to calculate initial margin for all trades at the clearing house. In contrast,
SMART calculates the IM based on a Delta Gamma approximation. The main drivers of tool for the IM calculation are zero
sensitivities in local currency.
Sensitivity Calculations for Trades
LCH.Clearnet calculates Delta and Gamma sensitivities analytically. There is no bucketing or apportionment of the sensitivities
as SwapClear calculates the exact P&L attribution at each knot point on the curve that is being shifted. For more information
about the SwapClear valuation and sensitivity methodology, contact the SwapClear sales team.
Accuracy of the SMART Tool Compared to Ofcial SwapClear Calculations
While SMART uses a Taylor Delta Gamma approximation, SwapClear uses a full revaluation of each trade, and this will
produce a small difference in the estimated IM numbers. The size of the difference is typically around 2%, and is dependent
on several factors, such as the portfolio composition and scenarios. It is important to remember that this tool is for estimation
purposes only and should in no way be relied on as denitive or predictive of what actual SwapClear initial margin will be.
Difference Between Bloomberg Market Value and LCH.Clearnet NPV
LCH.Clearnet NPV is based on LCH.Clearnets swap curve construction, interpolation method, OIS discounting, and dual
curve stripping based on previous days EOD marks. Bloomberg Market Value is based on Bloomberg user settings, which
dene the swap curve construction, method of interpolation, enabling of OIS discounting with dual curve stripping, and
market data pricing sources used to generate Market Value (MV) within SWPM. This may result in differences between the
two valuations. SMART is primarily an estimation tool and utilizes a limited number of elds for NPV calculations, so this may
simplify a complex instrument and also account for differences in values generated.
Supported Deal Types
If the LCH.Clearnet Initial Margin Simulator does not support your deal type, a pop-up appears.
Contact Information for the SwapClear Sales Team
Region
E-Mail
Phone
U.S.
USSwapClearSales@lchclearnet.com
+1 212-513-8282
Region
E-Mail
Phone
U.K.
SwapClear.Marketing@lchclearnet.com
+44 (0)20 7426-7543
Global
SMARTSUPPORT@lchclearnet.com
n/a
ANALYZING CURVES
IMPORTING CURVE RATES
On the Curves tab, you can import custom curve shift rates from a Microsoft Excel spreadsheet.
Steps:
1. Select the rate shift data in Excel, then drag the column contents into the Shifted Rate526 column.
The values in the Shifted Rate column update.

Note: You can only import rates into the Curves screen. You cannot import terms or discount factors.
2. Press <Go>.
The table and chart refresh with the new curve shift data.
CASHFLOWS AND RESETS
526
CHARTING CASHFLOWS
On the Cashow tab, you can chart and analyze historical and projected cashows for a swap deal.
Steps:
1. Follow the steps in Analyzing Cashows to customize the cashow data.
2. Click the Cashow Graph sub-tab.
Cashow data appears in a chart.

3. Choose the rates/cashows you want to chart:
527
To plot rates for an individual leg in the Deal Property Chart, from the Properties panel, select a Leg
or more rate types.
, then select one
To plot cashow amounts for the entire deal or an individual leg in the Cashow Chart, from the Projections panel,
528
select Net
529
or an individual Leg
, then select one or more cashow amounts.
527
The swap leg type. For example: Receive Fixed, Pay Float.
528
The sum of principal amounts and interest amounts paid/received on this date.
529
The charts update. For more information about using charts, see G <Help>.
CONFIGURING LEG DETAILS

AMORTIZATION SCHEDULE
You can update the values in the amortization schedule.
Steps:
2. If you are conguring leg details for a previously saved deal, from the Main tab, click the gray Edit button to activate the
edit mode.



5. Specify the payment type530 you want to display/update in the amortization schedule: Coupon531 or Payment Amt532 .
The amortization schedule data updates.

6. In the amortization schedule, update the values in any of the highlighted cells:
533
Accrual Start
: Indicates when the accrual begins at the given level of notional. The default value is the start date that
coincides with the swap cashow dates. You can modify any of the dates to customize the amortization and payment
schedule.
Amort Rates (%)

: Allows you to enter a percentage by which the original notional is increased or decreased. A
positive percentage decreases the notional, whereas a negative percentage increases the notional. For example, you
can enter 5.0 to decrease the notional amount by ve percent.
534
530
Allows you to select either payment amounts or coupon amounts to be calculated in cashows.
531
532
The amount expected to be received on the payment date.
533
The date on which the accrual period starts. On the Details tab, the accrual start dates coincide with the swap cashow
dates by default. You can modify the dates to correspond to a custom amortization and payment schedule.
The amortization rates on scheduled dates. You can enter values into the amortization table to apply new rates.
534
535
Amort Amount
: Allows you to enter a dollar amount to increase or decrease the notional amount at any period. A
positive dollar amount decreases the notional, whereas a negative dollar amount increases the notional.
Balance
536
: Allows you to enter the notional amount to be used for each accrual period.
|Hint|You can export the values to Excel by clicking the Export to Excel button, manipulate them in Excel, then drag and
drop them back into the appropriate column in the amortization schedule in SWPM. The columns to which you can drag
and drop data include Amort Rate (%), Amort Amount, and Balance. For more information about importing data from Excel
to SWPM, see Importing Data from Excel.
Note: The rst time you edit column data for a specic swap, the Conrm window appears, informing you that the
principal exchange now occurs at all payment dates to accurately reect the amortization in the cashows. Click Yes to
conrm or No to exit the window without making this change.
7. If you want to use the current amortization schedule for the other leg of the deal, select Apply Amortization to the Other
Leg.
The other legs amortization schedule automatically populates as you edit the current legs values. When the option is
unselected, the two amortization schedules remain independent.
8. If you want to save your changes, from the toolbar, select Actions > Save.
AMORTIZATION METHODS
You can choose the method for amortizing your swap deals.
Steps:
edit mode.
535
536
increases it.
Applies to the Details and Resets tabs. The actual amount or remaining balance of the original notional. The latest
balance amount is used for the next payment date if multiple balance amounts are specied after the previous payment
date, up to and including the next payment date. On the Details tab, you can enter the notional amount to be used for
each accrual period.



5. At the top of the tab, from the Congure drop-down menu, choose Amort, then choose the amortization method from the
eld that appears to the right.
Amortization choices include:
Simple: Allows you to manually enter the data or drag and drop spreadsheet data into the amortization table. For more
information, see Amortization Schedule.
Security: Allows you to enter an amortizing instrument, such as a mortgage-backed security, into the Security Amort
537
Lookup
eld and edit the assumptions for prepayment speed to create the corresponding table.
Loan: Allows you to enter a mortgage as an amortizing instrument. This method creates the cashow schedule from
538
539
540
541
Amount
, Coupon
, Residual
, number of payments calculated from pay Freq
(frequency) and months
(loan period), day count fraction for each payment period, and each calculates the following mortgage cashows: each
542
payment amount (same for all periods), interest payment amount, principal payment (Amort Amount
Linear: A straight-line method in which an equal percentage of the balance is amortized (reduced) each period so that
543
the nal balance is zero at Maturity
).
.
544
French: Calculates a xed coupon based on current market data, amortization months, and Freq
(frequency) of
payments. The total payment is the same for every period with decreasing interest and increasing principal payments
similar to a mortgage loan.
The options for the selected method appear.

6. Edit the options for the selected method, then press <Go>.
Note: For the denition of a eld, see Denitions.
The amortization table updates.
537
Allows you to populate the amortization schedule of a mortgage security or a sinking fund bond once you enter the
security identier. Principal pay downs imported into the schedule are expressed as a percentage of notional (i.e., the
percentage of the current notional of the security, as of the current settle date).
538
For example, enter FNCL 6.5 <MTGE> or 31380MB21 <MTGE> to load the amortization schedule of the mortgage
security into the current swap amort schedule or enter 544582NG <CORP> to load the schedule of the sinking fund
bond.
The method used to calculate the changing notional amounts.
539
540
The residual value applied in the amortization of an asset, expressed as a percentage.
541
Allows you to determine the frequency of observation for the Knock-Out feature; normally this frequency differs from the
coupon frequency.
increases it.
The termination date of the deal. The termination date appears as a nominal date and should be entered without
coupon frequency.
542
543
544
FEES
You can edit the fee structure for your deal.
Steps:
edit mode.



5. At the bottom of the amortization schedule, select Show Fees.
545
The fee structure table, which lists Fee Dates
546
and Fee Amounts
, appears.
6. Enter the dates on which fees are paid in the Fee Dates column, then enter the fees in the corresponding row in the Fee
Amounts column.
7. Press <Go>.
The screen refreshes. Your fee dates and amounts are included in deal calculations.
ACCRUAL DATES
You can enter custom accrual dates and payment intervals.
Steps:
edit mode.
545
The dates on which fees are to be paid on the swap.
546
The fees to be paid on the swap.



5. In the Cpn Accrual Start/End547 elds, enter the date range for the accrual.
547
The start and end dates of the coupon accrual period.
6. In the Every548 elds, enter the payment interval (e.g., 1, 5) in the rst eld, select the frequency (e.g., Quarterly, Monthly)
from the second eld's drop-down menu, then click the Add Entry button.
The screen refreshes. The accrual schedule and payment dates are re-generated based on your inputs.
549
Note: If the start date for the date range is before the Effective Date
550
new Accrual Start Date
552
new Accrual End Date
(on the Main tab), the effective date resets to the

551
. Similarly, if the end date entered is after the Maturity Date
, the maturity date resets to the
COMPOUNDING
When the reset frequency occurs more often than the oating leg pay frequency, a Compounding eld appears on the Detail
tab when the oating leg is selected.
As in zero-coupon swaps, you can include or exclude spreads while compounding.
1. To select the compounding method, from the Compounding drop-down menu, select the method:
ExcludeSprd (Exclude Spread): Simple compounding of the oating rate added to the principal. The spread is
then calculated on the principal for the entire calculation period without compounding (i.e., traditional Bloomberg
compounding).
Flat: The current period is calculated using the oating rate plus the spread. However, for future periods, the
accumulated interest is compounded using the oating rate only.
LinearIncSprd (Linear Including Spread): The default for basis swaps. This compounding method applies the reset
plus the spread weighed by the current period reset for each period.
548
The periodicity of the observations.
549
The effective start date.
550
The date when the accrual period starts.
551
The termination date of the deal. This appears as a nominal date and should be entered as a nominal date without
The date on which the accrual period ends.
552
Unweighted Avg (Unweighted Average): The arithmetic mean of all the reset rates for a pay accrual period, then
using that average rate as the oating rate (leverage and spread are applied after the average). For example, for a
monthly reset of Quarterly Pay Floater, the average is calculated as (r1+r2+r3)/3, where r1/r2/r3 are three reset rates for
the pay period.
IncludeSprd (Include Spread): This method makes no distinction between the oating rate and the spread. The
spread is added to the oating rate earned on the notional amount at the end of each period and added to the principal
for the next accrual period.
Note: Compounding is turned off and interest is added together from each period before payment.
The deal updates based on your selection.
SCENARIOS AND RISK

HEDGING RISK
You can create a hedge for a deal in the Interest Rate Swap Hedge Analysis (HGBF) function. HGBF allows you to hedge an
interest rate swap with cash instruments, such as government securities, Eurodollar futures, and bond futures.
Steps:
From the toolbar, select Actions > Hedge > (Hedge Type).
HGBF appears. For more information, see HGBF <Help>.
SINGLE-STOCK TOTAL RETURN SWAP
INTRODUCTION
You can use SWPM to price single-stock total return swaps (TRS).
A TRS is a swap agreement in which one party makes payments based on a set rate, either xed or variable, while the other
party makes payments based on the return of an underlying asset, which includes both the income it generates and any capital
gains or losses. In TRS, the underlying asset, referred to as the reference asset, is usually a stock, index, loan, or bond. You
can price a TRS in SWPM using either of the following methods:
Projection-Based: Calculates both the asset and nancing legs future cashows based on implied Libor forward rates,
with the assumption that the stock price appreciates (or depreciates) at the same rate as the projected Libor values. This
results in the deal pricing to par at inception.
Accrual-Based: Calculates the amount accrued since the most recent coupon period start date, and makes no
assumptions regarding either Libor or stock forward rates.
The following topics describe the calculations behind SWPM's projection-based and acccrual-based pricing methods, as well
as how to value single-stock TRS contracts in SWPM according to your preferred method.
For information about how to analyze and value a single-stock TRS in SWPM, see TRS Tabs.
For details of the projection-based model, see Projection-Based Model (Equity).
For details of the accrual-based model, see Accrual-Based Model (Equity).
TRS TABS
SWPM's total return swap (TRS) template is organized into eight tabs that allow you to set up and analyze the swap. This
topic provides information about key elds that appear on each tab. It uses the example of a one-year IBM US <Equity> vs.
three-month Libor TRS. The reference day (Curve Date) is 07/25/2013, exchange of principal is set to Never, the deal type is
Constant Share, and the calculation method is Projection based. For a more general overview, see Total Return Swap.
You can use the shortcut SWPM -TRS <Go> to access the TRS template from the command line, or you can click the
Main Tab
You can structure and value your TRS on the Main tab, which is divided into four sections. This topic explains key elds
available in the asset leg, nancing leg, and valuation sections.
Asset Leg: Congure the settings for the asset leg of the deal and analyze capital gain/loss.
Type: Select the method used to determine the notional amount on a TRS: Const Share or Const Notional. The
"constant share" method maintains a constant number of stock shares throughout the life of the swap; the actual
notional amount of the deal changes based on where the stock price is at any given moment. The "constant notional"
method maintains a constant deal notional throughout the life of the swap; since the notional value remains constant,
the quantity of stock required to maintain the notional changes based on the stock's current price. The notional value is
also applied to the funding leg, and therefore also impacts future funding cashows.
Currency: Select the currency in which the deal is priced. This eld can be set independently of the asset's currency,
and affects the funding leg in addition to the asset leg.
Payment Frequency: Select the payment frequency of the asset leg. A unique option for TRS is At Maturity. At
Maturity is used for deals in which the stock total return is calculated based on the initial stock value at inception and
the nal value at maturity, ignoring any changes that occur in the interim.
Asset Class: Select the asset's underlying asset class: Equity, Index, Govt, Corp, Muni.
Prev. Value: The stock value at the beginning of the current cashow period. The number of days to settle for the asset
leg is important when determining this value.
Latest Value: The value of the stock as of the curve date.
MV (Market Value): The present value of the asset leg's future cashows. To derive these future cashows, the
projection-based model assumes the stock price increases at the same rate as forward Libor rates.
Accrued: The accrued value of each leg from the current coupon period start date to the current valuation date. SWPM
usually uses the accrual-based model to calculate Accrued measures. The accrued interest of both legs is zero on the
contract inception date.
Financing Leg: The elds in nancing leg section are those available for the oating leg of a vanilla interest swap (e.g.,
Pay Freq
553
553
, Spread
554
, Leverage
555
). The nancing leg is most commonly based on an -IBOR index. Bloomberg
The frequency at which the cashows are calculated.
uses bootstrapping to derive implied forward rates, from which future Libor cashows are calculated. These future Libor
cashows are used to generate the leg's market value (MV).
Note: In the image above, the Latest Index eld is grayed out and does not match the value of Libor on the date specied.
This is because the deal's effective date is 7/30/13, while the valuation date is 7/29/13. Since the actual reset has not
yet occurred, the swap curve is used to project the value of Libor one day forward. It is this derived value (.26417) that
appears in the latest index eld.
Valuation: Choose the calculation method and calculate the market value of the deal.
Calc Method: Select the method used to price your deal: Projection-based or Accrual-based.
Note: This is the most important parameter in the Valuation section.
Principal: The net value of the market values of both the asset and nancing legs, minus any accrued value.
Accrued: The net accrued value of the deal for the current coupon period. This value represents the net of capital gain
or loss (including dividend and/or coupon payments) relative to the nancing cost from the coupon period start date
until the valuation date.
Market Value: The net sum of each single leg's MV. These values are the present value of the expected future
cashows, which you can display by clicking the Cashow tab.
Premium: The principal value of the deal, expressed as a percentage of notional.
DV01: The dollar value of a .0001 (one basis point) interest rate move. This value represents the dollar change in
market value given a one basis point shift downward in the underlying swap curve.
Gamma (1bp): Represents the change in DV01 for a one basis point change in the underlying swap curve.
Cashow Tab
The Cashow tab displays projected cashows as of the Valuation date indicated on the Main tab. By default, the Cashow
tab displays net cashows for the deal. However, you can display cashows for individual deal legs by selecting a leg from the
Cashow drop-down menu at the top left.
554
555
For example, if you choose the asset leg, additional columns appear, illustrating the breakdown between capital payments and
dividend payments for the given asset.
SWPM calculates the dividend payment value by taking the current number of shares and multiplying it by the dividend
per share value (which you can nd on the Dividend/Split Summary (DVD) function). If you analyze a deal using the
projection-based method, SWPM does not take into account the dividend payments that appear on the Cashow tab when
calculating the principal value of the deal. However, SWPM does take into account the dividend payments when calculating
the accrued. Thus, the market value of the deal ignores future dividends and transfers historical dividends into accrued.
For more information about DVD, see DVD <Help>.
Basket Tab
SWPM also allows you to value a TRS in which the asset leg is based on a basket of securities. The Basket tab allows you to
enter your own basket and customize the details of each security within the basket.
Basket Securities: Enter individual securities along with the number of units of each security you want to include in your
basket.
Basket Details: Displays the initial price and notional amount of each security, along with the current price and current
value. You can enter a proxy index price to use in the event that the equity's price is unavailable.
Details Tab
The Details tab allows you to drill down further into the details of each leg of the swap by selecting a leg view from the Detail
options at the top of the tab.
The image below shows the Leg1: Receive Asset view of the Details tab.
Payment Adjustments: Congure payment settings for individual legs of the deal.
Effective and Maturity: The deal's start and end dates, as indicated on the Main tab.
First Payment and Next to Last Pmnt: Used when the coupon payment days do not correspond with the effective
and maturity dates. For example, a swap may start on 07/30/2013 and mature on 07/30/2014, while its coupon
payments are made on the 15th of each period. In this example (illustrated below), you can enter the First Payment date
10/15/2013. This automatically updates the Pay Date column in the cashow schedule section of the tab. In situations
such as this, the rst or last coupon generally does not cover a full period.
Pay Freq: Select the frequency of the cashows. A unique option for TRS is the option At Maturity. At Maturity
indicates that there is only one payment, made at maturity, that represents the change in the asset price from the
effective date to the maturity date. In this case, the reset/compounding frequencies do not impact the calculation.
Div Payout: Specify how much of the total dividend (in percent) is actually received by the asset leg receiver.
Date Adjustments: Specify the calendar(s) and roll convention used when deriving the cashows, accrual, and reset
dates for each leg. This information is strictly based on the information stated in your term sheet, and is the same as that for
any plain vanilla swap.
Market Spread: Applies to the projection-based method only. The projection-based method applies a projected rate of
return for the asset leg with the assumption that the stock price will appreciate (or depreciate) at the same rate as the
projected Libor forward values. By entering a Market Spread, you can change the projected rate of return of the asset.
For example, applying a market spread of 100 bps increases the expected increase in value of the stock from Libor to
Libor + 100bps. Changing the Market Spread affects the projected reset rate for the asset leg.
Pay Delay: Specify the number of days after the accrual period ends that the cashow is actually paid. With a zero pay
delay, the Accrual End date and Pay Date are the same.
Cashow Schedule: Displays the details of each cashow, based on your inputs and settings.
Reset Date: Displays the reference date from which the asset value or Libor value is taken. This date depends on your
Days Before Accrual input in the date adjustments section.
Accrual Start and Accrual End: Displays the start and end dates for each accrual period.
Pay Date: Displays the date the coupon is paid for each accrual period.
The Leg2: Pay Float view displays details for the nancing leg. These details differ slightly from those available for the asset
leg. Specically, Leverage and Spread data columns appear in the cashow schedule section at the bottom of the tab. Details
also include the Days Before Accrl eld. In the example below, the asset leg settles T+3, while the Libor leg settles T+2,
resulting in different Days Before Accrual, depending on the leg you are analyzing.
Resets Tab
The Resets Tab displays both Libor and stock forward values. Recall that the projection-based model assumes the stock
grows at the same pace as Libor rates. In the example illustrated below, the current stock price of IBM (as of July 25, 2013) is
$197.22. The stock future values on October 2013, January 2014, etc. are not known. Using the projection method, SWPM
derives stock implied forward rates from the rate of change in Libor forward rates and prices the deal at par. Although there is a
dividend column, SWPM does not account for future dividend payments if the swap is priced with the projection-based model.
You can also use the Index menu at the top of the screen to display Libor-implied forward rates.
For more information about the nancial model used to calculate these projected Libor-implied forward rates, see Building the
Bloomberg Interest Rate Curve.
PROJECTION-BASED MODEL (EQUITY)
This topic provides information about the projection-based model for pricing a single-stock total return swap (TRS), including
examples illustrating calculations related to the previous share value, accrued values, dividend payments, market spread, and
asset projection.
Constant Share vs. Constant Notional
There are two methods (types) that can be used to determine the notional amount on a TRS. One option is known as "constant
share," in which the number of shares of stock remains constant throughout the life of the swap. This results in the notional
amount of the deal changing based on the price of the stock at any given moment. The other option is "constant notional,"
which maintains a constant deal notional throughout the life of the deal. Since the notional value remains constant, the shares
of stock required to keep the notional constant changes based on the stock's current price. The notional value is also applied
to the funding leg and impacts the future cashows of the funding leg.
You can select the method you want to use for a TRS from the Type menu on the Main tab.
By default, the Notional Type is set to Const Share and the Default Num of Units is 10MM shares. You can change the default
settings by selecting Data & Settings > SWPM Settings and Templates from the toolbar, and then updating the settings
under the heading Total Return Swap.
In the example below, the deal notional has an initial value of $1.9722MMM, as indicated in the Leg 2 (Pay Float) section. This
value comes from the 10MM IBM shares multiplied by the initial stock price of $197.22 per share.
When you select Type > Constant Share from the Type menu, the future notional values on any given day are calculated by
multiplying the 10MM shares by the future stock price.
The Resets tab, shown below, displays expected stock prices (forward rates) on future reset dates.
The Cashow tab, shown below, illustrates how the notional values of both legs vary over time. The rst notional amount
corresponds to the one that appears on the Main tab. In the second period, the stock value increases to $197.360373.
Therefore, the notional value for period 2 is 10MM shares * $197.360373 = $ 1,973,603,731.
If you do not want the notional value to change over time, on the Main tab, you can select Const Notional from the Type menu.
The notional remains constant throughout the life of the swap, as displayed on the Cashow tab, shown in the image below.
|Hint| When pricing a TRS based on a term sheet, it is not always clear if the TRS should be structured with a constant
notional or constant shares. It is useful to check the term sheet for information like: "Equity Reset Dates = Sept 25, 2013, Dec
26, 2013...", etc. Where "equity reset" is mentioned, the deal should be structured as constant shares, so that the notional
resets on each future reset date.
Calculating Previous Value
On the Main tab, the Prev. Value eld represents the stock value at the beginning of the current cashow period. A common
misconception is that this value can be replicated by referencing the accrual start date in the Historical Price Table (HP)
function. In practice, there are other factors, such as days before accrual and settlement dates, that must be accounted for.
Consider the deal illustrated below.
In this case, the accrual start is 7/30/2013, and the Prev. Value is 197.22. If you run IBM US <Equity> HP <Go>, the value
for IBM on 7/30/13 is not 197.22. This is because the Prev. Value eld in SWPM reects the Days Before Acrl eld on the
Details tab, which is set to three, as shown below.
Therefore the Prev. Value comes from three business days earlier, 7/25/13. This is the value used as the Reset price, as shown
below on the Details tab.
For more information about HP, see HP <Help>.

Calculating Accrued Values
Note: The accrued calculation is the same for both the projection and accrual-based methods.
Consider the deal illustrated below. Since the accrual start date of 07/30/2013, the underlying security (IBM US <Equity>)
has experienced both a price depreciation and a dividend payment. (You can see this on the Dividend/Split Summary (DVD)
function. For more information, see DVD <Help>.)
You can display the price depreciation and dividend payments on the Cashow tab by choosing Leg 1: Receive Asset from
the Cashow menu. The Cashow tab, shown below, shows a 9.5MM dividend, as well as about -130MM in capital losses.
The dividend calculation is discussed in depth in the next section and is based on the actual dividend per share. The capital
losses are based on the initial stock price (Prev. Value) relative to the current stock price (Latest Value). Using 10MM shares,
the stock price dropped 13.07 dollars per share (197.22 to 184.15.)
Since there are 10MM shares, that equals a capital loss of 130,700,000 and a dividend gain of 9,500,000, resulting in
a net accrued value of -121.2MM, which is seen as the asset leg accrued. The oating leg interest is a standard Libor
accrued interest. The notional is 1,972,200,000 (10MM shares at 197.22 dollars per share), the current Libor rate is
.26500 (latest index), and 37 days have accrued from 07/30/13 to 09/05/13. Therefore, using the standard interest formula,
the following applies: 1,972,200,000 * .265% * (37/360) = 573,150.58, as seen in the nancing leg (Leg 2) section. It
appears as negative since you are paying this leg. Together, this -121.2MM and the -573,150.58 result in a net accrued of
-121,737,150.70.
Calculating Dividend Payments
Using the same example as the previous section, you can use DVD to arrive at the 9.5MM dividend payment. The dividend
payment date used in SWPM is the stock ex-date. This date must fall in between the current asset reset date and the current
valuation date. You can reference the Details tab for more information about asset reset dates. The example below uses the
constant shares method and therefore has 10MM shares. Each single stock pays $.95 per share for the current accrual period;
therefore, the total dividend is 10MM * .95 = $9,500,000.
The dividend for the current accrual period also appears on the Resets tab.
Market Spread Calculations

The Market Spread option on the Details tab allows you to specify a spread that investors expect to receive in addition to Libor
appreciation (depreciation) for the asset.
The example below compares the total payment on an asset leg with 0 bps spread to the total payment of an asset leg with a
100 bps spread.
With a market spread of 0 bps, the expected payment on the asset leg is 1,331,476.73.
With a market spread of 100 bps, the expected payment on the asset leg is 6,371,543.4.
The additional payment due to the market spread is 6,371,543.40 - 1,331,476.73 = 5,040,066.67. This value represents the
asset growing at an additional rate of 100 bps above Libor. The 100 bps (1%) of the projected payment for the given coupon
period is: 1,972,200,000.00 * 1% * (92/360) = $ 5,040,066.67.
Full Walk-Through of Asset Projection
Using the projection-based calculation method, the future values of the asset leg are calculated based on the assumption that
the value of the asset leg appreciates at the same rate as the Libor leg (unless using the market spread feature described
above). At inception, a projection-based TRS has the same cashows on each leg, as shown below, assuming there has been
no spread added to the Libor leg.
The Libor leg's cashows are generated using a standard bootstrapping approach utilizing the market swap curve. Once
these cashows have been generated, the asset price for any given period is the price that results in the asset leg's cashow
matching the nancing leg. Using the example from the image above, the nancing cashow for 01/30/14 is $6,423.07. Based
on the values on the Main tab, we own 60,000 shares of IBM.
For the investor to return $6,423.07, they would need the stock price to rise by .107051 ($6,423.07 / 60,000 shares). Since
the price started at 176.885817, the projected value would have to be $0.107051 higher, which is 176.962868, as seen on
the Reset tab.
This example is easy to replicate when the Days Before Accrual eld is set to zero. In practice, most TRS have Days Before
Accrual set to 3. When this is the case, the initial value of the security that is shown on screen is actually for a date three days
prior to the cashow period. Therefore, the value shown is rst projected three days forward, and the resulting value is used as
the "start" price of the security. This process does not appear on screen.
ACCRUAL-BASED MODEL (EQUITY)
This topic provides information about the accrual-based model, which does not make any assumptions about future asset
values.
You can run SWPM -ETRS <Go> to load the TRS template in accrual-based mode. When you choose the accrual-based
model, SWPM ignores future projections and the deal is valued using only the accruals, starting from the beginning of the
current cashow period until the current valuation date.
At the inception of an accrual-based TRS, the market value should always be zero. This is because the stock's current value
is the same as its initial value, and no dividends have been paid. As time passes, the Libor leg of this swap begins to accrue
interest at the current Libor rate plus any spread. The asset leg, however, does not change unless the value of the underlying
stock changes, or a dividend is paid. This differs from the projection method, since the accrual model does not make any
assumptions about future asset values.
Additionally, the Latest Index on the nancing leg is zero for USD deals. This is because, by default, TRS deals settle T+3,
while Libor settles T+2. Since this method makes no projections, the expected value of Libor is not known (xed in the market),
hence zero appears. Once this deal moves past the effective date, a current value appears.
Once the deal has been booked, the asset leg reects changes in the asset value. In a scenario where the stock moves from
197.22 to 200, the asset has appreciated 1.4096%. Using the notional of 1,972,200,000 * 1.0496% gives a $27,800,000
increase, as shown as the MV and the Accrued values in the image below, as well as the capital gain value displayed on the
bottom right. In this example, we are assuming the stock price changed intraday on the inception date, which is why the reset
rate is still zero.
One additional unique feature of the accrual-based model is the option to set a Second Fixing. This eld allows you to easily
set the xing (reset) dates going forward for a security. In the example in the image above, the rst xing would be at the
effective date (taking into account your options for days before xing) and then occur every three months on the same date.
The Second Fixing option allows you to specify a custom date from which xing starts going forward. In this case, if you
want the reset to be based on the 15th of the month, you could enter the 15th in the Second Fixing eld. As with all other
resets/xings, the actual pay dates will be affected by your settings
in the Days Before Acrl and Pay Delay elds on the Details tab.
INDEX TOTAL RETURN SWAP

INDEX TRS
This topic explains the model and inputs used to price index total return swaps (TRS) in SWPM.
Index TRS pricing is very similar to the single-stock TRS pricing described in Single-Stock Total Return Swap.
The example index in this section is the S&P 500 Total Return Index (SPXT <Index> DES <Go>) and the reference date
is March 20, 2013. The index is calculated intraday by S&P based on the price changes and reinvested dividends of SPX
<Index> with a starting date of Jan 4, 1988. For more information on the index, see SPXT <Index> DES <Go>.
You can enter SPXT <Index> SWPM -ETRS R03/20/2013 to price this deal using the accrual-based method, which is
described for single-stock TRS in Accrual-Based Model (Equity).
Consider the example deal shown in the image below.
The initial value of the index is from March 20, 2013, the rst index Reset Date shown below on the Details tab.
|Hint| You can compare the initial value to the value shown for the same date on the Historical Price Table (HP) function, as
shown in the image below. For more information on HP, see HP <Help>.
In the example, the contract has as an effective date 03/25/2013 and a curve date of 03/20/2013. The deal effective date is
by default T+3 from the Curve Date and Valuation Date. You can update these inputs on the Details tab by selecting Leg 1:
Receive Asset and changing the value of the Days Before Acrl eld.
As always, the TRS market value on the contract inception day is zero when using the accrual-based methodology. The index
value in the nancing leg is zero because, as of March 20, 2013, (Curve Date), the oating index reset due to occur one day
later (03/21/2013) is still unknown. The Details tab displays this information and allows you to change the reset convention for
the oating leg as well; the Leg 2: Pay Float view is shown below.
Note: Regarding dividends for indexes: the underlying index of this deal is a total return index. Based on its description,
dividends are already included in its performance. For this reason, dividends in SWPM should be excluded from the Market
Value calculation, otherwise they may be double counted. To avoid this issue, from the Details tab, select Leg 1: Receive
Asset, then set the eld DivPayout to zero.
BOND TOTAL RETURN SWAP
INTRODUCTION
This topic explains the model and inputs used to price bond total return swaps (TRS) in SWPM.
Bond TRS pricing is very similar to the single-stock pricing described in Single-Stock Total Return Swap.
The bond used in the example in the following topics is ISIN US313375ZL42 (FHLB 2.795 10/17/23 <Corp>) and the
reference date is March 20th, 2013.
Before analyzing the two different calculation methods, the accrual-based model and the projection-based model, note the
following features of bond TRS in SWPM:
Bonds can be traded clean or dirty, that is, with a price that either includes or excludes accrued interest. The bond TRS
pricing model calculates asset appreciation/depreciation from the bonds dirty price.
The bond price used in the calculations is the mid price.
Bonds are primarily traded OTC. You can specify the pricing source to be used for a bond's price through either the All
Quotes (ALLQ) function or the Pricing Source (PCS) function. For more information, see ALLQ <Help> or PCS <Help>.
The Notional eld on the Main tab refers to the bond market value (not the face value). To set up a TRS where the bond
has a face value of, for example, 1MM USD, from the Type menu in the Leg 1 section, select Const Share, and input a
share amount derived by dividing the desired notional by the price of the bonds.
Bond coupon payments are taken into account, but only appear historically.
For more information on each calculation method, see Introduction

ACCRUAL-BASED MODEL (BOND)
The Main tab for a bond TRS using the accrual-based model appears very similar to the one described for the single-stock
TRS in Accrual-Based Model (Equity).
If you want to set up the asset leg so that it corresponds to a bond face amount of 10 million USD, update the elds:
Type: Constant Share
Unit: Bond face amount divided by the bond price
Note: If you use the type Constant Notional, the face amount of the bonds changes each period, rescaling the number of
bonds from the current price, thus keeping the notional constant.
The bond pricing source used in this example is BVAL.
The Prev Value is the bond's BVAL dirty price calculated as the sum of:
BVAL clean mid price as of 03/20/2013, as shown below in the Historical Price Table (HP) function:
For more information on HP, see HP <Help>.
Accrued interest as of 03/20/2013, as shown below in the Field Search (FLDS) function:
For more information on FLDS, see FLDS <Help>.

Note: The settlement used is T+0.
BVAL Dirty Mid Price = 106.104 + 1.187875 = 107.291875 USD, as is indicated on the Main tab in the image below.
The funding leg notional amount is calculated by the Unit amount * bond dirty price = asset (bond) dirty amount. This value
corresponds to 100,000 units * 107.290875 = 10,729,187.5 USD.
Note: At the contract inception date, the Notional amount on the nancing leg for accrual-based calculation is constant
throughout the cashow schedule because the asset leg has not reset to a new and different value yet, as shown below on the
Cashow tab.
Accrual-Based Model with Valuation Date After Bond's Coupon Date

The asset bond (ISIN US313375ZL42) used in the example in this section pays semi-annual cashows on April and October
17. For this reason, it is useful to explore and analyze what happens when both the Curve Date and the Valuation Date fall after
a coupon payment but before the end of the rst asset leg cashow period (06/25/2013, as indicated on the Details tab). The
image below illustrates the Main tab on April 20, 2013.
The market value of the deal derives from three factors:

The bond's coupon paid in-between the most recent asset leg reset date (03/20/2013, as indicated on the Details tab) and
the current Valuation Date. This amount appears on the bottom right of the Main tab in the Dividend Pmt eld.
|Hint| The Cashow Analysis (CSHF) screen with a matched face value (10MM USD) displays the same value. For more
information on CSHF, see CSHF <Help>.
The bonds price appreciation/depreciation. The bonds dirty mid price (based on a T+0 accrued interest) is 107.916292
USD and this capital gain is the amount received by the asset receiver investor.
The initial asset market value is: # Unit * Initial Price = 100,000 * 107.291875 = 10,729,187.5 USD
The asset market value on valuation date is: # Unit * Price = 100,000 * 107.916292 = 10,791,629.2 USD
The asset market value percentage change is: (Current Market Value / Initial Market Value) 1 = 0.582%
The capital gain will nally be: Asset Market Value at the beginning of the period * % change = 10,729,187.5 USD *
0.582% = 62,441.67 USD, which appears in the Capital Gain eld
The nancing leg has an accrued interest, as described in Accrual-Based Model (Equity).
The Market Value shown on the Main tab is the sum of these three components.
PROJECTION-BASED MODEL (BOND)
The second method available to price a bond total return swap (TRS) is the projection-based model. The security used in this
example to illustrate a bond TRS is ISIN US313375ZL42 (FHLB 2.795 10/17/23 <Corp>), and the initial reference date
March 20, 2013.
While most of the information is the same as the accrual-based model described in the previous section, the discount and
forward curves now appear on the Main tab. The forward curves are used to project the future Libor reset rates as well as the
asset's future value, while the discount curve discounts the expected payments.
As with the accrual-based method, the asset price used to perform the calculation is the mid dirty price, and it is based on the
pricing source selected for the bond on the Price Source Selection (PCS) function. For more information on PCS, see PCS
<Help>.
In the projection-based method, DV01 is available for each individual leg and the entire deal, and is represented as a 1 bp
downward shift in the yield curve, similar to a x-oat swap.
SWAPTION/CANCELLABLE SWAP
DEFINING YOUR VIEW

By default, when you access the swaption template in SWPM, the Option and Valuation Settings sections expand, spotlighting
the elds most relevant to the swaption structure. You can customize your default view.
From the toolbar, select Views, then choose from the following:
Standard: Expands the Option and Valuation Settings sections.
Full Data: Expands all sections.
Ticketing: Expands the Option section.
Custom: Expands the sections you specify in your custom view.
Congure: Allows you to congure your custom view.

The selected view appears by default when you access the swaption template in SWPM.
SAMPLE DEAL TERMS (SWAPTION)
Below are sample deal terms for a ve-year 1 x 5 European swaption, which you can price using the swaption template in
SWPM. To price the deal, you must input the terms in the Leg 1, Leg 2, and Option sections of the cross-currency template
and press <Go>.
Option
Input
Style
European
Expiration
02/13/2015
Swap Start
02/18/2015
Swap End
02/18/2020
Notional
10MM
Option
Input
Currency
USD
Strike
2.317264% p.a.
Leg 1 (Receive Leg)
Input
Market Side
Receive
Coupon
2.317264% p.a.
Day Count
30I/360
Modied Following
Leg 2 (Pay Leg)
Input
Market Side
Pay
Index
US0003M
Reset Frequency
Quarterly
Pay Frequency
Quarterly
Day Count
ACT/360
Modied Following
DETAILS
The Details tab displays detailed option and leg information and allows you to edit leg characteristics, such as date generation,
amortization, and payoff information. For example, you can manually enter step-up xed coupons or, for oating legs, increasing
spreads. You can also update the accrual periods and amortization amounts for the leg and calculate fees.
The Details tab for swaption deals is divided into three sub-tabs, each of which includes expandable/collapsible sections of
data. You can expand any section by clicking the plus sign (+) to the left of its heading.
Option: Allows you to further congure option details along with the option schedule and the fee schedule. You can also
export the option and fee schedules to Microsoft Excel via the Export to Excel button. For more information on a eld,
Leg 1: Receive Fixed: Allows you to further congure settings for the xed leg of the deal. For example, the Bus Day
556
Adj
556
eld allows you to choose the business day adjustment method used to adjust cashow dates to business days.
You can also specify whether to adjust payment dates only or to adjust accrual end dates and payment dates when
557
calculating swap cashows. Further, you can specify the roll convention
method and calendar used to generate
cashow dates, enter custom cashow amounts, and customize the accrual schedule. For information on using the
Amortization Wizard to customize the accrual schedule, see Amortization Wizard. For more information on a eld, position
Leg 2: Pay Float: Allows you to further congure settings for the oating leg of the deal. For example, you can specify
558
the roll convention

method, the calendar used to generate cashow dates, and the xing calendar. Further, you can
enter custom cashow amounts, and customize the accrual schedule. For information on using the Amortization Wizard to
customize the accrual schedule, see Amortization Wizard. For more information on a eld, position your cursor over it or
see Denitions.
CURVES
The Curves tab for swaption deals provides transparency into the tickers used to construct the curves that are used to price a
swap in SWPM. It also allows you to evaluate the impact that different scenarios would have on your swap deal.
The tab is divided into four sections. The curve conguration section allows you to congure the curve used to project forward
rates or discount cashows. The tickers and rates section provides transparency into the tickers used to construct the curves
and allows you to manually override curve values and apply shifts to the whole curve or to dened buckets. The zero rates chart
allows you to visualize curve data, and the valuation section displays swap values and risk gures.

day.
557
558
Area.
Curve Conguration: Allows you to choose the method used to interpolate between points on the selected curve, specify
the curve date, and specify the DV01 calculation method. You can also enter a shift to be applied to the entire curve,
refresh the data that appears, and export the curve data to Microsoft Excel (in which you can manipulate the data and
then drag it back into SWPM).
Note: The changes you make on the Curves tab impact the deal valuation on the Main tab.
For information on the elds that appear, see Denitions.
For information on the Curves Toolkit, which allows you to interact with interest rate curves directly in Excel, see the
Curves Toolkit section of DAPI <Help>.
For information on dragging and dropping rate data into SWPM, see Importing Curve Rates.
Tickers and Rates: Displays curve data in a table:

Term: The term to maturity of the particular point on the curve.
Market Rate: The market-quoted par coupon swap curve.
Shift: Allows you to apply shifts to the whole curve or to dened buckets. You can manually input shifts for specic
terms, or, in the curve conguration section, you can enter one shift to be applied to the entire curve.
Shifted Rate: Displays the rate resulting from applying the specied shift to the market rate.
|Hint| You can drag values from Excel into the Shifted Rate column. For more information, see Importing Curve Rates.
Zero Rate: Displays the zero coupon swap rates implied by the quoted par coupon swap curve (i.e., the market rates
in the Market Rate column). These zero rates are used to calculate the discount factors, and may be thought of as
discount factors expressed as an annualized percentage return.
559
Note: Short-term rates, e.g., Libor rates, are naturally spot/zero rates
. Where the market rates are not naturally zero
rates, e.g., in the case of Eurodollar contracts, bootstrapping is used to convert the market rates into spot (zero) rates.
For more information, see Building the Bloomberg Interest Rate Curve.
Discount: The rate used to discount the cashow back to the valuation date. Discount rates represent the value of one
dollar at a specic point in the future.
Zero Rates: Allows you to visualize the zero rates in the curve. For information on using advanced charting options, such
as track, annotate, and zoom, see Charting Basics.
Results: Allows you to evaluate the swap based on its valuation and sensitivity gures. Only risk management Greeks
appear in the Results section; however, you can click the More Greeks button to display additional sensitivity measures,
including the underlying DV01, option DV01, and option norm DV01. For more information on a eld, position your mouse
For instructions for customizing and applying shifts to a curve, see Customizing Curves.
CASHFLOWS
The Cashow tab for swaption deals displays the present value of the cashow amounts for each leg or on a net basis, so you
can better understand the stream of cashows in a deal.
The tab is divided into two sections. The cashow options section allows you to customize the data that appears in the
cashow data section.
Control Area: Allows you to navigate between tabs, congure your default settings, and switch between the table and
chart views of cashows by clicking the Cashow Table and Cashow Graph sub-tabs.
For more information on charting cashows, see Charting Cashows.
559
For more information on the tabs and toolbar options, see Control Area.
Cashow Options: Allows you to customize the cashow data that appears and then export customized cashow data to
Microsoft Excel. You can display cashow amounts for each leg or on a net basis, historical cashows, the zero rates used
to calculate the discount factor, and the equivalent coupon rate (for the oating leg) based on the reset rates.
For more information on customizing cashow data, see Analyzing Cashows.
For more information on exporting to Excel, see Exporting to Excel.
Cashow Data: Displays future cashows along with their present values. Your selections from the cashow options
section determine the columns of data that appear. Either nominal or actual business-adjusted payment dates appear,
according to your selection from the Bus Day Adj
560
eld on the Details tab.
Note: The rst payment date is the nominal date on which the rst coupon payment is scheduled. When the coupon
payment dates for the swap generate, nominal dates appear according to the roll convention and payment frequency
specied on the Details tab.
For more information on conguring the business day adjustment, roll convention, and payment frequency on the Details
tab, see Conguring Leg Details.
For more information on generating payment dates, see Payment Dates.
RESETS
The coupon of the oating leg of a swap deal is based on the rate of a specied index. The index rate changes over time, and
the rate used to determine the leg's coupon resets periodically to follow the changing index. The Resets tab for swaption deals
allows you to analyze the historic and projected periodic resets. You can display reset, convexity, and forward rates for the deal
and enter custom historical rates in the oating leg cashow schedule.
The Resets tab is divided into a control area and a table of reset rates.
560
day.
Area.
Reset Rates: Displays the implied forward reset rates used to value the deal and allows you to export them to Microsoft
Excel. The reset rates feed directly from the forward curve that you set in the curve data section on SWPM's Main tab.
For information on customizing reset rates, see Managing Resets.
For information on how to display and customize the forward curve that feeds the reset rates into SWPM, see ICVS
<Help>.
For information on exporting reset rates to Excel, see Exporting to Excel.
SCENARIO
The Scenario tab for swaption deals allows you to perform what if scenario analyses in which you can see the effect of specic
shifts in the swap curve on a future date and assess the risks of an open swap position. SWPM allows you to test different
scenarios on the same horizon date or the same scenario on different horizon dates. You can also store the scenarios (market
shifts and time shifts) and global settings (forward evolution and pricing modes).
The Scenario tab is divided into two sections. The scenario section allows you to congure up to four different scenarios, and
the Results section displays the results of your analysis.
Note: Results appear in the results section after you customize your inputs and click the Calculate button. The image below
and the section descriptions reect the screen after you have clicked the button.
Area.
Scenario: Allows you to congure up to four different scenarios for analysis. For each scenario, you can specify the
horizon term (Time Shift) and the curve date you want to use. You can choose a saved scenario from the OTC Derivative
Scenario Analysis (SHOC) function, or apply custom basis point shifts to a selected swap curve. The Path Progression
drop-down menu allows you to congure the progression for the scenario: you can apply the shock either today, at the
nal horizon date, or over time to the horizon date. The forward evolution settings allow you to choose the curve used as
the base case in your analysis: you can use the projected interest rate curve at the horizon date (Y) or today's interest rate
curve (N). The plus sign to the left of the curve names allows you to display the individual basis point shifts that are applied
to each point on the curve. For cross-currency swap structures, a customizable FX rate eld appears. For swap structures
with embedded options, a customizable volatility eld appears. You can enter a value in units of "percent of Black Vol." For
a VCUB shift, each and every VCUB market volatility quote is shifted by the shock amount. For example, for a at volatility
shift of 5%, a at Black vol of 20% shifts to 25%.
For detailed instructions for setting up and analyzing scenarios, see Analyzing Scenarios.
For information on SHOC, see SHOC <Help>.
Results: Displays the results of your scenario analysis and allows you to display the projected cashows based on your
scenario inputs. Results include the present value of the individual legs (Leg1/2 PV) and the deal (Net PV), accrued
561
562
interest, Gamma (1bp)

, DV01
, and the present value of payments that are reinvested based on rates on the curve.
The Basic Results drop-down menu at the top-right of the section allows you to chart the market value, Gamma, or DV01
of a selected scenario over time.
561
562
If applicable, the gamma for the swaptions priced by the HW1F model is the difference between deltas when the swap
curve is parallel-shifted up and down by 10 bps. Delta1 shift up the swap curve by 10 bps, Delta2 shift down the swap
curve by 10 bps. Gamma = (Delta1 - Delta2) / 2 and then scaled to 1 bp.

For information on charting scenario results, see Charting Results.
RISK
The Risk tab for swaption deals allows you analyze the sensitivity of a deal to various rate shifts at individual points along the
curve.
The Risk tab is divided into ve sections. You can congure the curve shift and calculation method in the conguration section,
and then analyze risk values in the risk table and risk chart. The Greeks and additional risk measures sections allow you to
evaluate the swap.
Note: KRR results appear in the risk chart and risk section after you customize your inputs and click the Calculate button. The
image below and the section descriptions reect the screen after you have clicked the button.
Control Area: Allows you to navigate between tabs and congure your default settings. The control area also includes the
Vega Matrix sub-tab, which displays the vol sensitivity for each expiry and tenor. For more information, see Control Area.
Conguration: Allows you to congure curve shift options, currency/curve conventions, IMM date, and Libor xing
options. Your selections override the DV01/KRR curve settings from the Swap Curve Defaults (SWDF) function. The
DV01/KRR Calc Method drop-down menu allows you to choose whether the reference rate used for the rst oating
coupon in the par swap curve is presumed to be xed or allowed to shift. You can also choose to display portfolio key rate
563
risk
563
564
or full key rate risk
in the risk table.
Key rate risk is the change in the market value of the deal for a basis point change in a particular swap rate. For example, if
the par curve is shifted up or down by one basis point at a specic term point, and the rest of the points on the par curve
remain the same, the dollar change in market value divided by two is the key rate risk for the term.
For more information on SWDF, see SWDF <Help> or enter SWDF DFLT <Go>.
For detailed instructions for analyzing risk according to your specications, see Managing Risk.
Risk Chart: Charts net portfolio/full key rate risk values from the risk table. For information on using charting options, such
as track, annotate, and zoom, see Charting Basics <Help>.
Greeks: Allows you to evaluate risk values. For information on a eld, position your mouse over it or see Denitions.
Risk: Displays risk values for individual curve components based on your selections from the conguration section. For
example, the 3 MO row displays the change in market value of the deal for a basis point change on the three-month cash
565
rate. At the bottom of the section, the Additional Risk sub-section displays risk
the individual legs of the deal and for the deal as a whole.
Additional Risk: Displays risk
564
565
568
and DV01
569
566
, DV01
, and mod. duration
567
for
for the deal as a whole.
Average Notional =
566

567
568
For a par swap, the deal risk is equal to Modied Duration because the Market Value is zero. Leg Modied Duration =
(DV01 / Market Value) x 10,000
MATRIX
The Matrix tab allows you to create a matrix to quickly compare the impact of different scenarios on measures such as market
value, premium, and DV01.
Matrix pricing supports the following structures: plain vanilla swaps, cross currency swaps, caps/oors, swaptions, cancellable
swaps, and range accruals. The data on the Main tab appears as the base case used in the matrix. The Matrix tab is divided
into two sections. The matrix conguration section allows you to specify the measures for your x and y axes. The matrix displays
the results of your "what if" analysis, according to your selections from the matrix conguration section.

Average Notional =
569

Matrix Conguration: Allows you to specify the measures, intervals, and number of data points you want to display on
the x and y axes of the matrix. For example, you can evaluate the impact that 10 bp shifts at ve different points on the
curve would have on the market value of four deals with different maturity dates, at intervals of one year.
The Calculate button populates the matrix. The Export to Excel button allows you to export your matrix values to a
Microsoft Excel spreadsheet. For detailed instructions on customizing the matrix, see Matrix.
Matrix: Displays the results of your customized "what if" analysis. The Outputs sub-section on the left side allows you to
add additional measures (outputs) to the matrix. You can show/hide the Outputs sub-section by clicking the double arrows
(<<).
AMORTIZATION WIZARD
On the Details tab of the swaption template, you can choose the method for amortizing your swaption deals with the
amortization wizard.
Steps:
1. Select the sub-tab corresponding to the leg you want to congure. For example, select Leg 1: Receive Fixed.

2. Click the Amortization Wizard button.
The Amortization Calculator appears.

3. From the drop-down menu, choose an Amortization Type:
Simple: Allows you to manually create a schedule by entering the data or dragging spreadsheet data into the
amortization table. For more information, see Amortization Schedule.
Security: Allows you to enter an amortizing instrument, such as a mortgage-backed security, into the Security Amort
570
Lookup
eld and edit the assumptions for prepayment speed to create the corresponding table.
Loan: Allows you to enter a mortgage as an amortizing instrument to create the amortization schedule. This method
571
creates the cashow schedule based on the Amount
, Coupon
572
, Residual
573
, number of payments calculated
574
from pay Freq

(frequency) and Months (loan period), and day count fraction for each payment period, then
calculates the following mortgage cashows: each payment amount (same for all periods), interest payment amount,
575
and principal payment (Amort Amount
).
Linear: A straight-line method in which an equal percentage of the balance is amortized (reduced) each period so that
576
the nal balance is zero at Maturity

.
The amortization options for the selected method appear.
4. Edit the options for the selected method, then press the Continue button.
Note: For the denition of a eld, see Denitions.
The amortization table updates.
For more on about saving deals, see Saving Deals.
570
Allows you to populate the amortization schedule of a mortgage security or a sinking fund bond once you enter the
security identier. Principal pay downs imported into the schedule are expressed as a percentage of notional (i.e., the
percentage of the current notional of the security, as of the current settle date).
571
For example, enter FNCL 6.5 <MTGE> or 31380MB21 <MTGE> to load the amortization schedule of the mortgage
security into the current swap amort schedule or enter 544582NG <CORP> to load the schedule of the sinking fund
bond.
572
573
574
coupon frequency.
increases it.
The termination date of the deal. The termination date appears as a nominal date and should be entered without
575
576
DEFINITIONS
Term
Denition
1/1
Appears in the Day Count menu for ination zero coupon and income ination swaps.
A day count that treats all the periods the same (i.e., day count fraction = 1.0),
regardless of the number of days in the accrual period.
23 USD Swaps (30/360,S/A)
This curve represents US dollar-denominated interest-rate swaps. The short-end of the

curve are cash rates with a day count of Actual/360. Payments on the long end of the
curve are based on a xed-rate versus a oating-rate with the xed-rate portion on a
semi-annual, 30/360 day-count basis and the oating-rate on a quarterly, Actual/360
day-count basis from the BBA LIBOR USD three-month rate (US0003M <INDEX>).
Pricing for long-end terms are a best bid/ask composite from latest quotes and the
sources include both banks and brokers.
42 USD OIS Swaps
This curve represents USD overnight index swaps. Payments are based on a xed-rate
versus a oating-rate overnight index with the xed-rate portion on an annual,
Actual/360 day-count basis and the oating-rate on an annual, Actual/360 day-count
basis from the FED Funds Effective Rate (FEDL01 <INDEX>). Pricing is a best
bid/ask composite from latest quotes and the sources include both banks and brokers.
The point on the curve.
*Accrued
The theoretical net accrued interest if the swap were not a zero coupon swap.
% Notl
(%) Vol
The volatility for the particular term at the specied percentage. This is calculated from
the market swap curve.
Above Coupon
The payment amount above the coupon rate.
Accrual and Payment Dates
Accrual end dates and payment dates are adjusted according to the business day logic
you choose.
Accrual based
Indicates that revenues and expenses are recorded when they are earned or incurred,
even though they may not have actually been received. The accrual method values the
structure based on the current accrual.
Accrual End
Accrual End Date
Accrual Start
The date on which the accrual period starts. On the Details tab, the accrual start
dates coincide with the swap cashow dates by default. You can modify the dates to
correspond to a custom amortization and payment schedule.
Accrual Start Date
The date when the accrual period starts.
Accrue
The coupon amount accrued up to the option settlement date.
Term
Denition
Accrued
The amount of net interest accrued, calculated as the sum of the accrued interest for
the funding leg. Each legs accrued interest is calculated as the Leg Coupon x Day
Count Fraction.
Accrued (Asset Swap)
Applies to asset swaps. The bond or swap's accrued interest from the last coupon date
to the valuation date.
Accrued (Brazilian)
Applies to Brazilian swaps and Cupom Cambial securities. The amount of interest
accrued on the leg since the last leg cashow date.
Accrued (Cap/Floor)
Applies to range accrual/cap/oor spread options. The amount of net interest accrued.
Accrued (Main)
Applies to the Main tab. The amount of interest accrued on the leg since the last leg
cashow date. This is calculated as Leg Coupon x Day Count Fraction.
Accrued (Range Accrual)
Applies to range accruals. The amount of net interest accrued from the last interest
payment to settlement. Also applies to capped oater and TARN, ratchet and snowball,
snowbear, thunderball, snowblade, ip-op, and PRDC.
Add Exercise Date
The date the option is exercised.
Add Floating Leg
Allows you to add a third leg by converting to a multi-leg template.
Add to Portfolio
Allows you to display the Portfolio Trade Ticket (PTT) function where you can book a
deal to a portfolio. For more information, see PTT <Help>.
Additive
Allows you to apply an absolute shift (in bps).
Adjust
Allows you to adjust payment dates while keeping accrual end dates unadjusted when
calculating swap cashows.
Adjust Accrual and Payment

Dates
Allows you to adjust payment dates while keeping accrual end dates unadjusted when
calculating swap cashows.
Ahead (Following)
If the date is not a business day, then the date is adjusted forward to the next business
day.
All Value In
The currency in which the market values of the deal are reported.
All Values In
The currency in which the market values of the deal are reported.
All Values In/Curr
The currency in which the market values of the bond and swap are reported. For
a cross-currency asset swap, you can choose either the bond's currency or the
remaining swap leg's currency to be the report currency.
Amort Amount
The amount to be amortized on each scheduled amortization date. You can enter a
dollar amount to increase or decrease the notional amount at any period. A positive
dollar amount decreases the notional whereas a negative dollar amount increases it.
Amort Dates
The scheduled amortization dates. Amort dates may be different from the
payment/cashow dates. Amort amounts that fall between two payment dates are
accumulated into the ending amort payment date for the percent of notional and amort
amount, in thousands. The amount specied as the latest between two payment
dates (inclusive on ending payment date) is used for the ending payment date for the
balance.
Term
Denition
Amortization Rate
The amortization rate for the leg.
Amort Rates
The amortization rates on scheduled dates. To apply new rates, enter a percentage
value by which the original notional is increased or decreased into the highlighted cells.
A positive percentage decreases the notional; a negative percentage increases the
notional. For example, enter "10" to decrease the notional amount by 10%.
Amort Rates (%)
The amortization rates on scheduled dates. You can enter values into the amortization
table to apply new rates.
Amount
Amount in 1000's
The amount in 1000's to be deducted from (amortized) or added to (accreted) the

original notional. Amounts specied after the previous payment date, up to and
including the next payment date, are accumulated into the next payment date for
calculations.
Apply amortization to next

payment
The accrual of the amortized schedule.
Apply Amortization to the Other Ensures that the current amortization schedule is also used for the other leg, if
Leg
applicable.
APR
The annual percentage rate at which cashows are reinvested between the original
curve date and the horizon date.
Ask (Settings and Templates)
Applies to the Settings and Templates window. Allows you to congure your default
ask settings for % Notl, Delta, and Vol. For more information, see Choosing Bid/Ask
Settings.
Asset Swap
An interest-rate swap used to convert the cashows of the underlying asset to desired
cashows via the swap market. The asset can be xed coupon payments or oating
rate payments, which can be converted to either xed or oating in the same currency
or different currencies.
Asset Swap Spread
The difference between the bond's implied value and its market price, expressed in
basis points over the oating leg of the underlying swap.
Asset Type
Applies to iBoxx Total Return swaps. The asset type on which the return is based.
Choices include:
Index
Govt
Corp
Muni
Equity
ATM (+0.05%) Spread (%)
The spread, given the specied give-up value.
ATM Strike
The par coupon for the underlying. Applies to the at-the-money cap strike for a
particular term. This is calculated from the market swap curve and is expressed as a
Term
Denition
percentage. A list of available swap curves appears in the Swap Defaults (SWDF)
function. For more information, see SWDF <Help>.
ATM Strike (Dual Digital)
Applies to dual digital custom securities. The par coupon for the underlying.
ATM Strike (Spread)
Applies to spread option caps/oors. The par coupon for the underlying.
ATM Vol
The at-the-money cap volatility for the particular term.
Auto Reset Rate
Choose Yes or No to specify that rates reset automatically.
Average Rate
The arithmetic mean of all the reset rates for a pay accrual period.
Back (Preceding)
If the date is not a business day, then the date is adjusted backward to the preceding
business day.
Balance
Applies to the Details and Resets tabs. The actual amount or remaining balance of the
original notional. The latest balance amount is used for the next payment date if multiple
balance amounts are specied after the previous payment date, up to and including the
next payment date. On the Details tab, you can enter the notional amount to be used
for each accrual period.
Balance (Range Accrual)
Applies to range accruals. The outstanding balance.
Barrier
The number of months/years and percentage value of the barrier.
Barrier (Range Accrual)
Applies to range accruals. The switch point between two specied payoffs.
Basis Adjusted
For cross-currency swaps, species whether the discount curve is basis-adjusted,

relative to the US curve.
Below Coupon
The payment amount below the coupon rate.
Bid/Ask/Mid
The market side of the discount curve used in the leg valuation.
Bid/Mid/Ask
The market side of the discount curve used in the deal valuation.
The Bid/Mid/Ask eld is based on your default settings. You can change this value
to display what the valuation is for a different market side. When you save the deal,
however, the market side on the screen is not saved. Rather, when you retrieve the
deal, the market side specied in your default settings is used in the valuation.
Bid/Mid/Ask (Curves)
Applies to the Curves tab. The rates on the selected market side for the curve number
appear. Change to Bid, Mid, or Ask to display rates on the selected market side for
the curve. If you change any rates in the curve grid that are on the market side of a
curve on which a leg is valued, then the market value of the swap changes.
For example, consider a plain vanilla xed-oat swap where the market sides for the
discount curves on both legs, and for the forecast curve on the oat leg, are set to
Mid on the Main tab. If you navigate to the Curves tab and change the values for the
rates on the Mid side of the curve, then the swap market value changes. However, if
you retrieve the Bid side of the curve and change any of the Bid rates, the market value
does not change because none of the legs use the bid rates in its valuation.
Term
Denition
Bid (Settings and Templates)
Applies to the Settings and Templates window. Allows you to congure your default
bid settings for % Notl, Delta, and Vol. For more information, see Choosing Bid/Ask
Settings.
Bilateral
Allows you to calculate bilateral CVA to determine the risk-free market value that
reects the losses to each party if the other party defaults rst.
Black-Scholes
The Black-Scholes model assumes that the underlying swap rate follows a geometric
Brownian motion with no drift and constant volatility. This assumption implies that the
underlying forward swap rate has a lognormal distribution. European swaption prices
can be obtained analytically. The Black-Scholes-implied volatility is dened as the
volatility to be used in the option-pricing formula to reproduce the swaption market
price.
Bond Coupon
The bond coupon paid. For oater bonds, it is the current index rate + margin.
Bond ISIN#
The Bloomberg International Securities Identication Number (ISIN) of the selected

bond.
Bond Price
The bond's price and yield.
Bond Price (Asset Swap)
Applies to asset swaps. The price of the underlying bond. The price is either clean or
dirty, depending on the bond-specic trading conventions (most prices are clean).
Book Trade to TS
Allows you to enter the trade in a Bloomberg trading system, provided you have the
appropriate privileging to the Trade Order Management System (TOMS).
BR01
Appears for basis swaps (single currency and cross currency basis swaps) on the
Main tab, Curves tab, and Risk tab. The basis risk metric, which is the change in the
MV of the swap, due to a 1 bps shift (contraction) in the basis swap curve. BR01 is
calculated as:
Shift 10 bps up -> MV(up)

Shift -10 bps down -> MV (down)
BR01 = [MV (down) - MV (up)] / 20
In this case, the shift pertains to the SWDF swap curve 51. For more information, see
SWDF <Help>.
Bull Call Spread
A call spread is a swaption strategy designed to work when the prevailing trend is
higher. The bullish call spread can be created by buying lower strike calls and selling,
or shorting, the same number of higher strike calls with the same expiration.
Bus Day Adj
Appears on the Details tab. The method used to adjust cashow dates to business
days when necessary. The drop-down menu displays the following choices:
Ahead (Following): If the date is not a business day, then the date is adjusted
forward to the next business day.
Term
Denition
Back (Preceding): If the date is not a business day, then the date is adjusted
backward to the preceding business day.
Modied (Following): If the date is not a business day, then the date is adjusted
forward to the next business day, but stays in the current month.
Modied (Preceding): If the date is not a business day, then the date is adjusted
backward to the preceding business day but stays in the current month. For
example, if March 30, 2013 is a Saturday, "Ahead (Following)" adjusts the date to
April 1, 2013, but "Modied Preceding" uses a date of March 29, 2013.
Business Day Adjustment
The method used to adjust cashow dates to business days when necessary.
Buy
Buy/Sell
The action taken on the selected bond, either buy or sell.
By Deal ID
Allows you to add a leg using a deal ID.
By Type
Allows you to add a leg by selecting the deal type.
Calc Basis
The basis on which xed cashows are calculated. For a bond-equivalent basis,
cashow periods are equal. For a money-market basis, cashow periods may not be
equal due to business day adjustments.
Calc Method
Allows you to select a method used in the calculation. For example: Accrual based,
Projection based.
Calculate
Allows you to select the variable you want to solve for.
Calculate (Asset Swap)
Applies to asset swaps. The method of calculation. The drop-down menu displays a list
of options, which vary depending on whether the bond is a xed coupon or a oater.
The Z-Spread and Par Shift Quick Calculator perform scenario analyses of the
relationship between the discount curve and the premium. The cashows are presumed
unchanged. Only the discount curve is shifted. As such, z-spread is the shift on the
stripped curve, while par shift is the shift on the par curve (unstripped). You can either
enter a spread to calculate the premium or enter a premium to calculate the spread.
Calculate (Dual Digital)
Applies to dual digital custom securities. The attributes of the cap, oor, collar, cap
spread, oor spread, and straddle to compute. The default computes the premium of
the deal given the strikes and volatilities. In the case of a cap-and-oor deal, the implied
volatility for the cap is also computed. You can calculate implied volatility by choosing
the option and specifying premiums and strikes. You can also compute strikes for the
deals for a target premium and specied volatility. The coupon can be computed for a
target premium on digitals. By varying what option you choose from the Calculate eld
drop-down menu, you can obtain the value of interest based on other pertinent values
present in the deal.
Calculate (Fixed Leg)
Applies to pay/receive leg (xed leg). You can select up to ve countries whose
combined calendars are used to generate actual reset dates and payment dates. The
Settlement Calendars function (CDR) provides information on what dates are holidays
in those countries for the next ten years.
Term
Denition
For example: To display the US calendar, enter CDR US <Go>. To display the
Japanese calendar, enter CDR JN <Go>.
When generating reset dates and payment dates, the calendars for the selected
countries are checked to ensure that those dates do not fall on holidays or weekends
in those countries. All actual reset and payment dates used in the calculations fall on
business days in all of the countries whose calendars are selected.
For more information, see CDR <Help>.
Calculate (Details)
Applies to the Details tab. The calendar used to generate actual reset rates and
payment dates. The Settlement Calendar function (CDR) provides information on dates
that are holidays. For more information, see CDR <Help>.
Calculate (FRA)
Applies to Forward Rate Agreements. The variable for which the new value is
calculated while holding other variables constant.
Calculate (Risk)
Applies to the Risk tab. The percent of the par value of the instrument under analysis.
The premium represents the market value of the deal weighted by the notional, e.g.,
premium = market value / notional x 100.
Calculate (Settings and

Templates)
Applies to the Settings and Templates window. Allows you to set the default valuations
for templates in SWPM. For more information, see Customizing Templates.
Calculate (Three Zone Digital)
Applies to three zone digitals. Allows you to choose whether to calculate the premium
or spread.
Calculation
Allows you to choose the calculation used in pricing the swap.
Calculation Calendar
The calendar used in calculation, e.g., ACT/360, 30I/360.
Calculation Cdr.
The calendar used in calculation, e.g., ACT/360, 30I/360.
Calculations
Allows you to choose up to ve countries whose combined calendars are used to

generate actual reset dates and payment dates. The Settlement Calendars (CDR)
function displays further information on what dates are holidays in those countries for
the next 10 years.
Calendar
The aggregate calendar of up to three countries that is used to generate actual reset
and payment dates. The Calendar eld takes into consideration holidays in the selected
countries to ensure that contract payment and reset dates do not fall on a holiday or
weekend.
Calendar Spread
A strategy that involves buying and selling swaptions on the same security (underlying
swap tenor) with different maturities. Using calls, the calendar spread strategy can
be set up by buying long term calls and simultaneously writing an equal number of
near-month at-the-money or slightly out-of-the-money calls of the same underlying
security with the same strike price.
Calibration Instruments
The vanilla swaptions used to calibrate the LGM (Hull-White) model. For more
information, see Models.
Term
Denition
Calibration Method
The method used to calibrate the LGM (Hull-White) model pricing the Bermudan
swaption contract. For more information, see Models.
Call Date
The call date for the option.
Call Date (Callable)
Applies to callable notes. The rst exercise date of the option. Callability can begin at
any time during the life of the bond.
Call Freq
The frequency of the exercise schedule.
Call Frequency
The frequency of the exercise schedule.
Call Option
The non-call price minus the market value.
Call Option Premium
The percent value of the option.
Call Opt Prem
Appears only when the deal is callable. The premium for the callable option.
Call Price
The percentage of the notional amount paid when the option is exercised.
Call Price(%)
The percentage of the notional amount paid, in percent, when the option is exercised.
Call Spread
A call spread is a swaption strategy designed to work when the prevailing trend is
higher. The bullish call spread can be created by buying lower strike calls and selling,
or shorting, the same number of higher strike calls with the same expiration.
Cap
1) In the Calculate drop-down menu, solves for the level at which the oating rate is
capped. 2) An option that provides a payoff when a specied interest rate is above a
certain level. The interest rate is a oating rate that is reset periodically.
Cap A Payment/Cap B Payment
The payment of each cap in cap A/cap B for each pay period.
Cap A Strike/Cap B Strike
The strike rate of each caplet in cap A/cap B for each pay period. They appear for cap
spread only.
Cap A Strike
The cap strike of the rst cap in a cap spread.
Cap B Strike
The cap strike of the second cap in a cap spread.
Cap/Floor Strike
The strike amount of each cap/oor.
Cap/Floor Strike %
The strike rate of each cap/oor.
Capital Gain
The capital gain resulting from the trade, if any.
Cap Payment/Floor Payment
The payment of each cap/oor for each pay period.
Cap Spread
A cap spread is a combination of a long position in one cap and a short position in
another cap at a different strike.
Cap Strike
The strike rate for the cap. The payoff occurs in a spread option cap if the factored
spread is above this rate. The payout is multiplied by the number in the Receive X eld
to determine the market value. The risks calculated take this number into account.
Cap Strike/Floor Strike
The strike rate of each cap/oor for each pay period.
Cashow
Term
Denition
Cash Out
The difference between the bond price and swap price.
Cash Rates
The day count convention for curve rates with terms less than or equal to one year. For
more information, see Day Count.
Cash Rates (Curves)
Applies to the Curves tab. The day count for the cash rates for the selected curve.
Cash Rates (Range Accrual)
Applies to range accruals. The day count convention for curve rates with terms less
than or equal to one year.
CCP
Used for classifying trades that are Swap Execution Facility-cleared (SEF) through
exchanges (CME, ICE, IDCG, LCH). The default is "OTC," which is the current
standard, and the trade is conrmed by both counterparties.
Ccy
Allows you to select the currency for which you want to adjust the scaling (multiple).
For more information on currencies, see CURR <Help>.
Ceiling
The upper boundary of the range.
Change the Option Call

Frequency to
Allows you to specify the option call frequency, i.e., Annual, Semiannual, Quarterly.
Clear Customization
Allows you to clear the custom defaults you have selected.
Client
Someone who clears swaps through a clearing member.
Collar
A collar is a combination of a long position in a cap and a short position in a oor.
Coll Ccy
The collateral currency used in the valuation.
Comp Freq
The compounding frequency of each leg.
Compound
The compound method. Applies only if the reset frequency is larger than the pay
frequency for the Libor leg of the oat-oat MUNI swap.
Congure
Allows you to choose and congure the amortization type.
Conv Adj
The convexity adjustment methodology applied for the underlying CMS rate and the
corresponding derivatives. For CMS, the reset rate for each period is the forward
constant maturity rate adjusted for convexity. For swaps in arrears, the reset rate for
each period is set toward the end of the period preceding the payment date by the
number of days to accrual. Hence, the reset rate is applied retroactively to the period
just ended. An adjustment for convexity is also applied for swaps in arrears.
Convention
The premium calculation type. For example: Spot Premium, Implied Premium.
Convert Notional by FX
Allows you to convert the notional amount to the current FX rate for the selected
currency.
Convert to Multi Leg
Allows you to convert the existing trade into a multi-leg template.
Convexity
The percentage duration change of the deal for a given change in yield. The convexity
is the second derivation of the deal's price with respect to yield, divided by the price.
The deal exhibits positive convexity when its price rises more for a downward move in
yield than its price declines for an equal upward move in yield.
Term
Denition
Corr
The correlation between the long- and short-term rates.
Correlation
The degree to which the two factors in the Two-Factor LGM model are correlated.
Correlation (Nikkei Linked Note) Applies to Nikkei Linked Notes. The corresponding correlation factor.
Cost
Counterparty
Counterparty CDS Recovery
The recovery rate for the credit curve of the counterparty, used to generate
counterparty default probabilities.
Counterparty Deal Recovery
The percentage of a deal's market value that an investor receives if the counterparty
goes into default.
Country
The country issuing the ination bond.
Coupon
Coupon (Dual Digital)
Applies to dual digital custom securities. The xed coupon payoff for digitals.
Coupon (Flip-Flop)
Applies to ip-op trades, including capped oater and TARN, ratchet and snowball,
snowbear, thunderball, snowblade, ip-op, and PRDC. The xed coupon rate to
which a ip-op deal can switch.
Coupon (Range Accruals)
Applies to range accrual securities. The xed rate of interest for payment.
Coupon (Spread)
Applies to spread options. The xed coupon payoff for range accrual or digital
caps/oors.
Cpm Cambial
The xed interest rate calculated by the difference between the CDI rate and the
variation of the USDBRL local exchange rate.
Cpn
Cpn Accrual Start/End
The start and end dates of the coupon accrual period.
Cpty
The name of the counterparty to the agreement.
Create New Group
Allows you to create a new contact list in the Speed Dial function (SPDL).
Credit Adjusted MV
The security's market value minus the credit adjusted spread.
Credit Curve
The CDS curve used to value the security.
CR Sens
The change in value for a one basis point shift up of the credit spreads.
CSA
Indicates whether to use credit support annexes in the valuation.
Curr
The denominated currency of the leg or deal. For more information on currencies, see
CURR <Help>.
Currency
The currency of the leg cashows or volatility curve. For more information on
currencies, see CURR <Help>.
Currency (Brazilian)
Applies to the xed leg. BRL (Brazililan Real). For more information on currencies, see
CURR <Help>.
Term
Denition
Currency (iBoxx)
Applies to iBoxx Total Return swaps. The settlement currency. When you enter an
asset index, the settlement currency defaults to the currency of the index. However,
you can change the settle currency for both legs by selecting another currency from
the drop-down eld. The nancing leg always uses the settlement currency. When the
settlement currency is changed to a different currency from that of the asset index, then
the historical index prices are converted based on the FX rates on the relevant dates.
Currency (TRS)
Applies to Total Return swaps. The settlement currency. When you enter an asset
index, the settlement currency defaults to the currency of the index. However, you
can change the settle currency for both legs by selecting another currency from the
drop-down eld. The nancing leg always uses the settlement currency. When the
settlement currency is changed to a different currency from that of the asset index, then
the historical index prices are converted based on the FX rates on the relevant dates.
Currency (Settings and

Templates)
Applies to the Settings and Templates window. Allows you to set the default currency
for SWPM. For more information on currency settings, see Choosing Wakeup
Settings. For more information on currencies, see CURR <Help>.
Current Px
The current market price of the security.
Current Value
The current value of the security (real or implied).
Curve
The date of the curve used in calculations and payments.
Curve (Brazilian)
Applies to Brazilian Fix-to-Float and CDI. The curve used for the discounting. S89
is the curve used for Brazilian Swaps. Applies to Brazilian Onshore Pre xDI Swaps
(Brazilian Fix-to-Float). For more information on the curve composition, enter SWDF >
Brazil > 1) BM&F Pre x DI (select Src 8 to create a S89 with DI futures).
Curve (Cupom Cambial)
Applies to Cupom Cambial securities. The curve numbers for the deal.
Curve#
The curve number that corresponds to the curve data that appear. The curve data
appear for the curve number you select. Curve numbers are compiled from the
discount curves, forecast curves, and FX basis curves used in the swap deal.
Curve# (Curves)
Applies to the Curves tab. Curve data appear for the curve number you select. The
curve numbers are compiled from the discount curves, forecast curves, and FX-basis
curves used in the swap deal.
Curve# (Scenario)
Applies to the Scenario tab. The curve number used in the swap. It can be a single
curve or multiple curves, depending on the type of structure being priced. You can
select the curve defaults in the Swap Defaults function (SWDF). For more information,
see SWDF <Help>.
Curve Date
The date of the curve used in calculations and payments. This can be a historical date
or today's date. If the date is historical, then historical data from that date for the curve
selected (which can be a discount, forecast, or basis curve) is applied in the valuation.
If the date is today, then the most recent curve is used.
Term
Denition
Curves
Applies to the Swap Defaults function (SWDF). Allows you to choose the current swap
curve(s) (curve settings) from the SWDF for the specic currency or default curve
settings. For more information, see SWDF <Help>.
Curve Source
Allows you to select the curve source used in the calculation.
CUSIP
The Committee on Uniform Securities Identication Procedures number assigned to

U.S. and Canadian companies.
Custom Id
CVA
The counterparty valuation adjustment amount. CVA represents the risk that your
counterparty will default.
Daily
The settlement dates are the original dates that can be in the middle of a month. CPI
values are the daily weighted average of that month and next month's CPI values.
Day Cnt
The day count convention used to calculate the accrued interest and coupon periods.
The rst eld sets the number of days in a month and the second eld sets the number
of days in a year. In combination, these elds determine the day count fraction for a
period. For more information, see Day Count.
Daycount
The day count convention used for calculating xed interest payment periods. The rst
eld sets the number of days in a month and the second eld sets the number of days
in a year. In combination, these elds determine the day count fraction for a period. For
more information, see Day Count.
Day Count
The day count convention used for calculating xed interest payment periods. If
applicable, the rst eld displays the number of days in a month, the second eld
displays the number of days in a year. In combination, these elds determine the day
count fraction for a specic period. For more information, see Day Count.
Day Count (Brazilian)
Applies to the xed/oat leg. DU/252. DU indicates Dias Uteis, which means Business
Days in the Brazilian calendar. For more information, see Day Count.
Days
The actual number of days between effective and maturity dates.
Days Before Accrual
The number of days before the start of the accrual period at which the reset rate to be
applied is observed.
Days Before Acrl
The number of days prior to xing the oating rate.
Deal#
The CUSIP number assigned to the deal by the BLOOMBERG PROFESSIONAL

service that uniquely identies the deal in the system. This is also the deal ID used by
the API.
Deal ID
The code assigned to the deal by the BLOOMBERG PROFESSIONAL service.
Deal Notional
The notional amount, denominated in the currency of the structure.
Deal Type
The default deal type on which the template is based.
Default Prob
The probability of counterparty default.
Default Num of Units
Term
Denition
Delete
Appears if the current swap has been saved. Allows you to remove the current swap
from the database.
Delivery Currency
The currency used for delivery of the swap.
Delta
Delta (Cap/Floor)
Applies to spread options caps/oors only. The change in the value of an option for
each dollar change in the market price of the underlying asset.
Delta/Gamma/Vega/Theta
The value of Delta/Gamma/Vega/Theta of each cap/oor.
Delta (Hedge)
The change in the value of an option for each dollar change in the market price of
the underlying asset. For example, a cap with a delta of 0.50 means a half-point rise
in premium for every dollar that the underlying asset goes up. For a oor option, the
premium rises as the underlying asset's price falls. For more information, see Delta
Hedge.
Detail
Allows you to display additional details for the deal.
Digital
Indicates the current spread option cap/oor is digital.
Digital Cap
A digital cap is a cap option that provides a payoff of specied coupon R% when strike
K <= the oating rate.
Digital Coupon
After the Intro Coupon period, the coupon paid is conditional on the level reached by
the Nikkei index throughout the remaining life of the bond. If at each observation date
the index is greater than a trigger level, the buyer of the bond receives the rst coupon.
In all other cases, the buyer receives the second coupon. The Digital Serial Coupon is
paid following the general Pay Frequency, Day-Count, and Business Day Adjustment
settings for the bond.
Digital Coupon Payoff
The value that describes each of the payoffs when the index is greater or less than the
barrier value. From the drop-down menu, you can choose the appropriate payoff for
when the index equals the barrier value.
Digital Payoff (Dual Payoff)
A digital payoff (dual payoff) is a deal type where the actual payment of each payment
period depends on certain barrier conditions to be satised. That is, the payoff formula
hinges on whether the reference index is above or below a given barrier.
A simulation of the current implementation can be performed via either a four- or

ve-leg multi-leg deal, depending on whether or not there is any notional exchange. Of
the two oor legs and two cap legs, one of the two is digital.
Digital Serial Coupon
Nikkei Linked Note Callable Knock-outs have another unique coupon feature. After the
intro coupon period, the coupon paid is conditional on the level reached by the Nikkei
Index throughout the remaining life of the bond.
If at each observation date the index is greater than a trigger level, the buyer of the
bond receives the rst coupon; otherwise, the buyer receives the second. The Digital
Serial Coupon is paid following the general Pay Frequency (Nikkei Linked Note),
Daycount, and Business Day Adjustment settings for the bond.
Term
Denition
Direction
The trade direction.
Discnt
The discount factor for the specied term point on the curve.
Discount
The discount factor at the particular payment date.
Discount (Settlement)
Applies to settlement. The discount factor for period (T0, T1) where T0 is the valuation
date and T1 is the settlement date.
DiscountCrv
The corresponding discount curve of the model.
Discount Curve
The swap yield curve used to discount the cashows.
Discount (Curves)
Applies to the Curves tab. The discount factor for the specied tenor.
Discount Curve (FRA)
Applies to Forward Rate Agreements. The swap yield curve number, which is used to
discount the FRA cashow.
Discount Curve Shift (bp)
Applies to multi-leg deals. The amount the discount curve is shifted, in basis points.
Display
Allows you to select the shift type applied to the scenario.
Display Currency
The currency used to value the deal.
Dividend Accrual
The dividends or coupon interest accrued during the payment period.
Dividend Payment
The dividend payment calculated for the swap.
Dividend Pmt
The dividend payment calculated for the swap.
Dividend Yield
The dividend yield calculated for the swap.
Dividend Yield (%)
The dividend yield, in percent, calculated for the swap.
DivPayout
The income generated from the swap.
Down-In Level
Applies to digital barriers. The level to be breached for the option to knock-in.
Dscnt Crv
The swap curve number and market side used to value the cashow of the bond/leg.
Dscnt Curve
The swap curve number and market side used to value the cashow of the bond/leg.
Duration
The percentage price change of the deal for a given change in yield. The higher the
duration of the deal, the higher its risk.
DV01
DV01 Calc Method

ShiftinPercent is 0.1 for the default process of 10-basis-point up and down shifts. It
is the shift used to generate the upPrincipal and downPrincipal. The resulting DV01 is
therefore normalized for a 1 bp shift.
DV01 (Ination)
The sensitivity to the ination curve shift (downPrincipal - upPrincipal)/

(2xShiftinPercent).
DVA
The default valuation adjustment. DVA represents the risk (assumed by your
counterparty) that you will default.
DVA Exposure
The exposure the counterparty has to your default.
Term
Denition
DVD
The dividend paid on the total return swap.
Early Redemption
Applies to Callables/Knock-outs. The most distinctive aspect of a Nikkei Linked Note

and is common to both the Callable Knock-out and the Down-In Knock-out subtypes.
Knock-out options are part of a group of options that are broadly classied as barrier.
Also known as trigger options, they are path-dependent and terminated (knocked-out)
if the Nikkei index reaches a specied trigger level between inception and expiry.
Before termination, knock-out options behave identically to standard European-style
options, but carry lower initial premiums because they can be extinguished before
reaching maturity. The Early Redemption section of the screen allows you to customize
the settings for Knock-out functionality.
Edit
Appears only if the current swap has been saved. Allows you to unlock all of the elds
for editing.
Effective
The effective start date, i.e., the date interest begins to accrue. It appears as a nominal
date and should be entered as a nominal date without business adjustment.
Effective (Amortization)
Applies to amortization. The date interest begins to accrue. It appears as a nominal

date and should be entered as a nominal date without business adjustment.
Effective Date
The effective start date.
End Date
The end date of each cap/oor.
Equivalent Coupon Rate
Equiv. Coupon
Every
The periodicity of the observations.
Ex-Date
The exercise date for the option.
Exercise
The price at which the trader may buy or sell the underlying security, as dened by the
terms of the contract.
Exercise Fee
The fee owed to the counterparty when the option is exercised.
Exercise Info
Applies to option valuation. The individual exercise option value, based on the
assumption that the swaption will be exercised as a European option.
Exercise Into
Indicates the swaption expires in (x) years/months and the underlying swap has a (y)
year/month tenor. For example: 1 YR x 5 YR.
Exercise Style (Callable)
Applies to callable notes. The option exercise type, i.e., European, Bermudan.
Exercise Type (Callable)
Applies to callable notes. The option exercise type, i.e., European, Bermudan.
Exp Exposure
The value of the period loss, taking the recovery rate into account
Expiration
The expiration date of the option.
Expiration Date
The expiration date of the option.
Expiry
The expiration date of each cap/oor.
Term
Denition
Export To Excel
Allows you to export the data that appears to a Microsoft Excel spreadsheet.
Factor
The value by which you multiply the index; the number to be multiplied by the barrier.
FCM
The Futures Commission Merchant.
Fee Amounts
The fees to be paid on the swap.
Fee Dates
The dates on which fees are to be paid on the swap.
Fee Day Count
The calendar used to determine the fees.
Fee Percent
The fees to be paid on the swap as a percentage.
Fin Coupon
The xed coupon for the nancing leg.
Fin Spread
The spread added to the nancing leg.
First Call
The rst exercise date of a Bermudan or American option.
First Call Date
The rst call date of the bond.
First Call Date (Nikkei Linked

Note)
Applies to Nikkei Linked Notes. The rst exercise date of the option. Callability can
begin at any time during the life of the bond.
First Cpn Amt
Applies to swaptions only. The next coupon amount after the option is exercised.
First Cpn Date
Applies to swaptions only. The next coupon date after the option is exercised.
First Payment
The nominal date on which the rst coupon payment is scheduled. It appears as a
nominal date and should be entered as a nominal date without business adjustment.
For more information, see Payment Dates.
First Payment (Details)
Applies to the Details tab. The rst cashow payment. For a zero-coupon swap, only
the payment date appears. For more information, see Payment Dates.
Fixed Coupon
1) In the Calculate and Solver drop-down menus, solves for the xed coupon based on
your inputs. 2) Displays a graph of the xed coupon.
Fixing
The calendar used to determine non-business days when determining xing (reset)
dates.
Fixing Calendar
The calendar used to determine xing dates.
Fixing Cdr.
The calendar used to determine xing dates.
FLAT
The at volatility used in the analysis.
Flip-Flop Date
The rst date that a Flip-Flop deal had the option to switch between a oating and xed
rate coupon rate.
Floater Index
Appears for oater range accruals only. The oater index on which the payment is
based.
Floor
1) In the Calculate drop-down menu, solves for the level at which the oating rate is
oored. 2) A oor is an option that provides a payoff when a specied interest rate is
below a certain level. The interest rate is a oating rate that is reset periodically.
Term
Denition
Floor (Low Barrier)
Applies to low barrier securities. The lower barrier for each oating payment for the
oored oater.
Floor (Range Accruals)
Applies to range accrual securities. The lower boundary of the range for the
observation index.
Floor A Payment/Floor B
Payment
The payment of each oor in oor A/oor B for each pay period.
Floor A Strike
The oor strike of the rst oor in a oor spread.
Floor A Strike
Applies to Valuation. The strike rate of each oor in oor A.
Floor A Strike/Floor B Strike
The strike rate of each oor in oor A/oor B for each pay period.
Floor B Strike
The strike rate of each oor in oor B.
Floor Spread
A oor spread is the combination of a long position in one oor and a short position in
another oor at a different strike.
Floor Strike
The payoff occurs in a oor if the xing is below this rate. For combination deals (collar,
straddle, cap spread, oor spread), you can specify the position for each part of the
combination by entering a number in the Rcv X or Pay X elds. The payout of each part
of the combination is multiplied by this position in determining the market value. The
risks calculated take the positions into account.
Folder
For Knock-In/Knock-Out
Cancellable Swap
If long, the xed side is the call option owner. If short, the oat side is the call option
owner.
For Knock-In/Knock-Out
Swaption
Assumes the xed side is the call option owner.
Forward Crv
The curve number of the oating rate index used to calculate implied forward reset
rates for the range index. The forward curve defaults to the curve number that
corresponds to the Currency eld.
Forward Crv (Floaters)
Applies to oater bonds. The curve number and market side of the oating rate index
used to project implied forward reset rates for oaters' cashows.
French
The French amortization for a xed coupon based on current market data, amortizing
months, and frequency of payment. The total payment is the same for every period with
decreasing interest and increasing principal payments similar to a mortgage loan.
Freq
Allows you to determine the frequency of observation for the Knock-Out feature;
normally this frequency differs from the coupon frequency.
Frequency
Allows you to determine the frequency of observation for the Knock-Out feature;
normally this frequency differs from the coupon frequency.
From/To
The range of term points to be shifted.
Term
Denition
Full Key Rate Risk
The change in the market value of the deal for a basis point change on a particular
swap rate or tenor, based on the standard Portfolio Risk Grid and your custom tenors
and expiries. The points of calibration you choose for your yield curve determine the
bucketed risk.
Funding Spread (bp)
Future
A futures contract with an underlying instrument that pays interest. An interest-rate

future is a contract between the buyer and seller agreeing to the future delivery of any
interest-bearing asset.
Futures contract
The grid point risk based on futures contracts used in the swap curve. The grid point
risk does not appear if your swap curve is constructed using only cash and swap rates.
FV Notional
The nal notional amount in a zero-coupon swap where the interest (coupon) is
compounded and added to the starting notional. It is the nal, at-maturity payment of
the zero-coupon swap (specically, the xed-leg payment).
Fwd Curve
The curve number of the oating rate index used to calculate implied forward reset
rates for the oat leg. It defaults to the curve number that corresponds to the Curr eld.
Fwd CVA
The current value of the future CVA, assuming the counterparty does not default before
the period.
Fwd DVA
The current value of the future DVA, assuming that you do not default before the
period.
Fwd Evolution
The evolution to the forward. The down arrow to the right of the highlighted eld allows
you to forward evolve the market (curves and the FX) or use the same market that is
being used by the deal. The forward evolving of the curves is consistent with the curve
horizon tab in the Curve Builder (ICVS) function. For more information, see ICVS
<Help>.
Fwd FX
The implied exchange rate.
FX Delta
Valuation change if FX spot rate changes by 1% (FX Risk).
FxRate
Applies to Rcv/Pay. Appears for cross-currency asset swaps only. The currency spot
exchange rate.
FX Rate
The new FX rate applied to the swap.
FX Spot
Applies to XDF. Allows you to choose the FX market contributor defaults to feed
SWPM valuations.
FX Spot Risk
Appears for swap deals that consist of two currencies (the domestic or report currency
and the foreign currency). FX risk is the decrease in value of the foreign currency by
1% and the re-computation of the market value of the swap. SWPM assigns the report
currency as the receive side's default currency.
FX Vega
For callable structures, valuation changes due to 1% change in FX spot rate.
Gamma
The rate of change in the delta with respect to change in the curve shift. Delta is
dened as the rate of change in market value with respect to change in the curve shift.
Term
Denition
Gamma (1bp)
If applicable, the gamma for the swaptions priced by the HW1F model is the difference
between deltas when the swap curve is parallel-shifted up and down by 10 bps. Delta1
shift up the swap curve by 10 bps, Delta2 shift down the swap curve by 10 bps.
Gamma = (Delta1 - Delta2) / 2 and then scaled to 1 bp.
Gamma (1bp) (Average Floater)
Applies to average (Asian) oaters. The change in Delta (Hedge) for a 10 basis point
shift.
Gamma (1bp) (Chilean

Camaras)
Applies to Chilean Camara securities. The change in DV01 for a 1 bp shift.
Gamma (10bps)
The change in the delta (hedge) for a 10 bps shift.
Give Up (%)
The percentage points subtracted from the at-the-money value to create a oor
out-of-the-money strike value.
Greeks
Allows you to include sensitivity measures (greeks) in your analysis.
Grid Point Delta
The measure of the price change when a particular term rate changes. For example, if
the spot curve is tent shifted up or down one basis point at a particular term point, it
indicates the shift is tent-shaped, rising linearly from zero at the previous term point,
peaking at one basis point at a particular term point, and declining back down to zero
at the following term point. Assuming the rest of points on the spot curve remain the
same, the dollar change in market value divided by 2 is the grid point delta for that
particular term.
Hard Calls
Applies to Nikkei Linked Note Callable Knock-outs. While the Autocallable feature
depends on the behavior of the underlying equity index, the hard call feature is an early
redemption that is dependant on the behavior of interest rates.
Hedge
Allows you to create a hedge for a swap deal.
Help
Allows you to choose help documentation from the Interest Rate Derivatives function
(IRDD).
Hide Panel On Start
Allows you to hide the Global Settings or Scenario Settings section at startup.
HIST
The historic volatility used in the analysis.
Historical Cashows
The realized cashows over time.
HW1F
The Hull & White 1 Factor model is a short-rate model where the short rate is
assumed to follow a mean-reverting Brownian-motion process. The short rate
volatility is assumed to be time dependent, while its mean reversion is assumed
constant. European swaptions can be priced efciently in terms of the mean reversion
and short-rate-volatility function by methods such as the so-called Jamshidian
decomposition, which consists of dividing the bond (or swap) into a set of zero-coupon
bonds with strikes, so all are exercised under the same conditions.
Idx
The observation index.
If
The location where the condition for the barrier is created.
Term
Denition
IMM
The International Monetary Market.
Implied Vol
The single volatility that can be used in the Black-Scholes model so that the price
reproduces the market price.
Implied Volatility
The implied volatility is the single volatility that can be used in the Black-Scholes model
for the caps and oors in the deal and prices the deal to the given premium.
Incl. Principal
Allows you to include the principal amount in the price.
Include Accrued
A Y(es) or N(o) indicates market value is calculated with or without the accrued interest
or fees.
Inclusive
The inclusive digital pays coupon c% when the strike equals the reset rate. Exclusive
digital pays nothing when the strike equals the reset rate.
Incremental Initial Margin
The additional initial margin (IM) needed for a given portfolio as a result of a new trade
or amended trade. Incremental margin is calculated as: Portfolio IM after the addition
(or closeout) Portfolio IM before the transaction.
Index
The index on which the oating rate/payment/barriers are based. The default value is
determined by the ForwardCrv eld. It can also be the LIBOR or CMS swap rate.
Index (Brazilian)
Applies to Brazilians. Appears for oater bonds/swap leg only. The benchmark of the
oaters/oating rate index. Currently, BZDIOVRA is the only index supported. The
index is calculated by CETIP and released on a daily basis.
Index Ccy
The index currency used to price the swap.
Index/Coupon
The index for a oating and the xed percentage for a xed payoff.
Index/Coupon (Dual Digital)
Applies to dual digital custom securities. The number of months/years of the

index/coupon.
Index Curve
The market side and name of the property index.
Index (Details)
Applies to the Details tab. Appears for oater bonds/swap leg only. The benchmark of
the oaters/oating rate index.
Index Forecast
The cumulative index forecast, the forward rate of which is calculated from the Libor
and spreads from the market or user curve.
Index (FRA)
Applies to Forward Rate Agreements. The index that corresponds to the term tenor
of the loaded FRA contract. The value of this index is used to calculate historical
cashows in the case of matured FRAs.
Index (iBoxx)
Applies to iBoxx Total Return swaps. The underlying index on which the return is based.
Choices include:
ICPRDOV: iBoxx USD Domestic Corporates
IBOXHY:iBoxx USD Liquid High Yield
QW5: iBoxx EUR Corporates
IBOXXMJA: iBoxx EUR Liquid High Yield
Term
Denition
IYDU: iBoxx GBP Corporates
Index (Spread)
Applies to spread options. The two indices on which the spread of two oating rates
are based. You can enter a factor (double) in the eld preceding the index name. The
spread calculated takes the factors into account.
Index/Range Index
Appears for xed range accrual/oater range accruals only. The index that is observed
and compared to a range to determine whether interest is accrued or not.
Ination DV01

ShiftinPercent is 0.1 for the default process of 10 basis points up and down shifts.
Init Ntnl
The initial notional amount.
Init Px
The initital swap price.
Init Units
The initial number of units, or shares, to be sold.
Initial Coupon
The initial coupon for the Ratchet Floater.
Initial Margin
The returnable deposit required when opening new positions for interest rate swap
derivatives at a clearing house. It is held in case of default, in which case the clearing
house would inherit the defaulted positions and therefore would have the potential to
incur losses while transferring or closing the defaulted portfolio.
In Range Cpn
The coupon rate that accrues if the rate is inside the range.
Interest (Paid)
The amount of interest paid on this date.
Interest (Received)
The amount of interest received on this date.
Interpolation
Interpolation (Ination)
The method by which the settlement date pattern is determined if the deal starts or
ends in the middle of one month.
Interpolation Method
Interval
The start date and end date range.
Interval DP
The implied default probability for the period.
Intrinsic Premium
The premium for the underlying structure without the call option.
Intrinsic PV/Intrinsic Prem
The Intrinsic PV for cap is the intrinsic value of the cap. It is the greater of the forward
rate over the strike rate and zero multiplied by notional. The Intrinsic PV is the present
value of the intrinsic value. The Intrinsic Prem represents the Intrinsic PV weighted by
the notional.
Intro Coupon
The initial coupon for snowball, snowbear, thunderball, and snowblade deals.
Intro Coupon Rate (Nikkei

Linked Note)
Applies to Nikkei Linked Notes. The introductory coupon is a feature of the Nikkei
Linked Note Callable Knock-Out, since the coupon usually becomes digital after
introduction. If you insert the intro coupon (in percentage terms) and its end date, the
start date of the intro coupon is the Effective Date of the note. The intro coupon is
Term
Denition
paid following the general Pay Frequency, Day Count, and Business Day Adjustment
settings for the bond.
Intro Cpn End Date
The last date that the intro coupon applies to the Nikkei Linked Note Callable
Knock-out.
Intro End
The last date that the intro coupon applies to TARN and snowball, snowbear,
thunderball, and nowblade deals.
Inv CR Sens
The investor credit sensitivity for the selected period.
Investor CDS Recovery
The recovery rate for the credit curve of the investor, used to generate investor default
probabilities.
Investor Deal Recovery
The percentage of a deal's market value that a counterparty receives if the investor
goes into default.
Investor DP
The investor's default property.
IR DV01
The market value change in Yen for a 1bp upward parallel shift of the yield curve.
IR Sens
The interest rate sensitivity.
IR Vega
The interest rate vega.
IR Vol
The volatility source, either VCUB (volatility cube) or at (volatility). For more
information, see VCUB <Help>.
Kappa
The mean reverse speed of the short rate on the one factor LGM (Hull-White) model,
or the mean reverse speed of the short rate for the rst factor in the Two-Factor LGM
(Hull-White) model. For more information, see One-Factor LGM Model and Two-Factor
LGM Model.
Kappa2
The mean reverse speed of the short rate on the second factor in Two-Factor LGM
(Hull White) mode. For more information, see One-Factor LGM Model and Two-Factor
LGM Model.
Key Rate
The change in the market value of the deal for a basis point change on a specic swap
rate. For example, if the par curve is shifted up or down by one basis point at a specic
term point, and the rest of the points on the par curve remain the same, the dollar
change in market value, divided by two, is the key rate risk for that term.
swap rate / tenor, based on the standard consolidated Portfolio Risk Grid.
Key Rate Risk
The change in the market value of the deal for a basis point change in a particular swap
rate. For example, if the par curve is shifted up or down by one basis point at a specic
term point, and the rest of the points on the par curve remain the same, the dollar
change in market value divided by two is the key rate risk for the term.
KIKO
Applies to knock-in/knock-out cap/oor options. Allows you to choose the barrier type,
either In (knock-in) or Out (knock-out).
Knock Barrier Position

(Low/High)
The trigger condition. If low, the trigger condition is (Knock Index < Knock Level). If
high, the trigger condition is (Knock Index > Knock Level).
Term
Denition
Knock Direction (In/Out/None)
Indicates that the deal includes a Knock-In feature (IN), Knock-Out feature (OUT), or
neither of the above (NONE).
Knock Frequency
The frequency of the knock schedule.
Knock Index and Tenor
The index, based on which trigger condition is evaluated. The tenor is the tenor of the
reference rate.
Knock Level
The value used in the trigger condition evaluation.
Knock-In/Out on a Cap or Floor
A Knock-In Cap/Floor is a normal interest rate cap/oor with a Knock-In feature. The
cap/oor comes alive when an interest rate index (the knock index) reaches a particular
level (the knock level) and applies only for the period to which the rate applies.
A Knock-In/Out on a Cap or Floor is a type of trigger option. Knock-in options "come

alive" when the barrier is reached. Knock-out options "die" when the barrier is reached
on rollover dates. Their behavior is identical to standard European-style options, but
carry lower initial premiums, as they can be extinguished before reaching maturity.
A knock-in cap/oor converts to a regular cap/oor when the barrier is reached.
Similarly, a knock-out cap/oor starts like a regular cap/oor but terminates when
the barrier is reached. SWPM currently values periodic barrier options, i.e., for each
coupon reset/rollover date that the cap/oor can be a knock-in/out, and continue the
knock-in/out structure until maturity.
Knock-In/Knock-Out Swap
Under a permanent Knock-In Swap, two parties enter into a predetermined interest rate
swap if an interest rate index (the knock index) reaches a particular level (the knock
level) on any trigger dates. Once activated, the swap remains in place until maturity,
even if afterwards the interest rate index decreases below the barrier.
Under a permanent Knock-Out Swap, two parties enter into an interest rate swap,
which terminates if an interest rate index (the knock index) reaches a particular level
(the knock level) on any trigger dates. Once terminated, the swap is permanently
cancelled.
Knock-In/Knock-Out Swaption
A Knock-In Swaption is an Interest Rate Swaption with a "Knock-In" feature. The

swaption comes alive when an interest rate index (the knock index) reaches a particular
level (the knock level) during the period when the "Knock-In" feature is alive.
A Knock-Out Swaption is an Interest Rate Swaption with a "Knock-Out" feature.
The Swaption is terminated when an interest rate index (the knock index) reaches a
particular level (the knock level) during the period when the "Knock-Out" feature is
alive.
Lag
The difference between the CPI date and the ination leg's effective or maturity date.
Last Expiry
The expiration date of the last cap/oor.
Latest (Average) Rate
Appears for the oat swap leg only. The most recent average interest rate of the
oating rate index.
Latest Coupon
Appears for oater range accrual only. The calculated latest coupon rate based on the
latest oater index value. Latest Coupon is calculated as follows:
Term
Denition
Latest coupon = latest oater index x leverage + spread
Latest Index
The interest rate of the oating rate index as of the most recent reset.
Latest Index (Floating Leg)
Appears for the oat swap leg only. The most recent interest rate of the oating rate
index.
Latest Index (Range Accrual)
Applies to range accruals. The latest range index value.
Latest Spread
The factored interest rate spread of the oating rate indexes, as of the most recent
reset.
Leg1: Coupon
Calculates the xed coupon based on your Premium input. The Coupon appears in the
Leg 1 section.
Leg1: Spread
Calculates the spread above/below the index selected for Leg 1, based on your
Premium input. The Spread appears in the Leg 1 section. For example, for an ination
swap, Leg1: Spread solves for the spread above the CPI(T)/CPI(0) ratio. For a
oat-oat muni swap, Leg1: Spread solves for the spread above/below, e.g., LIBOR.
Leg1: Leverage
Calculates the oating leg leverage based on your Premium input. The Leverage
appears in the Leg 1 section. For example, for an ination swap, Leg1: Leverage
calculates the leverage applied to the CPI(T)/CPI(0) ratio. For a oat-oat muni swap,
Leg1: Leverage solves for the percentage of the index rate to be paid/received.
Leg2: Coupon
Calculates the xed coupon/par coupon rate. The Coupon appears in the Leg 2
section.
Leg2: Leverage
Calculates the oating leg leverage based on your Premium input. The Leverage
appears in the Leg 2 section.
Leg2: Spread
Calculates the oating leg spread based on your Premium input. The Spread appears
in the Leg 2 section.
Leg
Leg#
The CUSIP number associated with the swap leg. This is assigned by Bloomberg
when you save the swap.
Leg ID
The CUSIP number associated with the swap leg. The number is assigned by
Bloomberg once you save the swap.
Lend/Borrow
The side of the FRA contract.
Leverage
Leverage (Brazilian)
The factor of the oater index in the coupon reset. The default for the leverage is
1.0000 which equates to 100% of the BZDIOVRA index. This value is also known as
"Percentage of DI."
Leverage (Ination)
The magnitude of the reection on CPI movements on the ination leg coupons.
Linear
A straight-line method in which an equal percentage of the balance is amortized

(reduced) each period so that the nal balance is zero at maturity.
Linear Progression
The linear progression of the shock over time to the horizon date.
Term
Denition
Load
Allows you to access the Interest Rate Derivatives List function (IRDL), where the
previously saved deals are stored. For more information, see IRDL <Help>.
Loan
Allows you to select a mortgage type of amortization.
Lognormal
Deals with percentage changes in rates rather than, as in normal volatility, with basis
points changes in rates. Volatility is proportional to the level of the interest rate, and
implied volatilities are quoted as this relative volatility. Often called the Black volatility.
Market Rate
Applies to Cupom Cambial. A zero coupon for the Cupom Cambial and BRL S89
curve.
Market Rate (FRA)
Applies to Forward Rate Agreements. The implied forward rate for the FRA's contract
period.
Market Shift
The type of market shift applied in the scenario.
Market Shifts (SHOC)
Allows you to launch the Scenario Manager function (SHOC). For more information,
see SHOC <Help>.
Market Spread
The market spread used to get the projected value of the security.
Market Value
Maturity
The termination date of the deal. The termination date appears as a nominal date and
should be entered without business adjustment.
Maturity (Brazilian)
Applies to the xed leg. The termination date of the leg. The drop-down menu displays
a list of expiration dates of the DI futures contracts that correspond to the Brazilian
swap. Most of the Brazilian x-to-oat swaps expire on the same dates as the DI
futures.
Maturity Date
The termination date of the deal. This appears as a nominal date and should be entered
as a nominal date without business adjustment.
Maturity (FRA)
Applies to Forward Rate Agreements. The end of the FRA term. The maturity appears
as a nominal date and should be entered as such without business adjustment.
Maturity (Nikkei Linked Note)
Applies to Nikkei Linked Notes. The latest termination of the bond (unless either a
knock-out or a hard-call provokes early redemption).
Maturity (Three Zone Digital)
Applies to three zone digitals. The end date.
Max Step Up/max Step Down
The step-up/down values that are used in calculating a Ratchet coupon. The Ratchet
Floater eld denition displays further information on the coupon formula.
Member
A clearing member registered with the clearing house.
Mkt Curve
The spread value provided from the market pricing source. Interpolation is used to ll all
points of value.
Mod. Duration
For a par swap, the deal risk is equal to Modied Duration because the Market Value is
zero. Leg Modied Duration = (DV01 / Market Value) x 10,000
Term
Denition
Model
The model used to value the deal.
Model (Range Accrual)
Applies to three zone digitals and range accruals. The HW1F - Hull-White 1-Factor
model.
Model (Swaption)
Applies to the swaptions. You can use the Hull & White 1 Factor, Black-Scholes, or
Normal (Bachelier) model to price swaptions.
Modied Following
If the date is not a business day, then the date is adjusted forward to the next business
day, but stays in the current month.
Money
Depending on the tab, one of the following applies:
The difference between the bond's implied value (premium) and the market price
multiplied by the current bond amount.
The present value of the bond's Redemption Premium/Discount at the workout date.
The cash out multiplied by the current bond amount.
Monthly
The settlement is always set on the 1st of the start and end month, which means CPI
values are the direct monthly value for these particular months. For example, if the lag
period is three months, the coupon rate for one period is: (Monthly CPI on 3 month
before next Payment date / Monthly CPI on 3 month before previous payment date 1) x
100%.
Mortgage Prepayment for

Amortizers
The additional principal paid by the borrower to the lender on top of the payment of the
regular principal and interest on a loan.
MTY
The maturity date for the index.
Multiplicative
Allows you to apply a relative shift (in percent).
MV
MV (Main)
Applies to the Main tab. The sum of the present values of the leg cashows.
MV (Multi-leg)
Applies to multi-leg deals. The market value before the shift is applied.
MV (x)
The type of market value. The drop-down menu displays the following choices:
MV No Range: The market value of the range accrual deal, assuming range is
ignored. The deal is priced as a regular xed coupon bond (xed accrual) or oater
bond (Floater Accrual).
MV Zero Val: The market value of the range accrual deal if the coupon is adjusted
based on the number of days that projected interest rates are within the range.
Volatility of interest rates is not taken into account.
MV No Call: Appears only when the deal is callable. The market value of the range
accrual deal if there is no call option.
Net
The sum of principal amounts and interest amounts paid/received on this date.
Net Payments
The net of the cashows received and paid out on a particular payment date.
Net PV
The net present value.
Term
Denition
Net PV (Cashow)
Applies to the Cashow tab. The present value or discounted value of the net payment
amount.
Net PV (Scenario)
Applies to the Scenario tab. The sum of the pay leg and receive leg present values.
The value changes depending on the changes made on the scenario analysis.
Neutral Calendar Spread
Indicates that the options trader is neutral on the underlying security and is selling the
near-month calls primarily to earn from time decay.
New Deal
Allows you to choose a new deal type.
Next to Last Payment
The nominal date on which the next to last coupon payment is scheduled. It appears as
a nominal date and should be entered as a nominal date without business adjustment.
Next to Last Pmnt
The nominal date on which the next-to-last coupon payment is scheduled. The
next-to-last coupon appears as a nominal date and should be entered as a nominal
date without business adjustment.
Next To Last Pmnt (Details)
Applies to the Details tab. The payment prior to the last payment. For a zero-coupon
swap, only the payment date appears.
NKY
The digital coupon condition (the Nikkei index can be greater or less than a barrier) that
activates coupon 1.
NKY Spot
The latest level of the Nikkei index in the market.
No Adjustment
There is no adjustment to a business day.
Nominal Dates
The periodic dates generated from the payment frequency. Nominal dates do not
always fall on business days.
Nominal Payment
The cash ow payment without any range applied.
Non-Call Price
The present value of the note, incorporating all of the cashows, accrued interest, and
the knock-out options. The hard call option is not included.
Non-Call Price(%)
The present value of the note, in percent, incorporating all of the cashows, accrued
interest, and the knock-out options. The hard call option is not included.
Non-Delivery Currency
Applies to total return swaps. Allows you to choose the currency for non-delivery
swaps.
Normal
Deals with basis point changes in rates rather than, as in lognormal volatility, with
percentage changes in rates. Volatility is not related to the level of the rate, and
volatilities are quoted on an absolute basis. The single volatility that can be used in the
Normal (Bachelier) model so that the price reproduces the market price.
Normal (Bachelier)
This model assumes that the underlying swap rate follows a Brownian motion with no
drift and constant volatility. This assumption implies that the underlying forward swap
rate has a normal distribution. European swaption prices can be obtained analytically.
The normal implied volatility is dened as the volatility to be used in the option pricing
formula to reproduce the swaption market price.
Normal Compound
Indicates the interest proceed from the last reset period is reinvested at the new rate
for the next reset period.
Term
Denition
Normal Vol
The single volatility that can be used in the Normal (Bachelier) model so that the price
reproduces the market price.
Notes
Allows you to enter additional information about the deal.
Notication
The notication date of the option.
Notication Calendar
The combination of notication calendars used when generating the notication dates
from the number of notication days.
Notication Date
The notication date for the option.
Notication Days
The number of business days prior to the settlement dates. Settlement dates coincide
with coupon payment dates.
Notional
1.) In the Calculate drop-down menu, calculates a notional amount based on your
DV01 input. The Notional appears in the Leg 1/Leg 2 sections. 2.) Applies to an
individual swap leg. The notional value of the swap leg.
Notional (Cashow)
Applies to the Cashow tab. The amount used to determine the cashows. Each (M)
equals 000.
Notional (FRA)
Applies to Forward Rate Agreements. The principal amount to be lent or borrowed.

Each (M) equals 000.
Notional (Main)
Applies to the Main tab. The amount of the notional on the current date.
Notional (Nikkei Linked Note)
Applies to Nikkei Linked Notes. The notional amount, denominated in JPY.
Notional (Range Accrual)
Applies to range accrual inside/outside coupons. The amount used to determine the
leg cashows.
Notional (Settings and

Templates)
Applies to the Settings and Templates window. The notional size. Allows you to
customize the size of the notional by currency. For more information, see Choosing
Wakeup Settings.
Notional Type
Indicates whether the swap leg is denominated in units or notional amount.
OAS
The option-adjusted spread. To value this structure with a spread (OAS), enter an
appropriate bps amount in the OAS cell on the main screen valuation section. When
you launch SWPM, the premium should be calculated at an OAS of zero. When the
OAS is changed, the premium is re-computed and the PV of cashows is adjusted
accordingly.
Observation Start/End
Allows you to delimit the observation period for the knock-out. The observation period
can be shorter than the term of the bond and can start at any time during the life of
the bond. The observation start date also determines the dates of the full observation
schedule; normally, observation dates are antecedent to coupon payment dates.
OIS Dual Curve Stripping
Allows you to strip a standard (Libor) swap curve contingent upon the OIS discounting
of cashows.
Option
Applies to the oating leg. Allows you to enter into an Onshore CDI Swaption.
Enter SWPM -OV BRL <Go>
Term
Option MV
Denition
The current value of the total loss if there is a default in the period. Option MV takes
into account the recovery rate.
Option Normal DV01
Applies to European options. For the option normal DV01, normal vols are kept
approximately constant by keeping the HW1F vols (the internal model vols) constant.
Since the HW1F model is a normal model, keeping its internal vols constant closely
approximates keeping the normal vols constant.
Option Prem
Appears for deals with optionality. The dollar price per share that an option holder pays
the option writer for the option privileges.
Option Premium
1) For range option premium, the premium for the range.

Option premium = (Principal - Principal w/o Range) / Notional.
2) For swaptions, the premium for the option structure in points.
Option Premium (Callable)
Applies to callable securities. The premium for the call option if a call schedule is set.
Option Premium (Scenario)
Applies to the Scenario tab. The new market value for the option premium.
Option Premium (Swaption)
The swaption premium equivalent to the basis point of the underlying swap. Calculated
as the market value of the swaption weighted by the notional, i.e., premium = market
value/notional * 100.
Opt Prem
Appears for deals with optionality. The dollar price per share that an option holder pays
the option writer for the option privileges.
Original Asset Swap Spread
Appears for saved asset swaps only. The original asset swap spread.
Original Price
Appears for saved asset swaps only. The original price of the bond.
OTC Ticker
Out Range Cpn
The coupon rate that accrues if the rate is outside of the range.
Overnight Indexed Swap (OIS)
A xed/oat interest rate swap where the oating leg is computed using a published
overnight index rate.
Override
Allows you to apply a shift with a custom value.
Parallel Shift
A shift in the yield curve where the yields on all securities move the same amount
irrespective of their maturities.
Par Amt
The par amount traded.
Par Amt (Asset Swap)
The bond par amount traded, which must be a positive number. The par amount on the
left of the screen refers to the bond and the xed leg of the swap. The par amount on
the right of the screen refers to the oating leg of the swap.
Par Cpn
The coupon that brings the swap to par (the market value of the swap equals zero).
Par Cpn (Brazilian)
Applies to Brazilian CDI/Cupom Cambial curves. The coupon that brings the swap to
par (the market value of the swap equals zero).
Term
Denition
Par Cpn (Range Accrual)
Applies to range accruals. The xed coupon rate that results in the range accrual deal
with the market value equal to the notional.
Par Cpn (Swaption)
The par coupon for the underlying swap.
Par Shift...
Displays the Par Shift Quick Calculator, a scenario analysis tool that allows you to
analyze the relationship between the discount curve and the premium. The Par Shift
Quick Calculator presumes that cashows are unchanged and shifts only the discount
curve. Par shift is the shift on the par curve (not stripped).
Par Shift
The shift of the currency's par value.
Par USDBRL Fwd
The par USD/BRL forward rate that corresponds to the par coupon Cupom Cambial
rate.
Par Volatility Shift%
The percentage of the parallel shift of volatilities in the Vol Cube.
Path Dependent Pricing
Indicates that path-dependent pricing is used in the strategy. The drop-down menu
displays the following choices:
Shift at Horizon Date: No change in market inputs, and "shock" at the nal horizon
date.
Shift Today - Instantaneous: The shock as of "today" and no change between today
and the horizon date.
Linear Progression: The linear progression of the shock over time to the horizon
date.
Path Progression
The path used in the path-dependent strategy.
Paths
The number of paths used in the path-dependent strategy.
Pay
Indicates whether the coupon will be partially paid or paid in full on the exercise date.
The payment condition for each zone.
Pay Date
The date on which the cashow is actually paid or received. The payment date is
always on a business day and is determined by adjusting the nominal date according to
the business day convention and settlement calendar of the deal.
Pay Dates
The dates on which cashows are actually paid out or received. Payment dates are
always on business days and are determined by adjusting the nominal dates according
to the business day convention and settlement calendar of the deal.
Pay Dates/Nominal Dates
The pay dates are when cashows are actually paid out or received. They are always
on business days and are determined by adjusting the nominal dates according to the
business day convention and settlement calendar of the deal. The nominal dates are
the periodic dates generated from the payment frequency. They do not always fall on
business days.
Pay Delay
The delay between the end of the accrual period and the payment.
Pay Float/Receive Fixed
Identies the underline swap type, which could be xed-oat, xed-xed, or oat-oat
depending on whether the bond is xed coupon or oater and the side of the bond is
buy or sell.
Term
Denition
Pay Freq
The frequency at which the cashows are calculated.
Pay Freq (Asset Swap)
Applies to asset swaps. The payment frequency of the selected bond's coupon
payments.
Pay Freq (Brazilian)
Applies to Cupom Cambial securities. The payment frequency. Currently, the Brazilian
Fix-to-Float swap calculator only supports zero coupon swaps.
Pay Freq (Three Zone Digital)
Applies to three zone digitals. The frequency of the coupon payment.
Pay Frequency
The frequency at which the cashows are calculated for spread option range accruals.
Pay Frequency (Brazilian)
Applies to Brazilians swaps. The payment frequency. Currently, the Brazilian

Fix-to-Float swap calculator only supports zero-coupon swaps.
Pay Frequency (Nikkei Linked

Note)
Applies to Nikkei Linked Notes. The frequency at which the cashows are calculated
for a Nikkei Linked Note Callable Knock-out.
Pay PV
Appears for deals without optionality. The current value of the pay leg.
Pay/Receive Float
Identies whether the oat leg is a pay or receive oat.
Pay/Reset/Frequency
Appears for oater range accruals only. The frequency at which the oater indices are
reset and cashows are calculated.
Payment
The actual net payment after the range value is removed.
Payment Amt
The amount expected to be received on the payment date.
Payment Date
The date(s) when cashows are actually paid out or received. Payment dates are
always on business days and are determined by adjusting the nominal dates according
to the business day convention and settlement calendar of the deal.
Payment Dates
The actual dates on which cashow transactions (paid out or received) occur. Payment
dates are always business days.
Payment Dates Only
Accrual end dates are unadjusted and only payment dates are adjusted according to
the business day logic you choose.
Payments (Pay) (Historical

Cashows)
Applies to the Cashow tab. The amounts paid out on the respective payment dates.
Payments (Pay) (Net Cashows) Applies to the Cashow tab. The amounts expected to be paid out on the respective
payment dates.
Payments (Rcv) (Historical
Cashows)
Applies to the Cashow tab. The amounts received on the respective payment dates.
Payments (Rcv) (Net Cashows) Applies to the Cashow tab. The amounts expected to be received on the respective
payment dates.
Payment Type
Allows you to select either payment amounts or coupon amounts to be calculated in

cashows.
Payoff
Indicates the direction of coupon payments, either pay or receive. Payoff methods vary,
depending on the deal, strategy, and/or leg.
Term
Denition
Pct. Notional
Peak Exposure
The maximum expected loss in the event of the counterparty's default.
Percent
The factor that is applied to the index New Rate = Percent x Index + Spread.
Percent of Notional
The notional amount on the cashow date is calculated as the stated percentage
of the original notional. Amounts specied after the previous payment date, up to
and including the next payment date are accumulated into the next payment date for
calculations.
Period Expiry
The expiration date for the period.
Period Start
The starting data for the period.
Pick Up (%)
The percentage points added to the at-the-money value to create a cap in-the-money
strike value.
Portfolio Key Rate Risk
swap rate or tenor, based on the standard consolidated portfolio risk grid. Portfolio
key rate risk denes bucketed interest rate exposure in terms of interest rate swap
maturities and outright swap rates. It adds all the risk below the one year tenor to the
one year risk bucket to facilitate swap portfolio analysis.
Portfolio Name
Position
PRDC (Callable Reverse Dual

Bond)
Long Receiver: The option buyer is long and receives Fixed/Pay Float on a swap, if
exercised.
Short Receiver: The option seller is short and pays Fixed/Receive Float on a swap, if
exercised.
Long Payer: The option buyer is long and pays Fixed/Receive Float on a swap, if
exercised.
Short Payer: The option seller is short and receives Fixed/Pay Float on a swap, if
exercised.
Typically, the rst coupon of a PRDC structure is xed, and subsequent coupons are
then proportional to an FX rate (domestic currency per one unit of foreign currency).
Therefore, the coupon is larger if FX is higher on the coupon date and vice versa.
Issuers are effectively short FX options with strikes that appear lower in FX.
PRDCs are principal-protected notes that pay a high initial coupon ranging from 4
to 7%. Subsequent coupons are linked to an USD/JPY exchange rate, such that
payments rise if the yen depreciates. Most PDRCs are also callable with Bermudan
option dates.
Prem
The premium, calculated as (Market Value / Notional) x 100.00.
Premium
1.) In the Calculate drop-down menu, calculates the market value based on your
inputs. The Market Value appears in the Valuation section. 2.) The premium, calculated
as (Market Value / Notional) x 100.00. 3.) In the Solver drop-down menu, calculates
Term
Denition
the net present value (NPV) based on your inputs. The NPV appears in the Results
section.
Premium (Asset Swap)
Applies to asset swaps. The underlying is a sinkable bond. The premium should be
scaled by the current amount. The bond's premium is the implied value of the bond.
Premium = (Market Value - Accrued) / Par Amount.
Premium (Average Floater)
Applies to average (Asian) oaters. The percent of par value of the instrument being
analyzed. Premium represents the market value of the deal weighted by the notional,
i.e., Premium = Market Value / Notional x 100.
Premium (Dual Digital)
Applies to dual digitals/range accruals/caps/oors/Cupom Cambial securities. The

percent of the par value of the instrument being analyzed. The premium represents the
market value of the deal weighted by the notional.
Premium (FRA)
Applies to the Forward Rate Agreements. The premium, calculated as (Market Value /
Notional) x 100.00.
Premium (Main)
Applies to the Main tab. The principal divided by the notional. For swaps with different
notionals on each leg, the average notional is used. For cross-currency swaps with
different notionals on each leg, the average notional in the reported currency is used.
(Average Notional for Cross Currency Swaps = [Pay Notional in Report Currency +
Receive Notional in Report Currency] / 2 )
Premium (Nikkei Linked Note)
Applies to Nikkei Linked Notes. The clean price percentage of the note.
Premium Paid At Expiry
Species the premium will be paid at expiration of the period.
Premium/PV/Fwd Val
The PV is the present value of the option. The Premium represents the PV weighted by
the notional. The Fwd Val is the undiscounted value of the option at pay date.
Premium (Range Accruals)
Applies to range accrual securities. The value of the option premium + underlying
premium.
Premium (Structured Notes)
Applies to capped oater and TARN, ratchet and snowball, snowbear, rhunderball,
snowblade, ip-op, and PRDC. Premium = Principal of the Floater / Notional of the
Floater.
Premium (Swaptions)
The percent of par value of the instrument being analyzed. Premium represents the
market value of the swap weighted by the notional, i.e., Premium = Market Value /
Notional x 100.
Premium (Three Zone Digital)
Applies to three zone digitals.
Prepayment Model
The prepayment model you chose, along with an associated value for the model.
Prepayment models have different assumptions for the prepayment behavior of the
Borrower. For more information on prepayment model abbreviations, see the Credit
Model and Prepayment Rate Notation function (BPN). Enter <MTGE> BPN <Go>.
Note: The default model and corresponding value(s) that appear is determined
by settings you selected in the Mortgage Defaults function (MDF).To
choose/update/review your mortgage defaults, enter MDF <Go>. For more
information, see MDF <Help>.
Term
Denition
Price
The price at which the option is exercised.
Price (%)
Price Source
The price source calculates the forward rates to price the property derivative swap.
If you choose Index Forecast from the Price Source eld drop-down menu, the
forward rates used to price the swap deal are overridden.
Principal
The Principal Value = Market Value - Accrued.
Principal (Cashows)
Applies to the Cashow tab. The amount of principal paid or received on this date.
Principal Exch
Indicates whether the principal is exchanged and on what dates (e.g., on Effective and
Maturity Dates, only on Effective Date, etc.).
Principal Exchange
Indicates when the principal is exchanged and on what dates (e.g., on Effective and
Maturity Dates, only on Effective Date, etc.).
Principal (Nikkei Linked Note)
Applies to Nikkei Linked Notes. The present value of the note, incorporating all the
cashows and the embedded options (knock-out, knock-in, calls, caps, oors).
Principal (Range Accruals)
Applies to range accruals. The amount of market value without accrued interest from
the last interest payment.
Privilege Type
The level of access to your deals. User allows you to limit privileging to the person who
created the swap, so only he/she can view and update the deal. Firm allows you to
privilege other members of your rm so they can see but not update the deal.
Priv Type
The level of access to your deals. User allows you to limit privileging to the person who
created the swap, so only he/she can view and update the deal. Firm allows you to
privilege other members of your rm so they can see but not update the deal.
Projected Cashow
The projected cashow value for contracts that mature at the time of valuation. It is
calculated analogously with historical cashow. The historical index value, however, is
as of the curve date instead of the implied forward market rate.
Projected Cashow (FRAs)
Applies to Forward Rate Agreements. The expected amount that changes hands at the
contract's settlement date. The projected cashow is calculated as:
[ Nx(L-K)xD(T1,T2) ] / [ 1 + LxD(T1,T2) ]
Where:
N = notional
L = implied forward rate for contract period (T1, T2)
K = FRA contract rate
D(T1, T2) = day count fraction for period (T1, T2)
T1 = settlement date
Term
Denition
T2= maturity date
Protection
The price if the Nikkei index is never below the Down-in level on any of the observation
dates. If the Nikkei index is below the Down-in level on at least one of the observation
dates, the nal payoff is (Nikkei Final Price / Nikkei Spot Price) x 100)%. The protection
is conditional based on the corresponding cap and oor.
Projection based
Indicates that projected revenues and expenses are used in the calculation. The
projection method includes all future projected cashows including the current accrual.
Proxy
The proxy index price used when the equity's price is unavailable.
PV
The present value or discounted value of the cashow amount.
PV01
The dollar value of one marginal basis point on the xed coupon of the swap deal.
Quality
The quality rating of the volatility model.
Quote Convention
Indicates the market quotation convention of European swaptions, i.e., standard spot
quotes or forward premium. The valuation and risk that appear in SWPM changes
accordingly.
Range
The lower/upper bound of the spread option range accruals. The payoff accrual occurs
if the factored spread is within the predened rate range.
Range Ceiling
The upper limit of the range.
Range Floor
The lower limit of the range.
Range Value
The value lost in the payment for being outside of the range.
Ratchet Cap
The maximum value of a ratchet coupon.
Ratchet Floor
The minimum value of a ratchet coupon.
Rate
1.) In the Calculate drop-down menu, the xed coupon that equates the Premium to
the Market Value divided by the Notional.
2.)The annualized interest rate for the specied term point on the curve.
To override any rate or rates on the curve, enter the new rate or rates in the respective
elds, then press <Go>. The rate(s) entered become part of the curve and the market
value and risk analytics are recalculated using the new curve. If any of the rates are set
to zero, or the rate elds are blanked out, new implied par curve rates are lled in for
the missing points.
Rate (Curves)
The source of the curve rates (e.g., LIBOR, User Rates, or Futures-Based). To change
the rate source, enter SWDF <Go>. For further information, see SWDF <Help>
Rate (FRA)
Applies to Forward Rate Agreements. The rate agreed upon in the FRA contract.
Rate Source
The source of the curve rates (e.g., LIBOR, User Rates, or Futures-Based).
Rcv Leg PV
The present value of the receive leg. The value changes depending on the changes
made on the scenario analysis.
Term
Denition
Rcv PV
Appears for deals without optionality. The present value of the receive leg.
Receive/Pay
Identies whether the deal is paying or receiving.
Receive/Send Fixed
Identies whether the xed leg is pay or receive.
Redemption Rate
The percentage of the amount above or below par of the principal redemption.
Redemption Premium/Discount = (Workout Price - 100)/100.
Ref Cusip
The CUSIP associated with the template(s) you choose. The following attributes of the
swap are based on the setting.
Vanilla deal swaps for up to 5 different currencies (Vanilla Templates tab)
Cross-currency Fixed vs. Float (Other Deal Templates tab)
Cross-currency Fixed vs. Fixed (Other Deal Templates tab)
Cross currency Float vs. Float (Other Deal Templates tab)
Cancellable Swaps (Other Deal Templates tab)
Swaptions (Other Deal Templates tab)
Cap/Floor (Other Deal Templates tab)
Reference Entity
The underlying or other security from which prices are derived.
Refresh
Allows you to refresh the data that appear.
Reinvested Value
The current value of net historical payments based on historical rates on the curve.
Reinvestment Rate
The type of cashow reinvestment rate for the horizon period. You can choose between
a at annual rate, which you can specify in the APR eld, and the actual market rate.
Reset Arrears
An (x) indicates that the oating rate for each period is set at the end of the period. This
reset rate in particular is used for comparison with the barrier and for computing the
oat payoffs in the digital coupon payoffs.
Reset Date
The date on which the rate is reset to apply to the next accrual period.
Reset Freq
The frequency at which the oating rate index is reset.
Reset Freq (Brazilian)
Applies to Daily Brazilian Fix-to-Float swaps. The frequency of the coupon resets,
which are compounded daily.
Reset Freq (Range Accrual)
The frequency of observation for the range index to determine whether interest is
accrued. Reset frequency occurs daily and produces output only.
Reset Freq (Three Zone Digital)
Applies to three zone digitals and range accrual inside/outside coupons. The frequency
of the coupon reset, which correlates with the pay frequency.
Reset Index
The index on which the oating rate is based.
Reset/Pay
The frequency at which the oater index is reset and cashows are calculated.
Reset/Pay Freq
The frequency at which the oating rate index is reset and the cashows are calculated.
Reset/Pay Freq (Spread Option

Range Accrual )
Applies to spread option range accrual deals. The frequency at which the oating rate
index is reset and xed daily.
Term
Denition
Reset Rate
The reset rates for the corresponding accrual periods. Both historical and implied
forward reset rates appear. You can change historical reset rates, which default to
rates on the historical curve, by entering new values into the corresponding highlighted
elds. The implied forward reset rates are determined by the forward curve and cannot
be changed.
Reset Rate (Cap/Floor)
Applies to cap/oor deals. The forward reset rate of each cap/oor option.
Reset Type
The type of rate reset used in the strategy.
Residual
Risk
For a cross-currency swap, where the leg notionals may be different, an average
notional amount is used in the equations. The average notional is determined in the
following way:
Average Notional =
Deal Risk = [ DV01 / Average Notional ] x 10,000 Modied Duration Modied Duration
= Modied Duration = [ DV01 / ( Notional + Market Value ) ] x 10,000
For a par swap, Deal Risk is equal to Modied Duration because the Market Value is
zero.
Risk Free
The quanto option's foreign currency risk-free interest rate.
Risk Free MV
The market value of the risk-free security.
Risk Reversal
The simultaneous purchase of an out-of-the-money call/put and sale of an

out-of-the-money put/call, usually with zero up-front premiums. The swaptions bought
and sold typically have the same notional size and pre-specied maturity.
Roll Convention
The method to use in order to generate cashow dates. For example, "Backward"
starts from the Next To Last Payment Date, then generates periodic dates backwards
based on payment frequency.
Roll Date Convention
The method to use in order to generate cashow dates. For example, "Backward"
starts from the Next To Last Payment Date, then generates periodic dates backwards
based on payment frequency.
Term
Denition
Running Bilateral Spread
The bilateral CVA spread calculated as a running amount.
Running CVA Spread
Running DVA Spread
The number of basis points to add to the xed rate to compensate for the default risk.
The DVA spread calculated as a running amount.
Save
Allows you to save the deal.
Save as
Appears only if the current swap has been saved. Allows you to create a copy of the
current swap. The copy is not saved until you click Save from the gray toolbar.
Save As Default (Index

Forecast)
Applies when you choose Index Forecast from the Price Source eld drop-down
menu. The preference of the price source and the forecast forward rates are saved as
the default and are used to directly price property derivatives.
Save As Default (User Swap

Curve)
Applies when you choose User Swap Curve from the Price Source eld drop-down
menu. The preference of the price source and the spread values in the user curve are
saved as the default.
Save Deal Popup
Allows you to display or hide the Save Deal window when saving a swap.
Scenario
The scenario name.
Scenario Graph
Allows you to display scenario data in a chart.
Scenario Table
Allows you to display scenario data in a table.
Security
Allows you to enter an amortizing instrument, such as a mortgage backed security, into
the Security Amort Lookup eld and update the assumptions for prepayment speed to
generate the associated table.
Security Amort Lookup
Allows you to populate the amortization schedule of a mortgage security or a sinking

fund bond once you enter the security identier. Principal pay downs imported into the
schedule are expressed as a percentage of notional (i.e., the percentage of the current
notional of the security, as of the current settle date).
For example, enter FNCL 6.5 <MTGE> or 31380MB21 <MTGE> to load the
amortization schedule of the mortgage security into the current swap amort schedule or
enter 544582NG <CORP> to load the schedule of the sinking fund bond.
Sell
The sell, or ask, side of the trade.
Send
Allows you to send the current swap to another BLOOMBERG PROFESSIONAL

service user via the MSG system. For more information on using MSG, see MSG
<Help>.
Series
The identier for derivatives with the same ticker, xed coupon, and maturity. You can
enter up to four characters. You do not have to specify a series if a swap's ticker, xed
coupon, or maturity are unique.
Session Recovery
Allows you to congure SWPM to recover your most recent deal(s) in case of a system
error.
Term
Denition
Set As Default
Allows you to set the global settings as your defaults for all deal types.
Set As Scenario
Allows you to set the current scenario as a default for all deal types.
Settle
The date on which the cash settlement occurs. For example, in the U.S., the default
value of the settle date is T+2 days after the valuation date. The date can be on or after
the valuation date.
Settle Date
The date on which future cashows are discounted.
Settle Date (FRAs)
Applies to Forward Rate Agreements. The date on which the FRA contract is actually
settled. Based on current market conventions, after this date, a FRA contract is
considered to be matured.
Settlement
The settlement date of the option. You can select up to ve countries whose combined
calendars are used to generate the number of business days to settle the deal
following the transaction day, T, on which the deal is initiated. The transaction day is
not usually the effective date of the swap. It can take a few days to settle paperwork,
exchange principal (if any), etc.
For most countries, including the U.S., the settle date is T + 2, meaning the transaction
date plus two business days following the transaction date. For example, when you
run SWPM, the default swap, which is in U.S. currency, has an effective date of two
business days following today's date. On the other hand, some countries, such as
Hong Kong, Canada, and England, have immediate, or T + 0, settlement.
For example, if you enter SWPM HKD <Go>, the swap is in Hong Kong dollars and
the effective date is today's date. A combined calendar to determine the settlement
date would use the maximum number of days to settle. For example, a combined
calendar made of the US and Hong Kong would have a settlement of T + 2.
Settlement Date
The settlement date of the option, if it is exercised.
Settlement (Save Deal)
Applies to the Save Deal window. The settlement date of the option. For most
countries, the settle date is T + 2, meaning the transaction date plus two business days
following the transaction date.
Shift
Shift (bp)
Shift at Hzn Date
No change in market inputs, and "shock" at the nal horizon date.
Shift Rate
Shift Today (Instantaneous

Shift)
The shock as of "today" and no change between today and the horizon date.
Shifted Spread
The shifted spread applied to the curve.
Shifted Rate
Shift (Risk Analysis)
Applies to the Risk tab. The number of basis points shifted during the risk analysis.
Term
Denition
Shortcut
Allows you to create a keyboard shortcut to access a specic template. For more
information, see Customizing Templates.
Show Fees
Allows you to display the fee structure for the deal.
Side
The deal side, i.e., Bid, Ask, Mid.
Side (FRA)
Applies to Forward Rate Agreements. The FRA contract party, i.e., borrower, lender.
Sigma
The historical volatility of the security for the selected date range and period, in
percentage terms, based on a continuously compounded rate of stock price returns.
Simple
Allows you to enter Amort Rates(%), Amort Amount, and Balance. data for a leg. You
can also drag and drop data from Excel.
Single Look
Applies to caps and oors. Indicates the reset rate is checked once in the future with
the payment made at the Maturity Date.
Source
Applies to the Equity tab. The source of dividends data, either Bloomberg or implied.
SPDL Sharing
Allows you to share via MSG the swap with groups created in the Speed Dial function
(SPDL). For more information, see Choosing Wakeup Settings and SPDL <Help>.
Spot Price
The value of the security at any given time in the marketplace.
Spread
The number of basis points over/under the oating rate index that the oating rate payer
is obligated to pay.
Alternatively, the spread amount added to the oater index in the oating rate reset.
The latest oating rate = Latest Index x Leverage + Spread.
Spread (bp)
The number of basis points over/under the oating rate index that the oating rate payer
is obligated to pay. The Calculation eld drop-down menu allows you to obtain the
value of interest based on other values that are currently part of the deal.
Spread (bp) (Asset Swap)
Applies to asset swaps. The difference between the bond's implied value and the
market price in basis points.
Spread (Details)
Applies to the Details tab. Appears for oater range accrual only. The spread amount
added to the oater index in the coupon reset.
Spread (Dual Digital)
Applies to dual digitals. The number of basis points to be added to factor x barrier.
Alternatively, the additional adjustment that is added to the percentage- adjusted index.
calculated as New Rate = Percent x Index + Spread.
Spread (Ination)
The facultative xed coupon to add to the CPI appreciation within the ination leg.
Spread Vega (1bp)
The sensitivity of an option price with respect to volatility of the underlying security
price.
Spread Vol
The normal volatility for the factored spread.

Conventionally, the spread of the rate of two indices is very small and appears in bps.
The normal spread volatility is directly associated with the spread changes (using
Term
Denition
units of bps) with the assumption that distribution is normal for the spread. Hence, the
spread option in SPWM, and the normal spread volatility, appears as a unit of bps.
Start Date
The start date of each cap/oor.
Straddle
A straddle (oating rate deal) is a combination of a long position in a cap and a

long position in a oor. A long straddle is the purchase of a put swaption and a call
swaption on the same underlying with the same strike (xed coupon) and the same
time to expiry.
Straddle (FRAs)
Applies to Forward Rate Agreements. A straddle is a combination of a long position in

a cap and a long position in a oor.
Strangle
A strangle is similar to a straddle except that the strike of the call lies above the strike
of the put. A long/short strangle is the purchase/sale of a put swaption and a call
swaption on the same underlying with the same expiry date but with different strike
prices.
Strategy
Applies to caps and oors. Strategies are combinations of two swaptions. It is similar
to creating a portfolio of two swaptions to enhance return or hedge using a particular
strategy.
Strike
The xed coupon for the deal.
Structured Notes
Allows you to choose the type of structured note you want to price.
Style
Swap Premium
Swap Price
The price of the payout leg of the swap, if it is a oat leg. The swap price should be
scaled by the current notional, if the payout leg has an amortizing schedule.
Swap Price (Asset Swap)
The transaction reference price of the asset swap, i.e., the price of the oater resulting
from the asset swap. The value is always equal to 100 in the case of a par-par asset
swap.
Swap Rate
The xed coupon rate of the swap. For step-up coupon bonds, the swap rate is the
coupon in the current coupon period. For oater bonds, it is the latest index of the
benchmark.
Swap Rates
The day count convention for curve rates with terms greater than one year. For more
information, see Day Count.
Swapped Spread
The realized spread, including all effects.
Swaps and Options
Allows you to choose the type of swap/option you want to create.
Swaption Strategy
SWPM features the following strategy templates that you can use to structure, save,
and ticket Portfolio/OMS systems: Straddle, Strangle, Risk Reversal, Call Spread, and
Calendar Spread.
Switch Value
Appears only when the deal is callable. The switch value = callable value - the largest
European option value within the multiple exercise options.
SWPM templates
Allows you to set SWPM default settings and display available template options.
Term
Denition
Synt. Spot/PTAX
The Synt. Spot rate or PTAX rate used in the Cupom Cambial curve calculation. If you
use the "clean" version in ICVS of Cupom Cambial, the eld refers to "Synt. Spot." If
you choose the "dirty" version of Cupom Cambial, the eld corresponds to PTAX.
Target Coupon
The predetermined barrier in TARN and snowblade deals. If the cumulative coupon
payments, expressed as a percentage of the notional amount, exceed the barrier (or
any) coupon date, the deal is redeemed automatically.
Tenor
The tenor of the reference rate. If the tenor is greater than one year, the underlying
becomes a swap rate, the deal becomes a CMS deal, and convexity adjustment
applies. The tenor should correspond to a valid index on the curve.
Term
The term to maturity of the particular point on the curve.
Term (Brazilian)
Applies to Cupom Cambial. The rst business day of each month, according to the
BM&F exchange.
Term (Curves)
Applies to the Curves tab. The point on the curve.
Term (Resets)
Applies to the Resets tab. The number of periods for which to calculate the
amortization schedule. The Term eld appears only when you choose ZPP as the
prepayment model.
Term Tenor
The alternative way to designate the start and end of the FRA contract. For broken
dates, only the month tenor value appears. The tenor value corresponds to the term
length of the FRA, and under current implementation cannot exceed 12 months.
Theta
The theta for the swaptions priced by the HW1F model is the change in market value
when the valuation date is moved ahead by one day. Assume that the swaption value is
V(T) where T is the valuation day, Theta = DF(T,T+1) V(T+1)- V(T). Here DF(T,T+1) is
the discount factor between T and T+1.
Theta (1-day)
The change in the market value for a one-day decrease in the time to expiry.
Ticker
The deal or group of deals. A slash (/) precedes all swap, FRA, and ZCS tickers. You
can only use letters for the ticker.
Ticker (Deals)
Applies to the Deals tab. The leg or group of legs. A double slash (//) precedes all leg
tickers. You can only use letters for the ticker.
Time Premium/Time PV
The prime premium is the difference between Premium and Intrinsic Premium. Time PV
is the difference between PV and Intrinsic PV.
Time Shift
The nal horizon date to be applied in the scenario.
Time Shifts
Applies to the Curve Date eld on the Scenario tab. The time shift and corresponding
curve date.
Time to Peak
The time at which the peak exposure to counterparty risk occurs.
TKR
The deal or group of deals. A slash (/) precedes all swap, FRA, and ZCS tickers. You
can only use letters for the ticker.
Total
The sum of the present values (PVs) of the payments.
Term
Denition
Trade Settlement
The date on which the asset swap was entered into and when the cash settlement was
paid. The default is the settlement date for bond trades done today.
Type
Type (Dual Digital)
Applies to dual digitals. The type of agreement being analyzed.
Type (Multi-leg)
Applies to multi-leg deals. Allows you to select the deal type when adding a leg.
Type (Nikkei Linked Note)
Applies to Nikkei Linked Notes. The type of call, either none, European, or Bermudan.
Type (Resets)
Applies to the Resets tab. The type of schedule. Choices include:
Amortizing Decreasing notional schedule.
Accreting Increasing notional schedule.
Rollercoaster Notional schedule may increase or decrease at different times.
Underlying
The underlying security used in the swap.
Underlying DV01
The sensitivity to the underlying curve shift (downPrincipal - upPrincipal) /

(2xShiftinPercent).
Underlying Prem
The premium value for the underlying structure.
Underlying Premium
Underlying Premium (Scenario)
Applies to the Scenario tab. The new market value for the underlying premium.
Unit
Applies to total return swaps.
Units
Unwind Annuity
The difference between the underlying xed interest rate of the swap and the unwind
coupon used to terminate the swap, expressed as a percentage.
Unwind Cpn
The xed rate of interest that was paid/received to terminate, or unwind, the swap.
Unwind PV
The net present value of the current swap cash ows versus the cashows of a
hypothetical unwind swap, where you pay/receive the coupon specied in the Unwind
Cpn eld in the Leg 1 (xed leg) section. The unwind swap is a spot start swap with
the xed coupon as the unwind coupon, whose cashow dates exactly match those of
the current swap. The unwind swap may have a different stub xing rate.
There may be a net cashow on the two oating legs at the next oating pay date (as
the two oater legs have a mismatch in accrual and reset rates). The xed legs may
have mismatched cashows at the next xed pay date (due to mismatched accrual
and different xed coupons). For the xed coupon pay dates beyond the rst date, the
difference in xed coupons (e.g., current xed coupon and the unwind coupon) results
in a cashow annuity (of unwind annuity basis points) for the remaining xed coupon
dates. If the unwind coupon is exactly equal to the par coupon, the unwind present
value equals the current swap market value.
Up-Out Level
The barrier price for the underlying Nikkei index that triggers the early redemption
(Autocallable) feature.
Term
Denition
USD Bloomberg Curve
The drop-down menu that appears next to the discount and forward curves, which
displays the default preferred named curve, set up in the Swap Defaults function
(SWDF) and the Curve Builder function (ICVS), and any other available curves. You
can choose a curve for discounting and/or a forward curve. For more information, see
SWDF <Help> and ICVS <Help>.
Use Vol Curve/Use Master Vol
Use Vol Curve indicates that the volatilities, which come from the vol cube, are used
and that the data can be viewed and modied from the volatility screen. Use Master Vol
indicates that the same volatility is used for all the caps/oors and that it is saved with
the deal.
User currency
Allows you to change the default currency in SWPM.
User Curve
The market spread values.
User/Firm Sharing
Valuation
The date on which the transaction occurs. For example, in the U.S., the valuation date
is T + 2 days. In Great Britain, it is T + 0 days.
Valuation (Brazilian)
Applies to Brazilian x-to-oat. The date on which the transaction occurs. For Brazil,
the valuation date is T+0 days.
Valuation Date
The date on which the transaction occurs. For example, in the U.S., the valuation
date is T + 2 days. In Great Britain, it is T + 0 days. If the date is in the future, then a
snapshot of the most recent curve is applied on that future valuation date.
Valuation (Settings and

Templates)
Applies to the Settings and Templates window. The default valuation date (Days to
Settle), i.e., how many business days from the curve date. For more information, see
Customizing Templates.
Value/Rate
Indicates whether a value or rate has been entered for the model. Value is expressed as
a decimal number. Rate is expressed in percentage points.
VCON
Allows you to request a quote or send a recap from or to a broker who is available
through the BLOOMBERG PROFESSIONAL service. For more information, see
VCON <Help>.
VCUB/Flat Vol Shift
The value in units of percent of Black Volume. For a VCUB Shift, each and every VCUB
market volume quote is shifted by this "shock" amount. A 5% shift of Flat Volume, for
example, would shift a at Black Volume of 20% to 25%.
Vega
The vega for the swaptions priced by the HW1F model is the change in market value
for a 1% shift in volatilities of the swaptions to which one calibrates.
Vega (Nikkei Linked Note)
Applies to Nikkei Linked Notes. The market value change in Yen for a 1% Nikkei
volatility change.
Vega (1%)
The change in market value for a 1% shift in volatility.
Vega (1bp)
The change in market value for a 1 bp shift in volatility.
Vega Bucketing
Vega bucketing (vega matrix risk) in the risk screen refers to sensitivity of price with
respect to change in volatility of individual market instruments (caps or swaptions) that
Term
Denition
are used in the construction of the volatility cube. The volatility cube is an input into the
pricing model for option derivatives in SWPM.
The sum of the vega buckets will in general be close, but not exactly equal to vega. The
difference is due to the non-linear way the price depends on the volatilities. For more
information, see the document Vega Bucketing in SWPM.
Vega bucketing (vega matrix risk) on the Risk tab refers to sensitivity of price with
respect to change in volatility of individual market instruments (caps or swaptions) used
in the construction of the volatility cube. The volatility cube is an input into the pricing
model for option derivatives in SWPM.
The sum of the vega buckets are in general close but not exactly equal to vega. The
difference is due to the non-linear way the price depends on the volatilities.
View
Allows you to navigate between the YAF Main, Curves, Detail, and Resets tabs.
Vol
The relative rate at which the price of the deal moves up and down, found by
calculating the annualized standard deviation of the daily change in price.
Volatility
Volatility (%)
Volatility Curve
The currency (specied in the Currency eld) and the type of volatility curve. If you
specify master volatility, the at master volatility is used for all caps and oors.
Volatility (VCUB)
Applies to the Volatility Cube function (VCUB). Allows you to choose the volatility cube
for the existing currency on the swap. For more information, see VCUB <Help>.
Vol Cube
The currency (indicated in the Currency eld) and the type of volatility curve.
If you choose Master Volatility, the at master volatility is used for all range
accruals/caps/oors. For more information, see VCUB <Help>.
Vol Cube (Brazilian)
Applies to Brazilian CDI swaptions. Currently, the Flat Volatility Analysis is the only
available analysis. By default, the CDI swaption launches with a 20% Black-Scholes
volume. For more information, see VCUB <Help>.
Vol Cube (CVA)
Applies to the CVA tab. The volatility cube used to calculate counterparty risk. For more
information, see VCUB <Help>.
Vol Cube (Three Zone Digital)
Applies to three zone digitals. The option to select among Flat or VCUB volatility. For
more information, see VCUB <Help>.
Vol. Source
The source of the volatility data used in the Nikkei Linked Note Callable Knock-out
calculation.
Vols
The volatility of each cap/oor.
Weight
The percentage weight of the security.
Term
Denition
Workout Date
Appears only when the deal is callable. The most likely call date for the deal given the
current price and call schedule.
Workout Date and Price
Allows you to construct the bond's cashows. Defaults to yield-to-worst. The workout
date is the most likely redemption date of the bond.
X-Axis
Applies to the Matrix tab. Allows you to select the pricing inputs on the x-axis of the
grid.
X-Size
Applies to the Matrix tab. Allows you to select the number of data points on the x-axis
of the grid.
X-Step
Applies to the Matrix tab. Allows you to select the intervals on the x-axis of the grid.
Y-Axis
Applies to the Matrix tab. Allows you to select the inputs on the y-axis of the grid.
Y-Size
Applies to the Matrix tab. Allows you to select the number of data points on the y-axis
of the grid.
Y-Step
Applies to the Matrix tab. Allows you to select the intervals on the y-axis of the grid.
Allows you to select the number of data points on the y-axis of the grid.
Yield Value
The Market Value of an Option, expressed as an annuity in basis points (bps) with
the frequency and convention of the option payoff (frequency and convention of the
"underlying" swap or leg).
For example, on a standard vanilla European swaption, the yield value of x bps with
frequency and convention of the underlying swap xed coupon, discounted (present
value) to "today" and equal to the swaption market value.
For a Standard Vanilla Cap, the yield value of x bps with frequency and convention of
the Caplets discounted (present value) to "today" and equal to the Cap Market Value.
Yield Value may be used by traders / investors as a rough estimate to gauge the
"average in-the-moneyness" necessary to justify the purchase of the option.
Yield Value = Premium / (Leverage x 100)
ZC Ratio
The ratio of Notional (starting) over Future Value Notional, i.e., the ratio between the
initial notional and the nal payment.
Zero Coupon
A bond or swap with no coupon payments.
Zero Rate
The interest rate earned on a bond or swap with no coupon payments (zero coupon),
which is presented based on a specic day-count convention and compound
frequency.
Zero Rates
Z-Spread...
Displays the Z-Spread Quick Calculator, a scenario analysis tool that allows you to
analyze the relationship between the discount curve and the premium. The Z-Spread
Quick Calculator presumes that cashows are unchanged and shifts only the discount
curve. The Z-Spread is the spread of the stripped, zero-coupon curve that makes the
multi-leg deal premium match the value specied in the Premium eld.
Term
Denition
Z-SPREAD
The number of basis points to add to the spot curve in order to make the bond net
present value equal to its market price. The bond's market price is an indication of the
value assigned to the bond's cash ows by the bond market. The swap markets implied
zero curve is used to determine the swap market's value for that same set of cashows.
To the extent that there is a discrepancy, the gross spread is viewed as the coupon of
a swap market annuity whose value equals the magnitude of this discrepancy. Most
importantly, all cashow valuations are done at a zero spread to the implied zero curve.
The z-spread quanties the difference of opinion about the bond's cash ows in the
two markets using an approach similar to that of an OAS model. In the z-spread
calculation, the cashows are again valued using the zero rates implied from the swap
curve. The single spread added to each zero rate is solved for, in turn solving for the
bond's market price. When the gross spread/z-spread is small, the two spreads are
close. The spreads diverge for bonds from weaker credits, with the z-spread tending
to be the higher of the two. While the calculation of the spread requires building
a multi-legged structure, the z-spread of the structure of the bond alone and the
structure of zero coupon rates sufce for the calculation.
Z-Spread
The spread of the stripped, zero-coupon curve that makes the multi-leg deal premium
match the value specied in the Premium eld.
Zspread
The amount required to adjust the swap spot curve to make the bond's net present
value equal to its market price.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> >
BEIJING
+86 10 6649 7500
FRANKFURT
+49 69 9204 1210
LONDON
+44 20 7330 7500
NEW YORK
+1 212 318 2000
SO PAULO
+55 11 3048 4500
SYDNEY
+61 2 9777 8600
DUBAI
+971 4 364 1000
HONG KONG
+852 2977 6000
MUMBAI
+91 22 6120 3600
SAN FRANCISCO
+1 415 912 2960
SINGAPORE
+65 6212 1000
TOKYO
+81 3 3201 8900
bloomberg.com
The BLOOMBERG PROFESSIONAL service, BLOOMBERG Data and BLOOMBERG Order Management Systems (the Services) are owned and distributed locally by Bloomberg Finance L.P. (BFLP) and its subsidiaries in all jurisdictions
other than Argentina, Bermuda, China, India, Japan and Korea (the BLP Countries). BFLP is a wholly-owned subsidiary of Bloomberg L.P. (BLP). BLP provides BFLP with all global marketing and operational support and service for the Services
and distributes the Services either directly or through a non-BFLP subsidiary in the BLP Countries. The Services include electronic trading and order-routing services, which are available only to sophisticated institutional investors and only where the
necessary legal clearances have been obtained. BFLP, BLP and their afliates do not provide investment advice or guarantee the accuracy of prices or information in the Services. Nothing on the Services shall constitute an offering of nancial instruments
by BFLP, BLP or their afliates. 2013 Bloomberg Finance LP. All rights reserved.

Bloomberg SWPM

Încărcat de

Informații document

Drepturi de autor

Formate disponibile

Partajați acest document

Partajați sau inserați document

Opțiuni de partajare

Vi se pare util acest document?

Este necorespunzător acest conținut?

Drepturi de autor:

Formate disponibile

Bloomberg SWPM

Încărcat de

Drepturi de autor:

Formate disponibile

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> SWAP MANAGER (SWPM)

Bloomberg's commitment to reducing our environmental

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> SWAP MANAGER (SWPM)

WHAT IS SWAP MANAGER (SWPM)?

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> SWAP MANAGER (SWPM)

Ination YoY Cap/Floor

CLF CLP X-Crncy Fixed Float Swap

DOCUMENTS AND VIDEOS

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> SWAP MANAGER (SWPM)

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> SWAP MANAGER (SWPM)

WHAT IS SWAP MANAGER (SWPM)?

Date printed: 01/12/2015

WHAT IS SWAP MANAGER (SWPM)? //05

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> SWAP MANAGER (SWPM)

Date printed: 01/12/2015

WHAT IS SWAP MANAGER (SWPM)? //06

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> SWAP MANAGER (SWPM)

, Bus Day Adj

(amortization dates), and fee amounts, so you

The shift (in basis points) applied to the curve.

Date printed: 01/12/2015

WHAT IS SWAP MANAGER (SWPM)? //07

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> SWAP MANAGER (SWPM)

(shift in basis points) for each tenor.

For more information, see Risk.

The number of basis points each tenor has been shifted.

Date printed: 01/12/2015

WHAT IS SWAP MANAGER (SWPM)? //08

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> SWAP MANAGER (SWPM)

The sum of the present values of the leg cashows.

Date printed: 01/12/2015

WHAT IS SWAP MANAGER (SWPM)? //09

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> SWAP MANAGER (SWPM)

PRICING A VANILLA SWAP

Date printed: 01/12/2015

WHAT IS SWAP MANAGER (SWPM)? //10

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> SWAP MANAGER (SWPM)

of the day indicated in the Curve Date

eld. The Valuation

date is the date at which future cashows are discounted.

variables: Premium , Notional , Leg1: Coupon , Leg2: Spread , Leg2: Leverage

Date printed: 01/12/2015

WHAT IS SWAP MANAGER (SWPM)? //11

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> SWAP MANAGER (SWPM)

Market Side: Receive Fixed

Date printed: 01/12/2015

WHAT IS SWAP MANAGER (SWPM)? //12

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> SWAP MANAGER (SWPM)

Effective: Today's date (for example, 07/19/2013)

Maturity: Five years forward (for example, 07/19/2018)

Day Count: 30I/360

Market Side: Pay Float

Reset Frequency: Quarterly

Pay Frequency: Quarterly

Day Count: ACT/360

Date printed: 01/12/2015

WHAT IS SWAP MANAGER (SWPM)? //13

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> SWAP MANAGER (SWPM)

In this example, use the default selections:

Dscnt Curve: 42 USD OIS Swaps

Fwd Curve: 23 USD Swaps (30/360,S/A)

Date printed: 01/12/2015

WHAT IS SWAP MANAGER (SWPM)? //14

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> SWAP MANAGER (SWPM)