Conditional Curve Enhancements | Weekly Release 7/3/20

Enhancement #1

Adjusted the default weight to be -1/2/-1 (consistent with Fwd swap matrix)

In this enhancement, the default weighting method was changed from the previous method of 1/-2/1 for butterfly strategies to the current convention of -1/2/-1 which is consistent with the default Forward Swap Matrix weighting.

This change is also reflected in the “Pay/Rec” to show the new distribution for butterfly strategies. Now, for bull butterflies with the -1/2/-1 weighting the legs are set as Sell Receive/Buy Receive/Sell Receive. Conversely, for bear butterflies the same weighting is distributed as Buy Pay/Sell Pay/Buy Pay.

Traders don’t need to take any additional steps to enable this enhancement. Simply use the default butterfly strategies (and custom ones), then select either Bull or Bear from the “Stgy” drop-down and click “Calc” to refresh the sheet.

Enhancement #2

Added rolldown (K) column which is calculated by multiplying the rolldown bps * swap dv01

The new default column “Roll Down(k)” shows traders the notional rolldown and compliments the existing rolldown column, “Roll Down(bp)”, which shows it in basis points. This enhancement will allow traders to easily see their rolldown in dollars rather than having to run manual calculations to get there from basis points. The “Roll Down(k)” is calculated as (Roll Down(bp) * $Swap DV01)/1000.

Enhancement #3

Enable traders to configure the rolldown period. Previously, we defaulted to roll to expiry/spot

With this enhancement, traders now can configure their own rolldown period for their strategies. Prior to this enhancement, traders could only set the rolldown period as the spot to the expiry. Now, the number of options available has been increased to include 1M, 3M, 6M, 9M, 12M, and the existing “Expiry” option.

It’s important to note at this time that the Roll Down ATM(%) and Roll Down ATM Sprd columns will be affected by changing the rolldown forward rate. The Roll Down ATM(%) is the forward swap rate for each leg based on the forward term set in the “Rate R” drop-down. The Roll Down ATM Sprd is the forward spread based on the weighting multiplied by the Roll Down ATM(%).

Of note: if a trader has a certain forward date set (e.g. 6M) and selects a forward rate that has a further expiry (e.g. 9M) the selected option will be overridden and the shorter term, manually entered forward date will be used.

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