# s curves

Tags: finance

## Interest rate sensitive products are epxosed to market rates by different curves

### S (swap and basis spread curves) and bond curves (F and M)

## Definition

- Swap curve built out of fixed coupon rates of market quoted interest rate swaps across different maturities in time.
- Consists of a fixed leg and a floating leg
- Swpa curves are constructed in segments from the market prices of various fixed income instruments
- Short end of swap curve (< 3 months) is calibrated on unsecurted deposit rates
- Middle area of the curve (3months - 2 years) isdervied from a combination of forward rate agreement congrats and interest rate futures
- Long end of the curve is constructed from observed quotes of swap rates (out to 10 years or more)
- Single currency basis spread curves are constructed from market quotes for basis swaps
- Basis swap is a floating-floating interest rate swap under the floating rate payments are referenced to different bases

- Used for
- Pricing fixed income instruments such as corporate bonds, mortgage securities, and other securitized products
- Price cash flows, swaps, FX forwards, and other derivatives