Combined curves

Created by Erik Åkerlund, Modified on Fri, 19 Apr 2024 at 08:04 AM by Teuvo Suoraniemi

To do an accurate Market valuation of Cross currency swaps you need to build a interest rate curve that includes different types of basis spreads. Further down in this article is also described how to do a market valuation by combining credit spread curves and market data curves.

Market data set up

If you need to create a new curve (for example Basis curve, credit spread curve) you first go to Market data Setup.

Market data set up

NOTE You have to choose a currency the curve is relevant for, which tenors that are relevant and you need to select day count convention. 

Curve definition - New market data curve

  1. In the dropdown list choose Market Data
  2. Give the curve a name
  3. Select the curve you created in market data set up and choose which tenors you need to build up your curve. You can pick a few of the ones you did set up in the market data or set up all.
  4. The actual rates can either be import from your market data provider (not included in Treasury Systems) or import from an Excel Manual import of market data (FX rates and interest rates)) or type it in manually in the system.

Curve definition - New Combined curve

  1. Create a new curve but choose Combined this time
  2. Give the curve a name
  3. Select a currency the curve will be valid for
  4. Select base curve, that is the market data curve you will use as a base
  5. Press the + sign to add another curve (only curves in the chosen currency will be available to choose) then decide if you would like to Add, Subtract, Multiply or divide.
  6. You can add multiple curves
  7. You can shift a combined curve with a percentage that you fill in next to the base curve.

You can also create a Constant curve that you can add to your combined curve.

Market valuation with credit spread curves.

Market data setup: Create a credit spread curve (in the same way as other market data curves).

Curve definitions : Add the spread curve as a new curve

Curve definitions: Create a combined curve that consists of a market data curve (i IRSEK) and your credit spread curve. In this example the combined curve is called 'Company market valuation curve'

Enter the combined curve as the discount curve on the deals for which you want to use this for market valuation.

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