Pricing

Price interest rate instruments against calibrated curves using .rate(), .npv(), and .cashflows(). This guide covers IRS, FRA, ZCS, OIS, and Deposit pricing against a DiscountCurve calibrated from USD SOFR market data.

Setup -- Calibrate a Curve

Calibrate the shared USD SOFR dataset to produce a discount curve for pricing.

import datetime
from vade import DiscountCurve, IRS, FRA, ZCS, OIS, Deposit, Solver

effective = datetime.date(2025, 6, 16)

nodes = {
    effective: 1.0,
    datetime.date(2025, 7, 16): 1.0,
    datetime.date(2025, 9, 16): 1.0,
    datetime.date(2025, 12, 16): 1.0,
    datetime.date(2026, 6, 16): 1.0,
    datetime.date(2027, 6, 16): 1.0,
    datetime.date(2028, 6, 16): 1.0,
    datetime.date(2030, 6, 16): 1.0,
    datetime.date(2032, 6, 16): 1.0,
    datetime.date(2035, 6, 16): 1.0,
}

curve = DiscountCurve(
    nodes, interpolation="log_linear", convention="act360", id="sofr"
)

dep_1m = Deposit(effective=effective, termination="1m", rate=0.0, convention="act360")
fra_3m = FRA(effective=effective, termination="3m", fixed_rate=0.0, convention="act360")
fra_6m = FRA(effective=effective, termination="6m", fixed_rate=0.0, convention="act360")
irs_1y = IRS(effective=effective, termination="1y", frequency="a", fixed_rate=0.0, convention="act360", float_convention="act360")
irs_2y = IRS(effective=effective, termination="2y", frequency="a", fixed_rate=0.0, convention="act360", float_convention="act360")
irs_3y = IRS(effective=effective, termination="3y", frequency="a", fixed_rate=0.0, convention="act360", float_convention="act360")
irs_5y = IRS(effective=effective, termination="5y", frequency="a", fixed_rate=0.0, convention="act360", float_convention="act360")
irs_7y = IRS(effective=effective, termination="7y", frequency="a", fixed_rate=0.0, convention="act360", float_convention="act360")
irs_10y = IRS(effective=effective, termination="10y", frequency="a", fixed_rate=0.0, convention="act360", float_convention="act360")

instruments = [
    (dep_1m, 0.0430), (fra_3m, 0.0425), (fra_6m, 0.0415),
    (irs_1y, 4.00), (irs_2y, 3.85), (irs_3y, 3.75),
    (irs_5y, 3.70), (irs_7y, 3.75), (irs_10y, 3.85),
]

solver = Solver(curves=[curve], instruments=instruments)
result = solver.iterate()
assert result.converged
calibrated = solver.get_curve(0)

IRS Pricing

Price a 5-year interest rate swap with a slightly off-market fixed rate. The .rate() method returns the par rate implied by the curve (in percentage form), and .npv() shows the mark-to-market value.

irs = IRS(
    effective=effective,
    termination="5y",
    frequency="a",
    fixed_rate=3.80,
    convention="act360",
    float_convention="act360",
)

float(irs.rate(calibrated))  # 3.7000000000002484
float(irs.npv(calibrated))   # -4542.843986271881

The par rate is 3.70% -- the curve-implied fair fixed rate. Because our swap pays 3.80% fixed (above par), its NPV is negative from the fixed-rate payer's perspective.

FRA Pricing

Price a forward rate agreement covering the 3-month to 6-month period. FRA .rate() returns the implied forward rate in decimal form.

fra = FRA(
    effective=datetime.date(2025, 9, 16),
    termination=datetime.date(2025, 12, 16),
    fixed_rate=4.20,
    convention="act360",
)

float(fra.rate(calibrated))  # 0.040488991946056214
float(fra.npv(calibrated))   # -323.57645004154983

ZCS Pricing

Price a 3-year zero coupon swap. ZCS .rate() returns the par zero-coupon rate in percentage form.

zcs = ZCS(
    effective=effective,
    termination="3y",
    fixed_rate=3.80,
    convention="act360",
    float_convention="act360",
)

float(zcs.rate(calibrated))  # 7.777073194074961
float(zcs.npv(calibrated))   # -1666.5413047417533

OIS Pricing

Price a 2-year overnight index swap. OIS is structurally similar to IRS but designed for overnight rate compounding.

ois = OIS(
    effective=effective,
    termination="2y",
    frequency="a",
    fixed_rate=3.90,
    convention="act360",
    float_convention="act360",
)

float(ois.rate(calibrated))  # 3.8500000000003856
float(ois.npv(calibrated))   # -956.7775507331098

Deposit Pricing

Price a 1-month deposit. Deposit .rate() returns the implied deposit rate in decimal form.

dep = Deposit(
    effective=effective,
    termination="1m",
    rate=0.0440,
    convention="act360",
)

float(dep.rate(calibrated))  # 0.04299999999999926
float(dep.npv(calibrated))   # -83.03578842494552

Cashflow Analysis

The .cashflows() method returns a Polars DataFrame with period-level detail for each leg of the instrument. Each row represents one accrual period with its notional, rate, cashflow amount, discount factor, and NPV contribution.

irs = IRS(
    effective=effective,
    termination="5y",
    frequency="a",
    fixed_rate=3.80,
    convention="act360",
    float_convention="act360",
)

df = irs.cashflows(calibrated)
df.columns  # ['Type', 'start', 'end', 'payment', 'Ccy', 'Notional', 'fixing_rate', 'Rate', 'Spread', 'DCF', 'Cashflow', 'DF', 'NPV']
df.shape  # (14, 13)

Next Steps

Calibration -- multi-curve calibration and solver algorithms
Risk -- delta, gamma, and bucket-level sensitivities

Pricing

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