Editing Rates in a Yield Curve

By default when you open the Yield Curve the system displays the market data for the cut-off time set in the pricing page for the default market data source.

In this page as well as changing the market data source (see Changing the Market Data Source in the Yield Curve) you can also edit each interest rate (as well as each price for a future) as required for specific cuts. It is important to note though that defining inappropriate rates for the yield curve can affect the calibration of the rates. Accordingly, caution is advised when changing these inputs.

You can edit the rates by doing any or all of the following:

You can edit each rate individually. After you manually edit a value in the yield curve, the background of that field turns blue.

 

You cannot edit the swap rates for the yield curve created for a currency’s non-standard index.

You can shift the rates for all tenors up or down by the same basis points (using the parallel shift functionality). You do this entering a value in the Shift Yield Curve By field, using the + <> - toggle button to indicate if you want to shift the rates up or down, and then clicking the Calculate button. The value can be a whole number or less than a whole number, e.g., 0.34.

After you do this it is noted in the page that you have shifted the yield curve by the defined amount.

Once you have done this and until you manually instruct the system to remove any changes by clicking the Refresh button, any shift in rates is retained during the current session. That means that if you shift the rates and then later in the same session shift the rates again, this latter shift is added to any previous shift(s) already made in the session. In addition, in the page the total amount by which you have shifted the yield curve in the current session is noted.

 
Editing the yield curve in this way is only supported for the standard index.
Changing the yield curve for the standard index in this way automatically affects the yield curve for each of the same currency’s non-standard indexes as well. However, this is only true for the rates for elements and tenors that are common to both the standard and non-standard yield curve. That is, any elements and/or tenors in a currency’s non-standard index yield curve that are not also included in the standard index yield curve will not be affected by this editing.
If you shift the rates down by such an extent that one or more of them will be negative, the system not only treats them as zero but also displays them as zero in the Yield Curve page.

You can twist (or shift) the yield curve at two points.

You do this by first defining the two points at which you want to shift the yield curve and by how much to shift the curve at each of those points, and then clicking the Calculate button.

Based on the two shifted points, SD then calculates the required shifts for each of the other points in the yield curve—using linear interpolation or extrapolation as necessary—and then applies them. In addition, the background of each cell turns blue, indicating that its data has been changed as the result of a manual edit.

It is important to note that if you only define one point, the system assumes the second point has a shift of 0, and calculates the other points accordingly.

 
Editing the yield curve in this way is only supported for the standard index.
Changing the yield curve for the standard index in this way automatically affects the yield curve for each of the same currency’s non-standard indexes as well (as soon as you accept the changes into the system).

Copy and paste rates within the yield curve. After you do this the background of each field with a pasted rate turns blue. For more information see Copying & Pasting Data from the Yield Curve.

For the currencies for which a separate yield curve is built for each non-standard index you can edit the basis spreads between the standard and each non-standard index. To do this see Editing the Basis Spreads Between a Standard and Non-standard Index.

Editing an interest rate also affects the discount factor and zero rate for the same tenor. However, to see these changes you must first click the Calculate button.

If as a result of your changes any of the rates are now invalid, they will be displayed in red. For more information on invalid rates in the yield curve see Understanding the Colors Used for Rates in a Yield Curve.

Any manual changes to the data, including any shifts or twists, are accumulated until you next refresh the displayed data.

After making any changes, you can then tell the system to freeze the rates, that is, to use the edited rates for the subsequent pricing of instruments in this currency until further notification. You do this by clicking the Accept button. Once you click the Accept button the rates are frozen, as noted in the screen.

 

If you are editing the rates for a currency that has a distinct yield curve for each non-standard index, when you click the Accept button you are in effect freezing the rates for all of the currency’s yield curves. This is true whether you click the Accept button in the Yield Curve tab or the Basis Spreads tab.

In addition, next to the market data source for each set of rates a timestamp is displayed. This lets you see at a glance that the rates being used are frozen and when. The frozen rates are then used in the pricing pages until you do one of the following:

Click the Refresh button in the Yield Curve page.

Click the Refresh button in the Single Option page or the Portfolio page.

Log out of the system.

To keep your edited yield curve you must save it into the SD-IR Explorer window. For more information see Saving a Yield Curve.

To manually edit a rate in the Yield Curve page:

1. Access the Yield Curve page.
2. Choose the cut-off time for which you want to edit the data.
3. Select the rate you want to edit and enter the new value.
4. Click outside the cell. The call is highlighted in blue.
5. To update the corresponding forward inflation rate click the Calculate button.
6. To instruct the system to use the edited data displayed in this page in all calculations as relevant (instead of the system data) until instructed otherwise, click Accept. This action automatically recalculates the corresponding discount factors and zero coupon rates as well.

To shift the yield curve by a universal amount:

1. Access the Yield Curve page.
2. Click the Shift Curve By radio button and then in the field enter the amount in basis points by which you want to shift each interest rate (and price for the futures only).
3. Click the Calculate button to shift the rates (and prices) for each tenor. The corresponding discount factor and zero rate for each tenor are recalculated accordingly.
4. To instruct the system to use the edited data displayed in this page in all calculations as relevant (instead of the realtime market data) until instructed otherwise, click Accept.
5. Click OK.

To twist the yield curve:

1. Access the Yield Curve page.
2. Click the Twist Curve By radio button and then define the two points at which to shift the yield curve—and by how much to shift each of those points. So for example, you can shift the 3M cash rate by 10 basis points and the 10-year swap rate by 5 basis points.
3. Click the Calculate button. SD calculates the required shifts for each of the other points in the yield curve—using linear interpolation or extrapolation as necessary—and then applies them. In addition, the background of each cell turns blue, indicating that its data has been changed as the result of a manual edit.
4. To instruct the system to use the edited data displayed in this page in all calculations as relevant (instead of the realtime market data) until instructed otherwise, click Accept.
5. Click OK.