Study of the dynamics of the interest rate swap using machine learning methods
Keywords:interest rate swap, machine learning, Ukrainian overnight interbank rate index, fair value, zero coupon yield curve
For the European ﬁnancial system, the interest rate swap is a well-known mechanism to reduce the potential eﬀects of these risks, but it is new to the Ukrainian interbank market. In the second half of 2020, the National Bank of Ukraine and commercial banks held their ﬁrst interest rate swap auctions. According to this provision, one party oﬀers the other a ﬂoating interest rate while the other oﬀers a ﬁxed interest rate based on a conditional amount. Based on the Ukrainian overnight interbank rate index, the latter is computed (UONIA). Future cash ﬂows are discounted at rates determined by the zero coupon yield curve created for hryvnia government bonds. The parties agree on how to calculate the diﬀerence in interest payments within the predetermined period of time. The analysis of the fair value of this ﬁnancial instrument at future points in time is the main concern of mathematical modeling of interest rate swap transactions. Predicting future changes in fair value is particularly crucial when the zero coupon yield curve’s coeﬃcients vary and when there are speciﬁc trends in the index of overnight interbank rates. The sensitivity of the speciﬁed factors to the interest rate swap’s dynamics was investigated in the study, and a forecast of the instrument’s future dynamics based on the change in important macroeconomic indicators was developed.
Pages of the article in the issue: 37 - 41
Language of the article: Ukrainian
Resolution of the NBU Board dated 05/28/2020 No. 67 "On approval of the Regulation on conducting interest rate swap operations by the National Bank of Ukraine on the interbank market"(as amended by NBU Board Resolution No. 76 of 06/18/2020): https://bank.gov.ua/ua/ legislation/Regulation_28052020_67
Schedule of interest rate swap auctions: https://bank.gov.ua/ua/markets/ money-market/irs
Regulations on the calculation and publication of the Ukrainian overnight interbank rate index (UONIA): https://zakon.rada.gov.ua/laws/show/vr405500-20#Text
Money market: UONIA dynamics: https://bank.gov.ua/ua/markets/uonia-chart? startDate=31.12.2020&endDate=16.05.2022
On the approval of the Amendments to the Procedure for estimating the fair value of derivative ﬁnancial instruments, transactions with which the National Bank of Ukraine carries out: https://bank.gov.ua/ua/ legislation/Decision_19062020_415-rsh
Coeﬃcients of the zero-coupon yield curve constructed for hryvnia OVDP: https:// bank.gov.ua/ua/markets/ovdp/fair-value
Svensson model: https://zakononline.com. ua/documents/show/366367 652927
Rate index for deposits of individuals: https://index.minfin.com.ua/ua/banks/ deposit/index/
Deposit Interest Rate in Ukraine: https://tradingeconomics.com/ukraine/ deposit-interest-rate
Ukraine Interest Rate: https://tradingeconomics.com/ukraine/interest-rate
Excel ﬁle interest rate swap fair value calculator: https://docs. google.com/spreadsheets/d/1IXd-Le-ihId9SGrNeVCX18W7eL1b444Y/edit?usp=sharing&ouid=104784915637989918366&rtpof=true&sd=true
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Copyright (c) 2022 V. P. Zubchenko, P. V. Aleksandrova
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