Interpreting Reset Tenor and Maturity in LIBOR Swap Rates
Summary
The document explains how to read a Bloomberg-style rate label that combines a three-month LIBOR reset tenor with a 25-year maturity. The three-month period describes the floating leg’s rate-setting interval; it does not mean the quoted rate is simply an interest rate for borrowing over the next three months. The 25-year tenor identifies the swap’s overall maturity.
The response identifies the example quote as a derived zero rate from a fixed-to-floating interest rate swap referencing three-month US LIBOR. The swap’s fixed rate is the quote that makes the contract fair, and the zero rate is derived from that quote. It also breaks down parts of the ticker as indicating swaps, the three-month LIBOR curve, a zero rate, the swap maturity, and Bloomberg’s pricing source. The explanation is specific to the cited ticker convention; it does not give a general derivation of swap zero rates or cover other reference curves and vendors.
Key ideas
- The reset tenor identifies how often the floating leg resets, while the swap tenor identifies its maturity.
- A three-month LIBOR, 25-year quote in the example is derived from a 25-year fixed-to-floating swap.
- The swap quote is the fixed rate that makes the swap fair, from which the zero rate is calculated.
- Ticker components can encode the instrument type, reference curve, rate type, maturity, and pricing source.
Tags
Full text
# what is the definition of resetting tenor and time to maturity tenor in libor rates # what is the definition of resetting tenor and time to maturity tenor in libor rates I have a question about the definition and understanding of libor rates. We have the time to maturity tenor, $T$, which is the time over which i borrow or lend money. For libor we also have the reset date, i.e. in Bloomberg we find USD 3 Month LIBOR 25 Year. What does this exactly mean? Here the 3 Month is the reset tenor and 25 Year is the time to maturity. So for sure this is the interest rate over the next 25 Year. But what does the reset tenor mean? I observe daily changes in the market for this rate, so it cant be the interest I borrow or lend over the next 3 Month. One possible ticker in Bloomberg is for example S0023Z 25Y BLC2 Curncy. ## Answer by AKdemy (score 2) https://quant.stackexchange.com/a/74232 This is something I think the help desk (F1F1) would have answered with ease. S0023Z 25y BLC2 is a derived Zero Rate from US 3m LIBOR fixed to float (FXFL) interest rate swaps. The tenor in this example is 25y, and the swap quote would be the fixed rate that makes the swap fair. This answer shows a 5y swap which is otherwise identical. The coupon is the quoted value from which the zero rate of the ticker is computed from (would be 5y zero in this case). The Ticker logic is explained as follows: - S stands for swaps (same logic for government bonds, where you have G instead of S; see the FWCM link below for an example) - 23 is the 3M LIBOR curve as seen on `ICVS` - Z stands for zero - 25y is the swap tenor - BLC2 is the "pricing source". All BLC* tickers are Bloomberg calculated values. This is also what FWCM tickers and some FRD values have.
Shown in full with attribution under the source's licence. Licence: CC BY-SA 4.0 (Stack Exchange)
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.