When is linear interpolation adequate for swap rates?

Linear interpolation is adequate for tenors between standard points when the yield curve is relatively smooth. Cubic spline or monotone convex interpolation is preferred for risk management applications where curvature near standard tenors affects hedging accuracy.

What replaced LIBOR as the benchmark for swap rates?

SOFR (Secured Overnight Financing Rate) replaced USD LIBOR in June 2023 for new contracts. SOFR-based swaps use compounded-in-arrears or term SOFR rates. The transition required new fallback language, discount curve changes, and basis swap market development.

Interpolated Swap Rate by Tenor

Linearly or cubically interpolate between quoted swap rates to determine the mid-market swap rate for non-standard tenors (e.g., 7-year rate from 5-year and 10-year quotes).

Principal ($)

Annual Rate (%)

Years

Compounding / Year

$ Finance Disclaimer: These calculators are for educational and illustrative purposes only. Results do not constitute financial advice. Consult a licensed financial advisor before making investment or borrowing decisions.

How It Works

Linearly or cubically interpolate between quoted swap rates to determine the mid-market swap rate for non-standard tenors (e.g., 7-year rate from 5-year and 10-year quotes)

Each component has a specific meaning:

5-year — The 5-year recorded for the scenario being assessed.
10-year quotes) — The 10-year quotes) recorded for the scenario being assessed.

Note: Interpret the interpolated swap rate result against the thresholds and context described above.

How to Use

Enter the 5-year, 10-year quotes) for the scenario you are assessing. Linearly or cubically interpolate between quoted swap rates to determine the mid-market swap rate for non-standard tenors (e.g., 7-year rate from 5-year and 10-year quotes). Use the interpolated swap rate result to inform your calculation.

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