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0answers
30 views

If we modify duration, should we modify bond price? Options Futures and Other Derivatives

In Example 4.5 of Section 4.8 on Duration of Options, Futures and Other Derivatives (p.92), a bond's price and duration are computed assuming continuous compounding where the bond yield is y = 12%. ...
4
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1answer
118 views

Use of Girsanov's theorem in bond pricing

Assume that we want to calculate the time $t=0$ price of a bond: $B(0,T) = E_P[\exp(-\int_0^T r_s ds)]$, where $r$ is the interest rate following the SDE $dr_t=k(\theta-r_t)dt+\sigma ...
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votes
1answer
51 views

Calculating the sensitivity of the modified bond duration to changes in the coupon rate

Given that $B=Ce^{-y} + Ce^{-2y}+ (100+C)e^{-3y}$ where B is the bond price, C is the coupon. and It is a 3 years annual coupon bond. I want to find $\frac{dD}{dC}$ where $D$ is the modified ...
2
votes
1answer
89 views

Can the duration of a bond be greater than Time to Maturity

In the case of a vanilla bond I know that the duration will be less than the time to maturity. But I am observing that for a non-vanilla bond, the duration is greater than time to maturity. Can ...
1
vote
1answer
91 views

Interpolating spot rates given intermittent coupon-bond prices.

I'm trying to bootstrap spot rates given coupon-paying bond data. To simplify my problem, assume we are working with only 3 given data, the price/coupon rate on semi-annual bonds maturing in 0.5, 1, ...
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0answers
86 views

How to determine risk-free rate of Ecuador?

I have a question in determining the risk-free rate of Ecuador. For developed countries like United States and Great Britain, the risk-free rate can be obtained in financial database such as Reuter or ...
5
votes
1answer
133 views

Arbitrage with freshly issued bonds

I recently heard someone mention an arbitrage strategy involving selling freshly issued bonds and buying the "old batch" as it has shown that the liquidity in the fresh batch motivates/drives up these ...
1
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3answers
113 views

Given monthly returns of 10-Year Govt Bond, how to get monthly risk free rate of return

I have a list of monthly returns of a 10 year Govt Bond. I am not sure if this is a good proxy for the monthly risk free rate of return. Can somebody suggest how I can derive the monthly risk free ...
2
votes
1answer
148 views

Pricing credit risky bonds

How do we price credit risky bonds? If I discount the cash flows using LIBOR/zero rates, it won't take the credit riskiness into account. So should I use a rate based on the issuer's credit spread? ...
1
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1answer
59 views

Get discount factors with limited knowledge?

I am facing the problem of just having this information: 6% coupon bond with 2.5 years to maturity, traded at a 100% clean price 4% coupon bond with 1.5 years to maturity, traded at a 98% clean price ...
4
votes
1answer
183 views

Definition of gearings, spreads and curve in RQuantLib's Floating Rate Bond function

Consider the RQuantLib package function FloatingRateBond(). This takes as inputs gearings ...
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votes
1answer
48 views

Does YTM represent interest? [closed]

Does a bond's Yield to Maturity represent the amount of interest one gets at maturity even though it's expressed as a percentage? I read that it is a rate of return on a bond at maturity, but what is ...
2
votes
2answers
492 views

RQuantLib, Hoadley and Bloomberg YAS: fixed rate bond pricing differences?

I'm trying to price a fixed rate bond one year from now on. The bond is the PEUGOT 7 ⅜ 03/06/18, whose ISIN code is FR0011439975. I'm using such a specific example because in this way everyone can ...
3
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0answers
124 views

RQuantLib: any difference between FixedRateBond() and FixedRateBondPriceByYield() with flat term structure?

Please, consider the following functions from RQuantLib package: FixedRateBond() ...
3
votes
3answers
486 views

YTM and current yield

Which of the following statements is correct? a. If a bond’s yield to maturity exceeds its coupon rate, the bond’s current yield must also exceed its coupon rate. b. If a bond’s yield to maturity ...
2
votes
2answers
539 views

CTD and bond futures

I am reading a chapter on bond futures in Fabozzi's book. It states that without CF (conversion factor) the CTD (cheapest to deliver) would be the bond with the longest maturity and highest coupon. ...
2
votes
3answers
688 views

What is the clean price and dirty price of a risky bond?

Following up on this question: Yield of a risky bond, what is the definition of clean and dirty prices for a risky (defaultable, catastrophe, etc.) bond? I would think the dirty price should ...
3
votes
4answers
399 views

Yield of a risky bond

When working with risky bonds, i.e. corporate bonds, what is usually defined as the yield of such a bond? Is it the yield calculated as if the bond was riskless, or is it calculated by properly taking ...
1
vote
1answer
264 views

equity linked notes (bull/bear equity performance bonds)

I have to price what my lecturer calls "Bull and Bear Equity Performance Bonds". Basically there's dates $t_i \in [0,T]$, where $t_i - t_{i-1}$ is the same for all choice of $i$. On each date the bull ...
2
votes
1answer
645 views

Calculate the “ten year zero rate” given two bonds with two prices

I have a little question and need some help with the notation. So, the question goes as follows: A bond with a maturity of ten years that pays annual coupons of 8% has a price of \$90. A bond with ...
1
vote
1answer
115 views

Observed market price for the August-Greece-paid bonds where the NPV of the bond or of an option?

The bonds which Greece has paid had been valued by market as junk once, just before there payment. Given that the observed market value is the net present value of the instrument, why were they so ...
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3answers
601 views

How to properly interpret accrued interest of bonds

Ever since I work in finance I was wondering what accrued interest (AI) are good for (see the wikipedia article for a short introduction). I think I have a clear picture in mind now and the usual ...
2
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0answers
135 views

What is the highest frequency greek for options on futures on bonds?

I'm considering exchange traded options of futures on bonds. Options on bond futures are usually American, thus the Black model is out of question. Which is the most imporatant Greek with respect to ...
0
votes
1answer
134 views

How do I check whether OAS value is correct?

How do I check whether the Option-adjust spread value I have retrieved from external calc utility is correct? Can you please tell me the steps to verify this?