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0
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8 views

Calculating the YTM of a bond with only a calculator

How can you solve something like the following, just by using calculator (basically not using a computer): A seven year bond has coupon 5% (p.a.) and current price is 101.46% of face value. What is ...
0
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0answers
8 views

True yield question

First of all, is there a different between yield to maturity and the true yield of a bond. And then, how would the following be computed: There is a new issue of 180 day US T-bill with a discount ...
0
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1answer
26 views

Why Is Bond Time Value Risk Not Considered in Bond Immunization?

I know bond portfolio immunization includes duration and (if the hedging period is longer) convexity matching. These are equivalent to taking the first and second partial derivatives of the bond ...
1
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1answer
59 views

Calculation of Bond Carry from Synthetic future prices

I have only government bond yields with different maturities. How can I obtain sythetic future prices on bonds? After obtained the future prices, I am supposed to compute the return and carry returns. ...
3
votes
1answer
54 views

Why can a swap option be regarded as a type of Bond option?

Why can a swap option be regarded as a type of bond option? My idea: Suppose the swap rate of the swaption is $s$. Now consider a bond option expiring at $T$ with strike, $(P_K)_t = ...
0
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0answers
24 views

Hull white tree and the pricing of an interest rate swap

Currently, I have been able to set up the hull white tree. To price the swap, and we use the formula from Wilmott "Introduces Quantitative Finance", where we use the discount factors for all ...
0
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1answer
18 views

Pricing foreign currency bonds - which approach is more theoretically “sound”?

You own a fixed rate corporate bond in foreign currency (let's say JPY). Your domestic currency is USD. Which of the these two approaches do you consider theoretically better? Discount JPY cash ...
0
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2answers
73 views

The Difference between Notional and Par Value of a Bond

I have reached a confusing dilemma regarding the par and notional values of a bond. I have been told that the par value of a coupon bond is $100. However, the notional value of the bond is ...
2
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4answers
173 views

Bond portfolio hedging against currency risk

How do I hedge a bond portfolio against currency risk? Ideally I'm looking for books or other references on this topic.
4
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3answers
314 views

Default Probability Implied in Bond Prices?

Say I am trying to find the probability of default on JP Morgan implied by the price of their fixed income assets. Can this be done? Are there any pitfalls to this approach? I have heard of this ...
4
votes
1answer
189 views

Wrong discount factors when finding Nelson Siegel Svensson model parameters

I am trying to determine the parameters for the Nelson Siegel Svensson model and am solving a Non- Linear Optimization problem to do this. Some of the code I have written is below and this is where my ...
6
votes
3answers
109 views

Investment Grade Bond vs Junk Bond, whose duration is larger?

Just wondering how to calculate duration when take credit risk into consideration. I think if duration is calculated as weighted average of cashflow time, and weights are calculated using present ...
0
votes
1answer
39 views

question regarding carry & roll of a bond

I have a simple (and might be a dumb) question regarding the calculation of a bond's carry. If someone doesn't take into account cost of financing (e.g. the repo rate) then the bond's approximate ...
0
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1answer
64 views

Bank discount yield and money market yield

I have a question regarding Bank Discount Yield and Money Market Yield for US TBill. Some books mentioned that ...
3
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1answer
168 views

Issue with OLS Regression for Nelson Siegel Svensson parameters

I have been working on getting input parameters to the Non-Linear Optimization which gives the Nelson Siegel Svensson model parameters and am carrying out the OLS regression as described in this ...
1
vote
2answers
32 views

EUR issuance using forwards to hedge FX risk

Trying to think about the right way to hedge a EUR denominated issuance from FX risk only. Say I have an annual pay 20-year EUR bond and I want to hedge the FX risk but take the interest rate risk. I ...
1
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0answers
21 views

How to calculate the unrealised profit on sinkable bond

How is calculate the unrealised profit on Sinkable Bond when 50% of the bond value already been paid? Is the following method correct: Unrealised P&L = ((Current.Position * Market.Price) - ...
0
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0answers
33 views

Bond portfolio optimization

Problem is that I want to match single country term structure return as closely as possible. What would be best way to construct proxy to do this, with less bonds than in original term structure? I ...
1
vote
0answers
22 views

Issue on pricing bond using RQuantLib

trying to pricing a simple bond using RQuantLib, but cannot get the right values. For example, consider a bond with 2% annual coupon rate and flat interest rate of 3%, a 5 year maturity, and \$100 ...
0
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1answer
29 views

Conversion factor and CTD Bond

I'm reading the book 'Options, Futures and Other derivatives' an having a hard time to understand Conversion factor and CTD bond. Conversion factor I understand this as a factor to adjust the ...
1
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2answers
151 views

Why is the duration of a bond important?

I know what duration measures, but now in the age of computers why is it useful? If the yield changes, we could just simply plug the new yield into a program, or excel or something like that, and ...
0
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1answer
46 views

Duration of a floating rate bond

It is known that the price $p_t$ of a floating rate bond can be calculated discounting $(L+k)$ the sum of the next coupon payment $k$ and the face value $L$ at the relevant risk-free rate. Hence, ...
7
votes
1answer
169 views

Why can CDS indices be used as a bond market index?

I don't understand why the iTraxx indices family, which are credit default swap indices, are in practice often used to gauge the bond market. How are CDS prices related to bonds prices? And what other ...
0
votes
1answer
61 views

Why QuantLib assumes zero rates to discount factor is continuous?

https://github.com/lballabio/QuantLib/blob/0ec43027834220baf0a554d68de79a159a2c5489/ql/termstructures/yield/zeroyieldstructure.hpp ...
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1answer
42 views

ABS vs covered bonds vs CDO [closed]

What is the difference between asset-backed securities(ABS), covered bonds and collateralized debt obligations (CDO)?
1
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1answer
98 views

How to calculate US treasury total return from yield?

I'm struggling to understand the meaning of US treasury total return. What is easily available to get is yield data. Yield can be directly translated to the bond price at that time. In other words, ...
3
votes
1answer
56 views

Pricing bonds of float coupon rate by stochastic interest rate

So I am not sure whether the following pricing of the bond is possible. Given the stochastic interest rate, one wants to price the bond with the floating coupon rate or the coupon rate being unknown. ...
0
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0answers
47 views

Bond Convexity: Relationship between discrete and continuous interest rate

The interest rate risk of a bond price $P$ is measured by its Duration: $$D=-\frac{\frac{dP}{P}}{dr}$$ However, the explicit formula for the Duration given a function $P$ is different if $r$ is ...
3
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0answers
65 views

Duality of callable bond price

I am trying to understand the relationship between two methods of pricing callable bonds in the risk-neutral pricing framework. Problem statement Let's consider zero-coupon bond with face value 1, ...
1
vote
0answers
29 views

HJM model, existence of arbitrage:

The Setup: Suppose I know the yield curve of a Bond satisfies: f (0, t) = 0.04 for t ≥ 0 and f (ω, 1, t) = 0.06, t ≥ 1, ω = ω 1 , 0.02, t ≥ 1, ω = ω 2 , where Ω = {ω 1 , ω 2 } with P[ω i ] > 0, i = ...
0
votes
1answer
27 views

Fannie Mae and Freddie Mac as substitute benchmark bonds

"The reduction seen in US government debt in the late 1990s has led to a redution in the supply of intermediate and long-term government bonds, and some concern has arisen over this fact. In the ...
1
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0answers
37 views

Where can I find bonds time series?

I want to study dependence and correlation between bonds and CDS. I have already found a large CDS database of time series there: www.datagrapple.com I am looking for such a similar database (with an ...
0
votes
0answers
63 views

Need help on bond pricing

Hello everyone, I'm struggling here with this exercise. At first it seems simple but I'm still not finding the answer. For the 1. I need the YTM but it's not provided. Is there anyone here that ...
2
votes
1answer
136 views

Differential of stochastic term

Question 1: How does one come up with the equation in the red box below? It looks like some kind product rule, but I'm not sure how to apply Ito's lemma here. Bjork doesn't seem to explain it ...
1
vote
1answer
36 views

Derive Perpetual Bond Price

It is known that a perpetual bond with coupon $c$ has price $$P=\frac{c}{r}$$ How do you get to this price? Is $r$ stated in discrete or continuous compounding?
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1answer
90 views

Duration of perpetual bond

I am trying to derive the duration of a perpetual bond with coupon $c$ in two ways: $$D=-\frac{\frac{\partial P}{\partial r}}{P},$$ $$P=\frac{c}{r}$$ $$\Rightarrow D = ...
0
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0answers
21 views

Bond's bid-ask spread with no arbitrage assumption

Suppose I have a bond with unknown bid-ask spread, and a portfolio, containing it and also other bonds, all with known bid-ask spreads. How can the unknown spread be inferred? I assume there should ...
0
votes
0answers
24 views

Is there any research for CoCo-Bond in a two factor model?

Basically I am trying to price CoCo-Bond with the AT1P from Brigo. But in the end this isn´t a two factor model. Is there any concret research about this topic? Kind regards, WLS
1
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1answer
102 views

Difference between DV01 and IR DV01

What is the difference between DV01 and IR DV01? As far as I can see DV01 is at point on the yield curve and IR DV01 represents a parallel shift of the entire yield curve? My understanding is still ...
-2
votes
2answers
217 views

Modified or Macauley Duration in python

are there any existing python modules that can calculate Modified and/or Macauley Duration of a bond.
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0answers
51 views

state space for affine yield curve

i would like to reproduce in R the working paper " Affine free arbitrage class of Nelson Siegel term structure". The authors considering the equation of nelson siegel plus an adjustment term(C(t,T)) ...
4
votes
2answers
105 views

Compare the IRRs of two bonds

Say i have two 3 year bonds, which pay an annual coupon of 8% (1st bond) and 10% (2nd bond) respectively. Also, let's assume, that the spot curve is the same for both bonds. Other things equal, how ...
2
votes
3answers
60 views

Is a bond expiring at $T$ clean or dirty price a martingale under the $T$-Forward measure?

When we say Bond prices are martingale under T-Forward measure, do we mean their Clean Price is a martingale or is it their dirty price. I guess it should be dirty price, as clean price is just a ...
1
vote
1answer
116 views

Swap Rate vs Par Rate

If we calculate the par rate for n periods, why does the nth swap rate equal the par rate? A mathematical formulation would be helpful apart from an intuitive answer. Edit: Example:- A 2 year ...
2
votes
1answer
62 views

How to hedge an off-the-run bond?

Let's say we have an 11-year off-the-run Treasury bond, but we only have access to on-the-run Treasury bonds. How do we hedge?
2
votes
1answer
365 views

What is the hedging underlying of MBS

I am working on hedging agency MBSs using treasury bonds. So my question raise as which treasury bond should more likely be a hedging underlying of a MBS. What is the matching criteria usually for MBS ...
1
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0answers
29 views
1
vote
1answer
53 views

Calculate yield of maturity for a certain price in excel

I have a bond with a time to maturity of 5, a nominal value of $100, coupons of \$3,- and an yield price that I need to calculate so that the bond price equals \$100,-. This yield value is symbolized ...
1
vote
0answers
39 views

RQuantLib FixedRateBondPriceByYield() Non-tradable error

How do I use FixedRateBondPriceByYield() function on maturity date that is earlier than today? I get "non tradable error" when applying on date older than today. ...
0
votes
1answer
70 views

Implied rate of a bond question

A 2 year bond, yield 6%. A 1 year bond, yield 4%. What's the implied rate for the bond that starts one year from now?