Questions tagged [bond]
A bond is a fixed-income instrument generating cash flows at some specific dates in the futures. These cash-flows depend on the interest rate of the bond, which can either be fixed or variable. It is a debt instrument acting as a loan made from the buyer to the seller.
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Predicting bond auction result. Should I train separate models for different maturity in face of Data deficiency?
Problem Statement
Trying to predict how bond auction result ( in terms of yield ) is different from its forecast (the when-issued yield ).
More info:http://www.mortgagenewsdaily.com/mortgage_rates/...
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Optimized search for yield-to-worst of a callable bond
Suppose that I need to find the yield-to-worst of a callable bond, and that the option is American (call any time). The bond may have step-up coupons and/or non-constant call price (oprion strike). ...
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Decomposing a bond's excess returns into duration, volatility, and market-price-of-risk. Discrepancy/confusion with Rebonato text
I am working on deriving the formula for the market price of risk for zero-coupon bonds and the associated formula for the excess returns. I am following the derivation in Appendix 12.6 of Rebonato's ...
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RQuantLib: any difference between FixedRateBond() and FixedRateBondPriceByYield() with flat term structure?
Please, consider the following functions from RQuantLib package:
FixedRateBond()
...
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True or false: roll-down return is negative when a bond is trading at a premium
These three sources all say that the bond roll-down effect is negative if the bond is trading at a premium:
https://www.investopedia.com/terms/r/rolldownreturn.asp
https://corporatefinanceinstitute....
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How to calculate spot rates using market data of bonds?
Given 3 Bonds $A$, $B$ and $C$ with
\begin{matrix}
& \text{Bond } A& \text{Bond } B& \text{Bond } C& \\
\text{Price:}& 101,12\%& 99,03\%& 102,95\%\\
\text{Mat. in years:}&...
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Application of Ito's lemma relating to bond price
I'm interested in solving the following questions but I am confused on the second part because I do not know how to define/calculate the interest per "unit time", which I'm guessing is ...
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Black-Cox yield spreads
From Lando (2004)* I am trying to replicate the following figure (Section 2.6 Default Barriers: The Black-Cox Setup):
The spreads are computed as follows:
$$s(T) = \frac{1}{T}\ln\frac{D}{B_0}-r$$
...
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Bond spreads - SQASW
I posted this question in the finance/economics arm but someone suggested this would be a more relevant place.
I have attached a photo of a list of bond issuance's in Australia. Could someone please ...
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Modified duration and convexity of a bond in R
A soft question:
Are there any existing packages in R that allows one to compute the modified duration and convexity of bonds in R? If there isn't, how can one go about doing so (with formulas) with ...
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Dynamic Hedging for a Bond
Sorry if this question is duplicate.
Analyzing the scenario to hedge bond credit risk with CDS. but if Bond price changes CDS notional will not change. is there any way i can hedge this ?
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Pricing Government Bonds use OIS or Gov. ZC Yields?
I am pricing government bonds ranging from JPN, GERMANY, UK, India to NIGERIA, MXN, ARG, Brazil etc.
What is the better approach to use OIS for each currency or build a curve using government zero ...
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Futures basis (Bond) optimal delivery
i have a confusion regarding how the basis converges in a couple of scenarios. Lets assume I am long UST CTD Basis
Say the curve is upward sloping:
optimally, i would choose to make delivery of the ...
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Questions about the replicating portfolio in the binomial model
I'm starting to teach myself quantitative finance and I've got several questions (marked in bold) regarding the replicating portfolio of a security in the binomial model. I'm following, among others, ...
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Accrued interest on RFR Floating Rate Note
On fixed rate bonds and IBOR based floating rate notes the next cashflow is known definitively in advance, therefore the accrued interest for a given settlement date is a trivial calculation typically ...
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high coupon and low coupon treasury
for treasury off the run bonds, in general, does the market prefer high coupon or low coupon bonds ?
How about for credit bonds ?
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The price of liquidity
We are currently in the US Treasury roll period when investors are rolling from the previously issued notes and bonds into the currently issued notes and bonds, aka "Rolling from Off-The-Runs to ...
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How can I optimize a Bond Portfolio in Practice?
I'd like to optimize a bond portfolio with different bond classes (government bonds, corporates, ...) and different ratings as well as maturities. Is this even possible to optimize such a portfolio? ...
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Holding cost of risky sovereign debt in Europe
I am trying to better understand the sovereign bond market in the eurozone. In particular is it costlier for some institutions to hold periphery country bonds that contain more credit risk than say ...
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Yield to maturity of amortized bond
I have an amortized bond with maturity at 30.04.2023, a semiannual frequency, 10% coupon rate, 30Е/360 day convention, and a clean price of 104.9367. Also, there are two amortization payments: 300 at ...
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Pricing kernel representation
I am reading this paper https://mpra.ub.uni-muenchen.de/4969/1/MPRA_paper_4969.pdf pp.6-7 on discrete-time bond pricing. The model adopted is a a common affine model,
the short rate follows
\begin{...
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What are some advanced methods for bond risk transformations?
Consider a portfolio of bonds within a given yield curve (e.g. Gilt curve), consisting of positions in every bond in the curve. I'm looking for ways to transform the risk of the portfolio into ...
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State price deflator in the Vasicek model
I am trying to implement a simple bond pricing model using state price deflators in a Vasicek model. I am simulating paths of the processes
$$\mathrm{d}r^{P} =\kappa^{P}(\theta^P - r^P(t))\mathrm{d}t ...
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Pricing bond backed by collateral
I'm new to quantitative finance, and trying to derive an interest rate for a collateralized bond.
Imagine there are two parties, Alice and Bob. Alice wants to lend $X$ units of an asset to Bob. The ...
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simple question on bond futures pricing formula assuming continuous compounding
I'm reading a paper (Statistical arbitrage in the U.S. treasury futures market 2017), and have come across this derivation for the price of a bond future assuming interest payments and coupons ...
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Monte Carlo VAR with differente asset classes
I have found a very useful post regarding the use of Monte Carlo simulaton to obtain portfolio Value at risk, based on Cholesky decomposition, random variates, etc. This post I'm talking about is: Is ...
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Is it possible to use an Excel function to price a U.S. Treasury Floating Rate Note (FRN)?
I'm trying to price the following floating rate note:
The price displayed on Bloomberg is 100.103063.
If I pass the following to the PRICE() function in Bloomberg, I get 100.1019629.
=PRICE(...
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Price of a Bond-Call option in the defaultable framework
I would like to compute the price for a Call option written on a defaultable bond as underlying.
Suppose you have the following dynamic under the risk free measure $\mathcal{Q}$ for the interest rate:
...
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What is the difference between sovereign bond and government bond?
what is the difference between sovereign bond and government bond? Can I assume that both are the same? Thank you very much in advance!
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Callable Bond = long Bond - call on bond?
Can someone verify (maybe there is some literature around) the following relationships?
Callable Bond= Long on Bond + short on a Call Position
-->
PV(CallableBond) = PV(Bond) - Call on Bond?
or ...
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What does it mean to change the currency of a spread between bonds from 2 different countries?
On reuters I charted the spread between the 10yr US bond and the 10yr UK bond. It gives the me the option of choosing the currency. For just the standard spread(ie: yield(US)-yield(UK)) you select ...
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How to price zero coupon bonds with the Monte Carlo method?
Im trying to calculate monthly ZCB bond prices with a fixed maturity T, over a period of months via Monte Carlo methods.
Here is my attempt:
For the first month, the price is
$P_{t_0}(0,T) = E[exp(-...
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Observed market price for the August-Greece-paid bonds were 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 their payment. Given that the observed market value is the net present value of the instrument, why were they so low?...
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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 ...
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Bond basis arbitrage
The popular media refers to US.bond future basis trades in some contracts as arbitrage..they cite that as the future trades richer to cash hedge funds can buy basis and make money.
I'll assume they'...
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I am trying to compute the the tail of a future roll using the ratio of forward dv01
I am trying to compute the the tail of a future roll using the ratio of forward dv01, per the link CME: Calendar Spreads with Tails : I am trying to compute the the tail of a future roll using the ...
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Can I use Nielson Siegel to 'interpolate' par yield
The NS model initially set a parametric form for forwards and we can get equivalent zero rates. If I have a few par yields, can I simply fit the par yields to the NS form or the NS form of the zero ...
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Term structure building for credit risky bonds
I am trying to understand how, in practice, bonds (from simple corporate bonds to structured products like CDOs, ABS, MBS, etc.) are valued and marked to market.
-For corporate bonds,
...
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Gross Basis - Bond Futures
Just want to confirm - Gross Basis for Bond A, deliverable into a Future:
Gross Basis [A] = Clean Price [A] - Futures Price x CF [A]
where CF [A] = Conversion factor of Bond A.
Is this due to:
Gross ...
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Why is Bloomberg showing difference yields than US Dept of Treasury
I am using historical 30yr US treasury rates for a project. When I downloaded the rates from Bloomberg by queuing the history of the USGG30YR index, I found the numbers different from what US ...
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YTMs of Ukrainian Bonds are much greater than published yield curve suggests
I noticed that the yields to maturity of Ukrainian government bonds seem to be much greater (multiple times greater in some cases) than the avaialible yield curves suggest, and I'm trying to ...
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Comparative statics on $c/r$ using fundamental asset pricing equation
Consider the fundamental asset pricing equation for a perpetual coupon bond:
$$rP = c + \mu P' + \sigma^2/2 P''$$
with standard boundary conditions $P(\bar x) = \bar x$ and $\underset{x\rightarrow \...
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Stripped treasury bond prices
I saw this paragraph in the SHV prospectus
The Underlying Index is market valueweighted based on amounts
outstanding of issuances consisting of publicly issued U.S. Treasury
securities that have a ...
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Tree Pricing FRN Implementation
When pricing a bond via a short rate model on a tree, it seems natural to include intermediate time steps in addition to those corresponding to cashflow dates (i.e. for bonds with American style ...
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How to calculate the gaussian VaR for a portfolio with 3 corporate bonds and 1 IRS payer?
As data I have the daily change of zero coupon spot rates for some vertex (0.25, 0.5, 1, 2..) and the daily change of z-spread for corporate bonds, also by vertex
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Is there a closed form solution to the following system of SDEs?
Suppose we have the system
\begin{align}
dr_t=\alpha_r(x_t-r_t)dt+\sigma_rdW_t^r\\
dx_t=\alpha_x(\bar{x}-x_t)dt+\sigma_xdW_t^x\\
\end{align}
As this system is affine, I believe there should be an easy ...
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Can 2 unique Instruments have the same ISIN?
I always thought that 1 ISIN uniquely identifies 1 financial instrument. However, I have come across cases, where the same ISIN is used for a stock and a bond:
...
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Calculate the duration of group of Bond ETFs
Is it correct to get the weighted average of a bunch of bond ETFs to get the duration? Is it theoretical correct to say that.
I have 6M AGG (duration 8.39), 30M BND (duration 8.7), 60M SHY (duration 1....
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Is there an Ops Risk in being short a bond on the redemption date?
I am trying to understand whether everyone needs to be long or flat when a bond is redeemed, or being short a bond at that time is also not an issue
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Replicate an fixed income index in python
I am trying to replicate an fixed income index in python through linear programming. Data for all bonds in the index are available as well as index values. I intend to first create a free portfolio ...
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