Securities which obligate the borrower/issuer to make payments on a fixed schedule. Fixed income securities include sovereign, corporate and municipal bonds, corporate loans, and securitized lending (e.g., ABS). "Fixed" refers only to the schedule of obligatory payments, not the amount, and may ...

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1answer
57 views

How was money made from bond yield convergence?

I'm currently reading a book which provides examples of how hedge funds employed a global macro trading strategy in the past to generate significant returns. Once such example is the convergence of ...
1
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0answers
35 views

How to calculate the theta of a bond?

For calculating P&L from interest rate risk, we often use PV01 to estimate the day over day P&L by multiplying PV01 with a change in curve. Is there any approach to calculate theta P&L in ...
1
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0answers
38 views

Using CME DV01 to predict Futures price at 0.00% Yield

DV01 is published at CME Group for the cheapest-to-deliver bond here: http://www.cmegroup.com/trading/interest-rates/invoice-spread-calculator.html. If my goal is to get an approximation where the ...
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0answers
27 views

Sovereign credit default risk

so I'm tasked with trying to calculate the sovereign credit risk based on a 1 year default probability, and I know that Bloomberg already has a model for the 1 year default probability under the ...
1
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0answers
73 views

Bonds with embedded options pricing via binomial model

Notation: t - time; G(t) - zero-coupon yield curve; $r$, $r_d$, $r_u$ - interest rates. The task is to find market price of a bond for today, while knowing the price of a number of other bonds. ...
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0answers
22 views

Bootstrapping bond spreads as in the standard CDS model

Suppose that we have a spread curve $\boldsymbol{s}:=(s_1, ..., s_n)$, where $s_i$ are CDS par spreads. Moreover, assume the standard ISDA model framework, i.e. piecewise constant forward / hazard ...
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1answer
31 views

Calculate historical duration based on current duration & historical prices

Suppose I have today current duration of a bond and it's historical daily prices. How from that I can calculate the historical duration? e.g. the value of duration I would saw if yesterday, week ago, ...
2
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2answers
32 views

How to take care of newly auctioned yield/price in fixed income data

This is a financial data cleaning question. I have raw price and yield data for US cash treasury across the curve. In the time-series there are jumps on the day after the treasury auction results come ...
2
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1answer
69 views

Calculating IR sensitivity

I'm trying to figure out how to find IR sensitivity of a bond whose time to maturity of a bond is 2 years. Bond pays 10.875 percent coupons yearly. Duration is 1.8 years. How do you find the ...
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0answers
35 views

Bond Duration with Bond portfolio returns

if I have given CRSP bond portfolio returns with different maturities (1m-12m, etc), how is it possible to compute the Future price and the duration? Beside that I do also have the Nelson-svensson-...
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0answers
40 views

Murex and Calypso framework

I have been working on Murex and Calypso trading system for several years , front to back , I am facing a lot of question kind of : which software is better ? I can confirm to anyone interested in ...
0
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0answers
30 views

Bootstrap bond-implied default probabilities in MatLab?

Has anyone used MatLab to extract default probabilities from bond/fixed income prices? MatLab has some built in functionality to do this analysis with CDS ("cdsbootstrap"), but not bonds. Certainly ...
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3answers
129 views

Cross Currency Swap

1) What is the difference between Cross Currency Swap and Cross Currency Basis Swap? Appreciate if this can be explained in layman's terms. 2) Could you advise me which swap rate to be used for the ...
1
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1answer
41 views

Calculation loan's margin from bank perspective

I was wondering how bank calculates in practice the amount of money it earns after granting a credit (I hope margin is the proper word). Supposing, that the client took 3-year 10000 euros loan (36 ...
0
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1answer
38 views

How can I compute zero coupon bond prices from dirty/clean prices of coupon bonds?

I am having problems with computing zero-coupon bond prices. The question is the following: Today is $t$=14.4.2016 and I know dirty and clean prices of coupon bonds expiring at maturities: 4.7.2016, ...
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1answer
86 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 ...
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1answer
56 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 ...
3
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2answers
42 views

Integration to calculate expected value of swap rate

In Hagan's paper on valuing CMS swaps (Convexity Conundrums: Pricing CMS Swaps, Caps, and Floors), there is: So the swap rate must also be a Martingale, and $$E \big[ R_s(\tau) \big| \...
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1answer
75 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.
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3answers
361 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 ...
2
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0answers
38 views

Using Market Prices of Bonds to Model the Discount Curve with a Polynomial (Math + R)

I have a small program I'm building to interpolate the discount curve from a portfolio of benchmark bonds. If anyone has any guesses as to whether it's my process, or my code that's messed up I would ...
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0answers
15 views

How to calculate price in non-competitive bidding that bidders will receive?

Following bids are received in treasury bond auction. Notified amount is Rs.20,000Million. No amount devolves on the RBI/PDs. No. Of bonds/ Price(Rs.) 46/ 110.185 45/ 110....
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1answer
49 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 ...
4
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2answers
63 views

What does the difference between YTM of an inflation linked treasury bond and a comparable treasury bond represent?

I'm trying to understand yield to maturity of treasury bonds. For example, I have a 20 year inflation linked treasury bond which pays a inflation linked spread over a given fixed rate, and a 20 year ...
0
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3answers
107 views

What assets other than bonds are risk free?

I saw a question the other day that said Assume you have only two assets to build a portfolio. Name and explain three scenarios under which a completely risk-free portfolio can be formed? I ...
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0answers
32 views

Deriving the yield curve from the HJM dynamics

If I know that my model follows a no-arbitrage HJM model: \begin{equation} df(\tau) = \left(\sigma(\tau)\int_0^{\tau}\sigma(u)du\right)dt +\sigma(\tau)dW_{\tau} \end{equation} (where $\tau:=T-t$, ...
3
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2answers
99 views

Derive an expression for the value of the asset as a function of time, V(t), t>=0

An investor deposits USD 300 in a bank account at time 0, reinvests all interest payments and continuously invests USD 300 per annum, until the total value of the deposits reaches USD 3312. At that ...
1
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1answer
60 views

How to convert bond options strikes to future prices

CME, 10 year Note Call Strike 1300 How to convert this strike to future price? (today's open at 131'100) For example we can take current prices EOD data for example chart on CMEgroup: http://www....
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0answers
46 views

Normal Black&Schole model for swaptions isn't working properly

I just wrote two functions in Matlab which calculates the swaption prices based on the Lognormal model and on the Normal model, although I have the idea that the Normal model is wrong because the ...
1
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2answers
82 views

Modelling callable bonds in a risk model (historical simulation)

What is a best-practice example on how to model callable bonds in a risk model - I focus on historical simulation (HS). For plain-vanilla bonds the input factors for historical simulation could be ...
1
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1answer
59 views

By swap valuation, is accrued interest calculated?

If I treat the 2 legs as bonds, and I want to calculate the present value somewhere between 2 payment date, should I calculate accrued interest?
2
votes
1answer
98 views

Are there any opensource C# libraries for calculating bond duration and other FI Analytics?

I'm doing some Fixed Income analytics work and wanted to know if there where any opensource C# libraries that I could use in order to avoid writing functions for generic calculations like YTM and ...
0
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1answer
52 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, ...
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5answers
182 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 ...
3
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1answer
131 views

What is drift in interest rate term structure model

I was studying about the interest rate term structures and i came across term structure model with (and without) drift. I am really unsure about what this drift is in this equation for term structure ...
0
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1answer
69 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
84 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 ...
0
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1answer
83 views

Variance covariance matrix for a portfolio containing bonds also with other asset classes

What should we take for a bond or a zero coupon bond in order to make a variance covariance matrix? For example:- Equities - we take the market price Cash - we take the spot rates Bonds - Do we take ...
0
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1answer
42 views

Valuing corporate EUR loan of US entity? Which discount rate to use? US or EU?

If a US entity borrows in EUR and I need to perform a DCF valuation on that borrowing, should I use USD based curve (for the appropriate rating) or EUR based curves? In other words do I use the ...
1
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1answer
139 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, ...
0
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0answers
50 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
votes
0answers
69 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, ...
0
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0answers
38 views

Simulated bond index returns based on term structure changes

The J.P. Morgan European Monetary Union Index (EMU) 5-7Y (which is rebalanced monthly) currently (1-Jan-16) has the following characteristics: ...
0
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1answer
28 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
40 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
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0answers
38 views

Variable coupon Step up Step down bond

How do you price a variable step up step down coupon bond? From my understanding the coupon schedule should already be laid out and these should ideally have a call feature. However, I do have a bond ...
1
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1answer
39 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
109 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 = -\frac{-\frac{c}{r^2}}{\frac{c}{...
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0answers
20 views

Fixed Income Sec: development of UK bond markets relative to the stock market

I am asked to describe (school project in the course Fixed Income Securities) the development of the UK bond markets relative the UK stock market and I am not sure how to tackle it. I want to compare ...
0
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1answer
73 views

Do FRN's *always* trade on par on reset days, regardless if the issuer's credit quality has changed?

I keep reading that floating rate notes trade on par on coupon reset days. Is this always true, regardless of changes in the issuer's credit quality since the FRN was issued? It seems probably ...