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
82 views

What is the yield when a floating-rate note is issued above/below par?

I am new in this area so all help is much appreciated! Let's say a 3-year floating rate note pays a coupon of LIBOR+100 bps, and is issued at a premium with price = 100.5. I understand that this ...
2
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1answer
65 views

Why financial instistution for instance banks lowered down their interest rate during QE?

When QE is carried out, the Federal Reserve prints money and buy government bonds in an effort to pour extra money into the economy. This causes financial institutions for instance banks to lowered ...
2
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0answers
31 views

Expectation of expression with two currencies under forward measure

I'm trying to calculate the expected value, at time $0$, of a cashflow paid at time $T$, resetting at time $t$. The coupon is of the form: $V_0=\mathbb{E}^{T_2}\left[\frac{A_t^y(T_1,T_2)}{B_t^x(T_1,...
-1
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1answer
63 views

Finding Discount Bond Matrix in LMM Model C++

I am working on a 1 Factor Libor Market Model (LMM) in C++ and I working my implementation of the formula to find my Discount Bond matrix via the following formula: In the case of my model alpha is ...
1
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3answers
113 views

How to get to this answer on Macauley duration?

Can you explain why the answer to the following question is approximately 4.5%: An investor buys a bond that has a Macaulay duration of 3.0 and a yield to maturity of 4.5%. The investor plans to ...
0
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0answers
19 views

Flat - time dependant volatility

I've come across this short rate model (I don't know its name, the text simply calls it model 3) which has volatility decaying exponentially over time. $\Delta r= \lambda_t dt + \sigma e^{- \alpha*t}...
0
votes
2answers
101 views

Corporate bond quote convention

I'm not a quant practitioner, but a student so this may be a very simple question. I was of the understanding corporate US bonds were quoted 1/8 increments and US treasuries in 1/32 increments. Such ...
0
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1answer
51 views

Interest Rate and Price of Assets

I have a very basic question about finance. I know that for an asset, the price is inversly related to the yield to maturity, or the interest rate. However, I have three ways of thinking about this ...
0
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1answer
76 views

Duration vs. Convexity Contradiction

A lower coupon bond exhibits higher duration, which means higher price volatility with changing YTM. A lower coupon bond also exhibits higher convexity. However, with higher convexity, bond prices ...
1
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1answer
127 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 ...
0
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1answer
94 views

Zero Coupon Bond Forward Price

I'm currently working on the Coursera Financial Engineering and Risk Management course. In one of the questions I was asked to build a binomial pricing model for fixed-income securities. Specifically ...
1
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0answers
52 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)) ...
1
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0answers
50 views

affine arbitrage free class of nelson siegel yield curve

I'm studying statistics for finance at university. Last week i read the working paper on "The Affine Arbitrage-Free Class of Nelson-Siegel Term Structure Models". I would like to reproduce in R ...
1
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0answers
52 views

How to build a bond model portfolio (Invested in Emerging markets) [closed]

I have to build a model portfolio from the data of a portfolio composed of bonds from Emerging Markets accounted in $ (So exclusively corporate bonds from emerging markets). Do you have any ...
1
vote
1answer
176 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
63 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?
1
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0answers
72 views

State of Art - Nelson Siegel Modeling

My idea is to work with dynamic Nelson Siegel models(DNS) on my master's thesis. As I am finishing undergraduation this year I started researching on the subject. I wonder what is being discussed in ...
4
votes
1answer
201 views

Callable bond pricing

I have a HKD callable bond maturing in 2022. the call schedule is bermudan and the next call date is 10/17/16 and redemption price is 100 (the call date is 10/17 every year till maturity). Initially ...
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0answers
31 views

Can anyone suggest book about fixed-income portfolio management? [closed]

Can anyone suggest books about fixed-income portfolio management? Thx
2
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0answers
31 views

Equity protection and butterfly certificates pricing

Certificates issued by famous industry names are usually made up by a combination of a fixed income instrument and some vanilla and exotic options. I am looking for something which explains: how to ...
3
votes
2answers
330 views

How to calculate conversion parity for convertible bond?

Can someone explain how can I calculate the parity of this convertible bond? I know the formula is Current price of common stock x Conversion Ratio, but it doesn't seem to be right in this picture.
2
votes
0answers
96 views

Callable bond price sensitivity to Hull-White volatility changes

I'm using classic Hull-White model for short term interest rate dynamic: $$dr(t)=[\theta(t)-\alpha(t)r(t)]dt+\sigma(t)dW(t)$$ (Notation is quite intuitive, anyway I am using the same as Wikipedia ...
1
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1answer
60 views

Immunization: Whats the best way to hedge my short interest rate exposure?

What's the best way to hedge a portfolio against a rise in rates? Portfolio: long bonds different maturities. a) parallel shift b) convex shift (short and long term rise more than mid term) How is ...
1
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0answers
44 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. <...
5
votes
1answer
150 views

Seeming arbitrage in excess reserves

In the US banks are required to store 10% of their deposits in cash in the form of Fed Funds. Due to misbalance of demand and supply, some banks borrow such cash from others; the volume averaged ...
1
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2answers
60 views

What is an estimated rise in the interest rate of the 10-year Treasury in this scenario?

Suppose that the Federal Reserve had raised interest rate by 0.25% last week 17Sep2015. What is an estimated rise in the interest rise of the 10-year Treasury? Which futures contract should one use to ...
1
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0answers
60 views

Will rolling-down-yield-curve bond strategy work if interest rates remain unchanged?

Suppose I have 2 strategies; A) Buying A One Year Bond And Holding To Maturity (Buy & Hold To Maturity) B) Buying A 3 Year Bond and Selling After One Year (Rolling Down The Yield Curve) Assume ...
2
votes
1answer
90 views

CallableFloatingRateBond in QuantLib: just a matter of multiple inheritance?

I would like to know what are the issues related to a possible CallableFloatingRateBond class in QuantLib and to have some hints on implementation. My (very ...
3
votes
1answer
88 views

Why the negative sign in modified duration relationship

If $P$ is price, $D$ modified duration and $y$ yield then we have the relationship, $$dP=-D \cdot P \cdot dy$$ Why is there a minus sign and what does correspond to?
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0answers
53 views

Smoothening yield curve by minimizing forward curve slope

I am using government bullet bond data and have bootstrapped a yield curve by solving the following optimization which minimizes unweighted price error: $$\text{min}\sum_i\left(P_i-\sum_t\frac{F_{it}}...
2
votes
1answer
71 views

How to measure the volatility of illiquid bond with no historical prices

The basket of corporate bonds that I am following barely traded after the issuance. Hence, there is no historical data to estimate the volatility. Can you suggest me a different approach to come up ...
4
votes
1answer
184 views

U.S. Rate Hike Prediction

In a recent ft.com video an analyst mentioned that markets postponed their Fed rate hike expectation from September to around November 2015 due to the CNY devaluation, based on the "shift" of some "...
3
votes
0answers
66 views

Correct form for State Space Equation for Kalman Filter for DNS

In this paper: http://www.ssc.upenn.edu/~fdiebold/papers/paper55/DRAfinal.pdf in eqns 3,5 the state eqn has the mean removed. $(z_t-\mu)=A(z_{t-1}-\mu) + \epsilon_t$ $y_t=C z_t + \delta_t$ ...
1
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1answer
72 views

Selecting bonds to be used in Nigel-Siegel Svensson OLS Regression

I need to obtain the initial parameters that would be used in the Non-Linear Optimization that provides the Nelson-Siegel Svensson parameters for US Treasury Bonds. The Optimization appears to be very ...
1
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0answers
42 views

Is there a limit to the number of Spot rates than can be calculated from Par Yields

I am just trying to calculate Spot Rates from Par yields. I find that the code below gives very similar spot rates for the data here, yet if I increase the size of the ...
1
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1answer
208 views

Understanding how to calculate Accrued Interest of Bonds

When calculating the accrued Interest of Treasury Bonds, how does one set the settlement date? And, is it possible for certain bonds that there are no coupon payments before the settlement date and ...
1
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1answer
107 views

Calculating Accrued Interest of Bonds

I am trying to calculate the accrued interest for a set of Treasury Bonds. I am comparing the answer from the code below with that for the 1st Bond(row) over here. In the link the AI is ...
1
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1answer
38 views

Correct Theoretical Discount Factors from Nelson-Siegel-Svensson?

I am calculating the theoretical discount factors associated with a bond that has 30 months to maturity from today with the parameters below obtained from here using the Nelson-Siegel-Svensson Model. ...
3
votes
1answer
178 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 ...
2
votes
1answer
70 views

Forward parity in fixed income

In stock and index we have a beautiful forward-spot parity $$ F(t,T) = S(t)\cdot B(t,T) \tag{1} $$ which tells us that to price a forward contract at time $t$ with expiry $T$ we can just borrow ...
2
votes
0answers
51 views

Fed Funds Rate: longer maturities

FFR published by Fed Bank of NY is the average rate US banks charge each other for the overnight loans of their reserves required by the Fed regulations. Since Fed acts similar to a clearing house ...
0
votes
1answer
48 views

Constructing NS-Svensson parameters with zero coupon AND coupon bonds

I am in the process of calculating sovereign zero coupon yield curves using the NS-Svensson parameter for a number of countries. Due to data constraints, I would like to use the information from price ...
0
votes
2answers
169 views

Legitimate input parameters for Nelson Siegel Svensson model

I had previously asked this question and have come to better understand the answer with regards to setting the input parameters for the Non-Linear Optimization problem that provides the NSS parameters....
0
votes
1answer
118 views

Calculating discount factors using Nelson Siegel Svensson model

I am trying to understand how to calculate the discount factors $disc(TTM)$ mentioned on Page 9 of this pdf. When I'm calculating the discount factors, mentioned each bond has its own cash flow and ...
0
votes
1answer
41 views

Transforming coupon bond returns to ZC bond returns

I am interested in aggregated Amihud ratios measures over bond groups. For a large panel data set with daily bond prices and volumes I have calculated already Amihud ratios per ISIN/day. Naive ...
0
votes
1answer
36 views

Term to Maturity when calculating discount function

I am just trying to understand what TTM (Term to Maturity) means in Page 8 of this PDF when calculating the discount function. Is it just the vector representing the difference between the time to ...
0
votes
1answer
279 views

Setting input parameters for Nelson Siegel Svensson model

I am trying to determine the parameters for the Nelson Siegel Svensson model and am solving a Non-Linear Optimization problem to do this. I am trying to solve: $$ \min_\theta{\sum{(p_i - \hat p_i)^2}...
0
votes
1answer
228 views

Understanding how to obtain Nelson Siegel Svensson 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. I am using the procedure presented in this paper. The way I ...
4
votes
1answer
200 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 ...
3
votes
0answers
200 views

Calculating Net Annualized Return on LendingClub historical data

I am interested in the formula LendingClub provides as their measure of "Net Annualized Return": $\big(1 + \frac{\sum_{i=1}^N{((I_i + L_i - S_i - C_i + R_i) / P_i) P_i}}{\sum_{i=1}^N{P_i}}\big)^{12}-...