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
53 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 ...
1
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0answers
17 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 ...
4
votes
1answer
195 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 ...
4
votes
1answer
169 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 ...
0
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0answers
28 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 ...
1
vote
3answers
97 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 ...
0
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0answers
25 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 ...
1
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1answer
480 views

Convexity adjustment

I have a problem with the underlying assumption in the future/forward convexity adjustment. If I understand correctly, the assumption is, if I am long ED, I earn money when rates go down and invest ...
0
votes
1answer
68 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 ...
1
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1answer
33 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 ...
2
votes
2answers
479 views

Key Rate Duration for MBSs greater than Key Rate Tenor

Key Rate Durations (KRD) are essentially some fixed income instrument's price sensitivity to a non-parallel shift in interest rates (i.e., a shift at the "Key" Rate). For example, a 10-year bond's ...
6
votes
5answers
157 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 ...
-1
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0answers
17 views

How to find loans for investor collateral

I got this asssigment: Company A lends 20 mil from investor and has to put up investment collateral of 30 mil worth of loans. Company A operates in underwriting business. Collateral loans have to ...
0
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1answer
72 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 ...
3
votes
1answer
172 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
1answer
74 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. ...
0
votes
1answer
35 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, ...
3
votes
2answers
41 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| ...
0
votes
1answer
23 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 ...
4
votes
3answers
345 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
votes
0answers
37 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 ...
1
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0answers
14 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/ ...
6
votes
2answers
2k views

Why is the SABR volatility model not good at pricing a constant maturity swap (CMS)?

I have heard that the SABR volatility model was not good at pricing a constant maturity swap (CMS). How is that?
1
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0answers
155 views

Using the R package “ termstrc ”

I am attempting to use the function estim_nss from the termstrc package in R. However, I am experiencing the following error: ...
0
votes
1answer
43 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
votes
2answers
58 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
votes
3answers
105 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 ...
1
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1answer
54 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?
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votes
2answers
1k views

Is duration additive? $C_{newDur}=A_{fundDur}w_{a} + B_{fundDur}w_{b}$?

Suppose quantified duration (like Macaulay duration with changing intervals) $Dur = \frac{\sum t_{i} PV_{i}}{\sum PV_{i}}$ and two funds having durations $D_{a}$ and $D_{b}$. You own them in the ...
0
votes
0answers
29 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
votes
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
vote
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: ...
1
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2answers
73 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 ...
0
votes
0answers
43 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 ...
2
votes
1answer
87 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 ...
1
vote
1answer
81 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 ...
0
votes
1answer
47 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, ...
3
votes
1answer
123 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 ...
7
votes
1answer
174 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
63 views

Why QuantLib assumes zero rates to discount factor is continuous?

https://github.com/lballabio/QuantLib/blob/0ec43027834220baf0a554d68de79a159a2c5489/ql/termstructures/yield/zeroyieldstructure.hpp ...
2
votes
3answers
4k views

Interpretation of Macaulay Duration

I am having a difficulty conceptualizing the meaning of "Macaulay duration" - I want to note I completely understand the math, this isn't the issue. Modified duration & Efficitive Duration make ...
0
votes
1answer
66 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
votes
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
vote
1answer
110 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
votes
0answers
48 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 ...
2
votes
3answers
9k views

How is PnL calculated

In Fixed Income, I know that bonds PnL are evaluated depending on where the price lies on price/yield curve at the end of the day, compared to where it started from at beginning of the day. The ...
3
votes
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
2answers
152 views

what data to use to compare the interest rate among different currencies?

Very new to fixed income signals. I am a little confused about which data to use to compare interest rate among different currencies. For example, I am interested in compare interest rate in the ...
0
votes
0answers
37 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: ...
4
votes
2answers
2k views

What is the best alternative of Quantlib library

We need to build a Fixed Income Portfolio Risk Analytics solution. Somehow due to administrative reason we can't use Quantlib which is written in C++, even call it through SWIG via JNI. We have tried ...