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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1
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0answers
57 views

QuantLib FittedBondDiscountCurve fitResults [Error]

I try to use FittedBondDiscountCurve with NelsonSiegelFitting, but I faced with error when call fitResults() method: ...
2
votes
2answers
43 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 ...
0
votes
2answers
87 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 ...
2
votes
0answers
59 views

Why does a barbell portfolio have higher convexity than a bullet porfolio

I cannot quite understood absolutely why a barbell portfolio has higher convexity than a bullet porfolio. I can easily understand how the parallel line represents duration but I cannot see what ...
8
votes
2answers
291 views

How can we have negative probabilities in finance? Can we have negative payments in bonds? If not, how else can we have negative probabilities?

In Half of a Coin: Negative Probabilities, the author mentions bond duration. Suppose we have payments at times $t = 1,2,...,n$ denoted respectively by $R_1, R_2, ..., R_n$ and the discount factor is ...
1
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1answer
45 views

How do I calculate yield from a bond futures contract?

I would like to know how I can calculate the yield of a bond futures contract(say the 5 yr treasury "FVM05" is trading at 108.2)? I am not sure how to go about calculating the yield of the futures ...
0
votes
0answers
21 views

What does (a,b,c curve coefficients) mean for an Implied Volatility Parameterized Surface data? [closed]

I have a dataset which provides a, b, c curve coefficients for an Implied Volatility Parameterized Surface data for a ticker. What do they mean?
1
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0answers
22 views

How to calculate implied borrow rates from option chain information?

I am given information about a ticker with following options data: stock price, date, expiration date, strike price, call / put indicator, style (American or European), ask price, bid price, mean ...
4
votes
1answer
208 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 ...
0
votes
0answers
24 views

Interest Rate Differentials, CDS Differentials, Inflation Differentials

Is there any academic literature relating the difference in interest rates between bonds of the same tenor in different countries with the inflation differential, CDS differential, and risk premium ...
0
votes
0answers
37 views

Pricing of dual-currency bonds

I am dealing with dual-currency bonds, i.e. bonds whose coupon payments are made in a currency and the notional in another. I am wondering about the discount factor I should use to price such ...
0
votes
1answer
97 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
vote
1answer
50 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
520 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 ...
5
votes
1answer
77 views

What type of interpolation should be used in key rate perturbation models?

When perturbing a key rate in order to assess sensitivity of portfolio value, what sort of interpolation is standard? A book I am looking at says linear, but this seems pretty unrealistic to me--and ...
0
votes
1answer
93 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
182 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 ...
0
votes
1answer
26 views

Yield Curve Movement: Risk/Reward versus Safe Haven Demand & Monetary Policy Expectations

UK leaves Europe, credit rating get's downgraded. High uncertainty, higher perceived risk - based on just risk/reward, would expect yields on UK debt to increase. They did the opposite. UK government ...
0
votes
2answers
47 views

Do yield curves only show market expectations, or is there more to them?

I am hoping to understand 'Brexit' impact on UK yield curves. Specifically, government liability yield curves (so yields based on UK government bonds - Gilts): The Background On 24th of June - the ...
1
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0answers
43 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 ...
1
vote
0answers
77 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. ...
1
vote
1answer
63 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
vote
0answers
60 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 ...
4
votes
1answer
202 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
votes
0answers
29 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
vote
0answers
29 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 ...
6
votes
5answers
185 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
34 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, ...
1
vote
0answers
36 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-...
2
votes
1answer
73 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
vote
0answers
55 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 ...
2
votes
3answers
159 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
votes
0answers
37 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
vote
1answer
488 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 ...
1
vote
1answer
84 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
53 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
43 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| \...
4
votes
3answers
376 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
41 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
vote
0answers
17 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....
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
vote
0answers
180 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
67 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
65 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
108 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
vote
1answer
63 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?
8
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
34 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
61 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....