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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6
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0answers
253 views

is there a mapping from Altman Z-score for private companies to bond ratings or probability of default?

On wikipedia, there is a formula to calculate the Altman Z-score for private companies: Z-score estimated for private firms: T1 = (Current Assets − Current Liabilities) / Total Assets T2 = Retained ...
5
votes
0answers
55 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 ...
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, ...
3
votes
0answers
68 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. $(z_t-\mu)=A(z_{t-1}-\mu) + \epsilon_t$ $y_t=C z_t + \delta_t$ ...
3
votes
0answers
202 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}-...
3
votes
0answers
106 views

Pre- Versus post-2008 Crisis Rates Modeling

Modeling for interest rate derivatives (such as bermudan swaptions) is said to have undergone significant changes since the crisis. Prior to the crisis, counterparty default risk was often ignored, ...
3
votes
0answers
226 views

How are quants able to verify whether their calculated prices are any good

This question is related to the discussion on Model Validation Criteria However it appeard to be very high level to me and I would like to go more into detail. Not working at a pricing desk the ...
3
votes
0answers
199 views

RQuantLib: any difference between FixedRateBond() and FixedRateBondPriceByYield() with flat term structure?

Please, consider the following functions from RQuantLib package: FixedRateBond() ...
3
votes
0answers
160 views
2
votes
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 ...
2
votes
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,...
2
votes
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 ...
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 ...
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 ...
2
votes
0answers
93 views

Problem with Naive Bootstrapping (US Government Bonds)

I am using the formula here to determine the discount factor function and eventually the zero-coupon yields. I get the data for Coupons, Face Values and Closing Prices from Thomson Reuters, which I ...
2
votes
0answers
199 views

Modified duration in multi-currency portfolio

I was thinking about how to figure aut duration for portfolio of bonds denominated in different currencies… I would like to compare sensitivity of portfolio to shift of yield with competitive ...
2
votes
0answers
40 views

How can I break down the change in value for an inflation-linked bond

I am trying to decompose the change in value of an inflation-linked bond into two constituent parts: 1) That due to changing nominal rates on the issuer's non-linked bonds 2) That due to changing ...
2
votes
0answers
130 views

Is there such a thing as “sell-off risk” in bond funds?

Popular yet generally academically-grounded commentators such as Annette Thau and Larry Swedroe have claimed that there is the possibility for "sell-off risk" in bond funds. By this they apparently ...
2
votes
0answers
566 views

Yield Curve Volatility

Let you have several issuers, and let each issuer have its yield curve built up with liquid plain vanilla fixed rate bonds. Each yield curve has its slope and its curvature, and they obviously change ...
2
votes
0answers
561 views

What is an appropriate hedge ratio for hedging a credit instrument with equity of the same issuer?

Given a bond and a stock issued by the same issuer, what is the appropriate ratio of bond-to-stock one should hold in order to minimize the specific risk to that issuer? Equivalently, what is the ...
1
vote
0answers
38 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
vote
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 ...
1
vote
0answers
74 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
0answers
24 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 ...
1
vote
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-...
1
vote
0answers
42 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
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....
1
vote
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 ...
1
vote
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
vote
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
vote
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 ...
1
vote
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. <...
1
vote
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 ...
1
vote
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}}...
1
vote
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
vote
0answers
55 views

Issue with Naive Bootstrapping (US Government Bonds)

I am using the formula here to determine the discount factor function. I get the data for Coupons, Face Values and Closing Prices from Thomson Reuters, which I insert into the Dataframe ...
1
vote
0answers
67 views

Convertible bonds market data

My question is twofold. First, what are the key informations used to describe a convertible bond market ? I'm thinking about market size, conversion rate, appropriate index, ... Second, where to ...
1
vote
0answers
169 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: ...
1
vote
0answers
166 views

Incompatibility of Lognormal Forward Model (LMM\BGM) and Lognormal Swap Model

In his paper On the distributional distance between the Libor and the Swap market models (and also in his book about IR modeling) D.Brigo says: 10, 11, 12 are defined in the end of message. Do I ...
1
vote
0answers
236 views

What is the algorithm for the Fama-Bliss instrument selection?

Fama-Bliss discount bonds are defined through a straight forward calculation (Famma, Bliss 1987). For the purposes of a project I need to derive forward rates, yields &c. for periods not included ...
1
vote
0answers
222 views

Market Standard Pricing Models for Fixed Income Securities (Vanilla)

To clarify my heading, I have been searching for a material that consolidates all standard Fixed Income Security Pricing. E.g. ...
1
vote
0answers
42 views

How does a covered bond characteristics compare to a mortgage security for credit enhancement?

I need help with understanding how does a covered bond characteristics compare to a mortgage security for credit enhancement?
1
vote
0answers
175 views

Looking for FpML best practices

We want start using FpML within our organisation; where message will be sent using FpML. What are best practices to do this ? If anyone who have used Tools as well as; i want to use FpML for ...
0
votes
0answers
28 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 ...
0
votes
0answers
31 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 ...
0
votes
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 $\tau:=T-t$, ...
0
votes
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 ...
0
votes
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 ...
0
votes
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
votes
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 ...