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
247 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
54 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
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, ...
3
votes
0answers
65 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
187 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) ...
3
votes
0answers
105 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
225 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
198 views

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

Please, consider the following functions from RQuantLib package: FixedRateBond() ...
3
votes
0answers
158 views
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 ...
2
votes
0answers
29 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: ...
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
90 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
49 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
92 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
190 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
37 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
546 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
551 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
6 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 ...
1
vote
0answers
22 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 ...
1
vote
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/ ...
1
vote
0answers
37 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
51 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
49 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
70 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
41 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
57 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
52 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: ...
1
vote
0answers
41 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
66 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
156 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
160 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
226 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
217 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?
0
votes
0answers
29 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
votes
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 ...
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 $\tau:=T-t$, ...
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 ...
0
votes
0answers
49 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
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: ...
0
votes
0answers
36 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 ...
0
votes
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
votes
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^{- ...
0
votes
0answers
312 views

bond price formula in excel

I inherited a excel spreadsheet that has the following code to price a bond given coupon and current yield ...
0
votes
0answers
6k views

Bloomberg Pricing Sources: TRAC vs. BGN vs. BVAL etc

Sorry, I'm very new to using Bloomberg as a tool, so please forgive the naïve question. I couldn't find much information after some cursory online searches, so I figured I'd ask here. Particularly ...
0
votes
0answers
72 views

Input for unanticipated risk premium estimation

In the paper "Economic Forces and the Stock Market" by Chen, Roll and Ross, unanticipated risk premium (URP) is tested as a potential risk factor for stock returns. This factor is commonly calculated ...