The interest-rates tag has no wiki summary.
-3
votes
0answers
26 views
Understanding interest rate [closed]
When a central bank offers a high interest rate (such as Turkey), doesn't it make it go bankrupt? where is this money comes from? isn't that like differed money printing (paying the interest)?
Thank ...
1
vote
1answer
40 views
why banks shall keep short term gap position low?
I'm reading "Insights for Bank Directors" (http://www.stlouisfed.org/col/director/reference_view.htm), a good introduction to commercial banks, based on a virtual bank "Insight".
It talks about Gap ...
1
vote
1answer
150 views
Yield on Fixed income futures
I am trying to get a simplified model of the DV01 for the US 10YR Note futures but I cant figure out what the current yield is. When I back out the implied interest rate on the current TYM3 futures ...
1
vote
1answer
70 views
When calculating CIP between EU and US, which interest rates data to use?
I am wondering which data to use to test the Covered Interest Rate Parity between Europe and the United States. Recap that for the CIP to hold, it should mean that
F/S = (1+r)/(1+r*) where
F = the ...
3
votes
3answers
2k views
Why use swap-rates in a yield curve?
I have a question concerning interest yield curves. Many institutions use the Libor-swap rate curve as a yield curve. Let's be precise and say that we want the yield curve to be the curve that gives ...
0
votes
0answers
48 views
Historical IR Data for FX [closed]
I am looking for FX Swap, Depo or other interest data for a wide range of FX. I need one rate per day for 3 years.
Is this data available free anywhere?
0
votes
2answers
91 views
Matlab; How to specify Coupon frequency for Interest Rate Swap
I'm trying to price an interest rate swap and would like to change the default coupon payment frequency from 1 a year to 2 or 4 a year. I'm using
...
1
vote
1answer
89 views
LIBOR Rates available in CSV, XML etc
Is there a website that offers current LIBOR rates for all tenors for free in machine readable formats?
3
votes
0answers
62 views
Optimal mortgage rate strategy
When buying a mortgage, you can choose to "lock in" a rate at any point within 60 days of your closing date. Once locked in, you can't revert.
This makes it a secretary problem - in the traditional ...
4
votes
4answers
345 views
how to derive yield curve from interest rate swap?
According to some textbooks, to derive the yield curve, quote
overnight to 1 week: rates from interbank money market deposit,
1 month to 1 year: LIBOR;
1 year to 7 years: Interest Rate Swap;
7 ...
1
vote
1answer
136 views
How to download risk free rate?
I've been trying to download the national interest rates for some countries. When i use Datastream, it only gives me the currency return (while i need yield).
Can someone please tell how to ...
0
votes
1answer
66 views
What is the meaning of the discounted process defined from the interest rate process?
Assume a money market has interest rate process $R(t)$. In Shreve's Stochastic Calculus for Finance II, formula (5.2.17) on page 215 defines the discounted process as
$$
D(t) = e^{-\int_0^t R(s) ds}.
...
3
votes
2answers
207 views
Black-Scholes and Fundamentals
So basically
$dS_t=\mu S_tdt+\sigma S_tdWt$
and
$\mu=r-\frac12\sigma^2$
I have just been thinking about this later equation. This is very interesting because it ties together risk-free ...
3
votes
0answers
119 views
compute time from FX forward, how use DEPO rates?
assume I have following delta-term vol data from broker:
...
1
vote
1answer
48 views
Annual Percentage Rate and Yield
I found references relative to US where the Nominal Annual Percentage Rate or simply APR is defined as the simple interest rate (i.e. proportional to time and without compounding).
Instead the ...
2
votes
2answers
113 views
Fair swap rate of an amortizing swap
Recently I came across the problem of amortizing swaps. This is an agreement, where fixed payments and floating payments (e.g. 3-months LIBOR + spread) are exchanged based on a notional that is ...
1
vote
3answers
214 views
How to hedge the fixed leg of a swap contract?
I happened to get this question for Fixed Income Swap contract. (let's assume it's it's not cross currency).
If the fixed leg is paying 10% interest rate in this contract, but in the market the ...
2
votes
3answers
400 views
Is there an Australian Interbank Rate?
Most widely used Interbank Rates are LIBOR, EURIBOR. Then I read online on SIBOR (Singapore).
It says Canda, US are following LIBOR as well. So for Australia, is there a dedicated interbank rate like ...
5
votes
2answers
359 views
Why does the future price dominate the forward price and why doesn't the long rate fall?
There are two questions left about the book Term Structure: A graduate Course by Damir Filipovic, which bother me. The first one is about the Theorem, that the long rate never falls (p. 108). Why is ...
1
vote
1answer
154 views
BDT model implementation
I am looking for a nice and readable description of how to implement BDT model: $d log(r(t)) = [\theta(t)-\frac{\sigma'(t)}{\sigma(t)}log(r(t))]dt + \sigma(t) dW$.
I assume I already have ...
5
votes
1answer
152 views
How to derive the formula of a European Libor call option in a Libor Market Model?
I am struggling with the following two mathematical statements. The first is from the book "Term-structure Models: A Graduate Course - Damir Filipović" Suppose we have a deterministic function ...
7
votes
3answers
249 views
What is the relationship between Forward measures and LMM?
I am reading the book "Term-structure Models: A Graduate Course" by D. Filipovic. In chapter 7 they define the $T$-Forward measure through the density process
...
-2
votes
1answer
140 views
Yield Curve construction [duplicate]
Possible Duplicate:
What data sources are available online?
http://en.wikipedia.org/wiki/Yield_curve_construction#Construction_of_the_full_yield_curve_from_market_data
I understand there ...
8
votes
3answers
371 views
Pricing in HJM framework
As mentioned in earlier question, I am a math student, who attained a course in interest rate theory. However I have some question how these things actually work in reality.
So assume we are working ...
4
votes
1answer
216 views
Derive a short rate model from HJM
Suppose we are assuming the HJM framework. My question is, if it is possible to derive for different choices of the volatility function $\sigma$ (and hence of the drift function) the most common short ...
5
votes
4answers
328 views
Regressor: Nominal return, continuous return or first difference?
Suppose the application is linear models in financial econometrics. If we want to analyze stocks, the standard approach is to take the continuous/log return: $\ln{ \frac{P_t}{P_{t-1}} }$. Suppose, ...
3
votes
1answer
88 views
Value options when the currency’s risk free rate is negative?
How would you handle a negative interest rate in index/equity options valuation?
An example would be negative rates for short term maturities for Swiss Frank (CHF).
2
votes
0answers
122 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 ...
1
vote
0answers
89 views
Eurdollar Futures
Trying to understand the Eurdollar market a little better. I understand it's the market for dollar denominated deposits outside the US (not just in Europe). They are unregulated and not subject to ...
5
votes
0answers
103 views
Replicating portfolio and risk-neutral pricing for interest rate options
For equity options, the pricing of options depends on the existence of a replicating portfolio, so you can price the option as the constituents of that replicating portfolio. However, I am not seeing ...
3
votes
0answers
129 views
How does one estimate theta in the Ho-Lee model from a yield curve?
I have a yield curve constructed using linear interpolation with data points every 3-months for US treasuries.
I would like to use that calibrate a Ho-Lee model, but I can't wrap my head around how ...
1
vote
1answer
184 views
What are current interest rates on senior/junior/mezzanine loans for e.g. real estate developers?
For a case study I have to work on for a university course, about a real-estate-development project, I need to simulate the financing with different proportions of equity (40%), senior loan (35%), ...
2
votes
1answer
126 views
Why for one year (and not two or three) government bonds (there is a spike for Switzerland & Denmark)?
On 10.10.2012, I have looked at the bond-rates and, both for Switzerland and Denmark, there is a discontinuity/spike at 1Y, as per below
Switzerland: ON= -0.09, 1W= -0.180, 1M= -0.230, 3M= -0.2, 6M= ...
12
votes
6answers
679 views
Setting the r in put-call parity?
Put-call parity is given by $C + Ke^{-r(T-t)} = P + S$.
The variables $C$, $P$ and $S$ are directly observable in the market place. $T-t$ follows by the contract specification.
The variable $r$ is ...
6
votes
4answers
498 views
Why the interest rate for put-call parity is not constant?
Usimg the put-call parity
$C - P = S - K · e^{-rt}$
I tried to estimate the value of $e^{-rt}$, the present value of a zero-coupon bond that matures to 1 in time $t$:
$e^{-rt} = (P - C + S) / K$
...
6
votes
0answers
557 views
Modelling with negative interest rates
For a project, I am interested to model the impact of recently negative interest bonds on the portfolio. The literature on modelling negative interest rates is limited, and the only theory I could ...
5
votes
3answers
763 views
Why would a 6M LIBOR rate be significantly above 3M LIBOR, ED futures and swap rates?
Just was just looking at the various interest rates and noticed this:
...
6
votes
4answers
254 views
Government bonds with negative yield
In the recent time-series of bonds issued by (for example) Germany, Austria and France we see an unfamiliar phenomenon: negative yields. This is mainly the issue on the short end of the yield curve. ...
2
votes
1answer
222 views
Calculate the “ten year zero rate” given two bonds with two prices
I have a little question and need some help with the notation. So, the question goes as follows:
A bond with a maturity of ten years that pays annual coupons of 8% has a price of \$90. A bond with ...
0
votes
1answer
44 views
Showing that no interest rate will equalize amounts accrued [closed]
Suppose that your grandmother is receiving Social Security at the start of next year and has to choose between two plans for how to receive her payments. Divide each year into $k$ payment periods ($k$ ...
6
votes
5answers
746 views
What distribution to assume for interest rates?
I am writing a paper with a case study in financial maths. I need to model an interest rate $(I_n)_{n\geq 0}$ as a sequence of non-negative i.i.d. random variables. Which distribution would you advise ...
0
votes
0answers
67 views
Split in two the observed negative interest rates (theoretically always positive/negative)?
An autoregressive model to get the future evolution a non-jumpy evolution of the interest rates seems a good option , but not taking into account the possible future variations in credit rate states ...
1
vote
0answers
51 views
Neglect the positive values in negative interest rates modelling?
The magnitude of the negative interested rate should vary correlated with the increase in fixed assets prices and with cross-currency basis spreads.
Could their volatility / correlation ...
9
votes
1answer
235 views
Could banks move to continuous (rather than overnight) funding?
The dominant frequencies for Money Market and FX instruments were 6m and 3m for a long time, and banks slowly moved to commercial trades at those frequencies but funding overnight. If this is a step ...
0
votes
1answer
59 views
Separated software and physical cash flows modelling and pricing to be used with negative interest rates?
The physical cash presence in the final transactions is one of the issues in the presently observed negative interest rates bonds. Such a situation has historically been modelled within the "liquidity ...
0
votes
0answers
47 views
Jumps in the evolution of observed negative interest rates related to changes in credit ratings?
If credit risk is to be considered completed integrated in the market prices (integrated credit and market risk), the change in the credit rate will trigger the change in the interest rate/market ...
0
votes
0answers
48 views
Modelling the magnitude of negative interest rates as depending on the deposited volume
The discounting curves are generally inferred from zero coupon bonds, especially for short rates, where such zero coupon bonds exist. Given the recent governmental negative interest rate bonds, this ...
0
votes
0answers
37 views
The observed negative interest rates should be modelled as the observed positive ones?
The presently observed negative interest rates for the recently emitted negative interest bonds by France, etc seem to increase in magnitude with the term. This might suggest that their modelling is ...
0
votes
0answers
44 views
Bibliography and historical data relevant to negative interest rates modelling
For a project, I am interested to model the impact of recently negative interest bonds on the portfolio.
From this point of view, the literature I have found is limited.
I am asking for some ...
7
votes
1answer
334 views
Do people use unbounded interest rate models, and what alternatives exist?
A simple interest rate model in discrete time is the autoregressive model,
$$
I_{n+1} = \alpha I_n+w_n
$$
where $\alpha\in [0,1)$ and $w_n\geq 0$ are i.i.d. random variables. When working with ruin ...
