# Tagged Questions

An interest rate is the rate at which interest is paid by a borrower (debtor) for the use of money that they borrow from a lender (creditor).

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### Dec 16: FED rate hike?

Various news articles state that next Wednesday a rate hike by the FED was expected. Yet when I look at fed-rate futures, nobody seems to expect that: http://www.cmegroup.com/trading/interest-rates/...
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### How to get real interest rate from Nominal spot rates?

I have the nominal spot rates. Based on the Fisher equation , how to get the real interest rate ($r$) and the "expected inflation" ($\pi$) ?
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### Differential of stochastic term

Question 1: How does one come up with the equation in the red box below? It looks like some kind product rule, but I'm not sure how to apply Ito's lemma here. Bjork doesn't seem to explain it ...
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### CIR model, realistic parameters and usage

I'm currently working on SDE's, in particular with mean-reversion processes like CIR and Vasicek. The definition of the CIR model is dX_t = \kappa(\theta-X_t)dt + \sigma \sqrt{X_t}...
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### Which interest rate model for which product

Given the multitude of existing interest rate models (ranging from simple to very complex) it would be interesting to know when the additional complexity actually makes sense. The models I have in ...
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### Implications of Black Scholes Plot

I'm pretty new to finances, but I'm heavily into scientific computation. For my scientific computations class, I need to have at least a basic understanding of finances for the presentation I'm going ...
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### Why financial instistution for instance banks lowered down their interest rate during QE?

When QE is carried out, the Federal Reserve prints money and buy government bonds in an effort to pour extra money into the economy. This causes financial institutions for instance banks to lowered ...
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### Why Central Bank carry out Qe when they can directly force banks to lower down the interest rate?

To boost the economy, the central bank can do it either by lowering down the interest rate nor carry out QE. But QE objective is to lowered the interest rate also so banks can give out more loan. This ...
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### Bond price in Ho-Lee Model

I know Ho-Lee model and want to extract the price at $t$, of a European call option with strike price $K$ and exercise date $T$, on an underlying $S$-bond, but I don't know what way should I choose: ...
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### U.S. Rate Hike Prediction

In a recent ft.com video an analyst mentioned that markets postponed their Fed rate hike expectation from September to around November 2015 due to the CNY devaluation, based on the "shift" of some "...
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### Why is two-factor model so popular for bond futures?

Given that which bond in the basket becomes CTD depends massively on idiosyncratic moves among different bonds, should we not be always using N factor model instead of 2 Factor model? By using only ...
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### Influencing factors on credit

There was the following question on an exam: Which factors are influencing the effective interest rate of a credit? loan amount fees interest rate running time I would have said ...
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### 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 ...
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### Provide a bond pricing differential equation and invoke Feynman-Kac Theorem

Grateful for any assistance. Consider the process: $dZ=r(t)Z\,dt$ , where $r(t)$ is stochastic interest rate and $Z=Z(r,t;T)$ is a zero coupon bond Price. Provide a bond pricing partial ...
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### How does one estimate the probability of the Fed increasing its benchmark rate based on Fed funds futures?

How was this 67% probability calculated from Fed funds futures? Fed funds futures show a 67 percent chance the central bank will increase its benchmark rate by year-end from virtually zero, ...