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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114 views

Where can I get equivalent of 3 months libor or swap historical data?

Please note: I have already checked your standard "Historical data sources" link, but it does not have the data I need: I am looking for 5 years of libor/swap data for major currencies. Daily, or ...
2
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3answers
215 views

Deposit vs. LIBOR rates? (Bloomberg/SuperDerivatives)

I noticed that Bloomberg and SuperDerivatives both use "Deposit Rates" for the calculation of forward points for currencies. I couldn't find anything online that describes precisely where these rates ...
2
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1answer
196 views

Why Markov Functional Models (Hunt 2000) are not yet so popular?

I refer to MFM introduced by Hunt [2000]. These models can be seen a subset of interest rate market models. MFM allow us to describe the term structure elements using a set a functions of a ...
2
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1answer
129 views

Negative Eonia rates

I'm curious how the current negative Eonia (Euro OverNight Index Average) rates would impact derivatives pricing. Does it mean that if I post cash collateral to you, I also need to pay you interest? ...
2
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1answer
679 views

Risk-Free Rate determinant in CAPM

I have trouble understanding what type of maturity to use when calculating CAPM. My professor uses the 3-Month risk-free rate to ...
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1answer
108 views

if market is always assumed right, what happened when LIBOR was manupulated?

Recently Monetary Authority of Singapore (MAS) raps banks in rate-rigging. This is nothing new, LIBOR was also manupulated before, by some "major" banks. however, before the censorship, did any ...
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1answer
145 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= ...
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0answers
76 views

Calibration of Heston version of CIR

I'd like to calibrate a variant of Heston model for interest rates which is describe by this couple of SDE \begin{aligned}dr_t&=a(b-r_t)+\sqrt{r_t}\sigma_t dW_t^1 \\ ...
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60 views

Inflation/Rates Correlation

I've been looking into a short piece of maths a colleague has written on pricing inflation with payment delays, and was hoping someone could confirm whether my understanding is correct, or if my ...
2
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0answers
228 views

Bond (yield curve) dynamics in the Forward-LIBOR-market-model

The standard Libor-Forward-Market-Models provides a way of modelling the evolution of forward rates in time. However the model does not seem to be well suited for the modelling of zero-bonds. But ...
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0answers
198 views

Reasoning for Bloomberg's short rate volatilty calculation

Bloomberg, in its documentation, explains that it calculates the short rate volatility for its Hull White implementation by multiplying the e.g. 10y IRS rate (divided by 100) by the 10y cap vol. Why? ...
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0answers
110 views

A doubt about Evans and Jovanovic (1989) economic model for entrepreneurs with credit constraints

[I already posted this question on the math forum of stackexchange and I was advised that I should post this question here] In Evans and Jovanovic (1989) you will find a model for entrepreneurs with ...
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0answers
124 views

How to reproject rates risk on a subset of tenors

Is there a standard method (statistical or model based) to reproject rates risk obtained on a full set of tenors onto a smaller subset of tenors ? Let's imagine that I got a delta in the following ...
2
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1answer
426 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 ...
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0answers
433 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 ...
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2answers
180 views

Speed of mean reversion of an interest rate model

I would like to have a bit more of intuition about the concept of "speed of mean reversion" for an interest rate model, e.g. Vasicek or CIR. In particular, is a negative speed of mean reversion ...
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1answer
85 views

What is a good index to track short term interest rates?

This is an FX question. I want to track short term (overnight or next best thing) rates for major/em ccys. What's the best way of doing this? Is there an index I can follow? Preferably something ...
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1answer
790 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?
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2answers
106 views

For the Dothan model $E^Q[B(t)]=\infty$?

How can I show that for the Dothan short rate model We have $E^Q[B(t)]=\infty$ ? Where Dothan short rate model is " $dr_t=ar_tdt+\sigma r_tdW_t$ ". I appreciate any help. Thanks.
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1answer
144 views

How to develop your own interest rate model?

How can you develop your own interest rate model? What must be take cautiously before making one? Also what is the regulation that one mustfollow? Also what is some common properties that models ...
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1answer
329 views

What is the intuition behind the fact that Modified duration = Macaulay Duration / (1+r)?

I understand the derivation of both:take dP/dR and divide by P which will give you both 1) modified duration OR 2) macaulay duration / (1+r) (notice the weighted average time built into the ...
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2answers
285 views

Forward rates formulae

I am now working with forward rates and have somehow been asked to use an "intuitive" formula for forward rates. $$ \frac{F(0,s,T)}{F(0,t,T)} = \frac{F(s,s,T)}{F(s,t,T)} $$ I can understand the ...
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1answer
57 views

“Equivalent” data sets despite different numbers

Are the historical data sets of short term treasury bill rates considered the same as the historical data sets of savings account interest rates because by definition they are both risk free rates of ...
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1answer
1k views

Normal vs Lognormal Short Rate models

Are there any general arguments to decide whether it is better to use a model with a normal or a lognormal distribution of the short rate? E.g. Hull-White with a normal and Black-Karasinski with a ...
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1answer
392 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 ...
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1answer
69 views

Determining swaption prices using the characteristic function

There exist multiple techniques to determine call option prices that make use of the characteristic function. These techniques boil down to some integral expression of the option price in terms of the ...
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2answers
48 views

Incorrect characterization of spot rate?

Is the t in the red boxed $R(t,T)$ supposed to be the same as the S in the green boxed $R(S,T)$?
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1answer
90 views

How does Reuters quote caps?

I'm wondering which curves should I use when passing from the Implied volatility to prices. When I read an implied volatility (for instance 3Y Cap strike 0.5%) the discounts and forward rate ...
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1answer
64 views

Why interest rate future does not support fed policy on reducing assets buying?

Using the 3-mon eurodollar interest rate futures, I construct a yield curve each year for 2015-2021 using sampling date from the end of the month. If you graphed this out, you would see that the ...
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2answers
109 views

Different interim balances when calculating annual compound interest different ways

Something interesting that doesn't quite make sense to me. When calculating compound interest using P(1+r)^t, I'm calculating in two ways - one using the day 1 principal balance, and the other using ...
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2answers
207 views

Historic Value at Risk - Ratios vs. Differences

Quick Summary on Historic VaR Let $S_0,...,S_n$ be the daily values of some stock (where $S_0$ is the current value). Then for $i=1,\ldots,n$ we let $$\hat r_i:=S_{i-1}/S_i \quad \text{and}\quad \hat ...
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1answer
263 views

Derivation of the Nelson-Siegel model and proof of arbitrage

1. I am looking for a derivation of the Nelson-Siegel model $y(m)=a+b\left( \frac{1-e^{-\lambda m}}{\lambda m}\right)+c\left( \frac{1-e^{-\lambda m}}{\lambda m} -e^{-\lambda m} \right)$ It is ...
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1answer
184 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 ...
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1answer
52 views

Finding the Interest Compounded with Bank Advertising Yield

A bank is advertising 9.5% accounts that yield 9.84% annually. How often is the interest compounded. Answer is Quarterly. I've been trying to look for the formula for this; it doesnt seem to be ...
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1answer
105 views

Cash flow diagram, interest rate inflow series

I have a econ midterm coming up soon and stumbled upon this question. My approach is: 2C=800/(1.12^2)+1200/(1.12^6)=125.71 or C=1245.71/2=622.85 But I have a gut feeling this is wrong. I believe the ...
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1answer
146 views

LMM. Calibration to swaptions by Brigo and Morini. Volatility of swaption that matures at T=0

I'm reading Brigo D., Mercurio F. Interest Rate Models - Theory and Practice (Springer, 2006)(ISBN 3540221492) and also a source article on LMM cascade calibration to swaptions by Brigo and Morini. I ...
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1answer
242 views

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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2answers
483 views

How to express the Black Derman & Toy Model in a $dr=A\,dt+B\, dW$ form?

The Black Derman & Toy (BDT) model is given by $$d(\ln\,r)=\left(\theta(t)-\frac {d(\ln\sigma(t))}{dt}\ln r\right)\,dt+\sigma(t) \, dW.$$ How can one rewrite the BDT model as $dr=A\,dt+B\, dW$, ...
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1answer
108 views

Forward rates diffusion

I used a simple market model (Black 76) to price an american swaption. It's a formula similar to B&S, with another numeraire and forward rate as underlying. I used the SDE: $$ dF = \sigma * ...
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1answer
5k views

Implied interest rate from FX swap

This is not homework. I am trying to calculate the implied interest rate of one currency (C2) using an FX swap and the interest rate of another currency (C1 - base). I have the following: Spot: ...
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1answer
347 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 ...
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1answer
62 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 ...
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1answer
770 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%), ...
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1answer
54 views

Derive OIS rate from IRS rate and Fed Funds/Libor basis spread

For example I have 7Y interest rate swap rate and 7Y Fed funds/Libor basis spread. What is the step-by-step procedure to derive OIS rate from these two?
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0answers
41 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 ...
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0answers
18 views

Calculation of bond spot rates [closed]

the cash prices of six months and one year treasury bills are \$120 and \$115 respectively. A 1.5 years bond that will pay coupons of \$5 every six months currently sells for \$121. A 2 years bond ...
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0answers
99 views

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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0answers
26 views

Why the growth of the American Economy is going to cause the Fed to raise interest rates?

Due the growth of the American economy the Fed have published that interest rates are likely to increase. Why is that the response of the Fed?
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0answers
55 views

Hot do I calculate an effective forward rate? [closed]

I have to find nominal and effective forward interest rate for 3M-9M term, knowing that current interest rates are: 3M - 2.05% 6M - 2.04% 9M - 2.03% 12M - 2.02% For a nominal interest rate I just ...
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0answers
41 views

Pricing inflation lags

I've been looking into a short piece of maths I found on pricing inflation with payment delays, and was hoping someone could confirm whether my understanding was correct or if the maths isn't quite ...