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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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 ...
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66 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 ...
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44 views

Fixed Income Swap Sharpe Ratio Calculation

I have a Fixed Income based strategy based on swaps. Q1.) Given that swaps are based on a "notional" principal and no actual exchange of principal's takes place, is it fair to assume a funding cost ...
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143 views

Why use the E-curve as an interest rate benchmark?

EDSF or Eurodollar synthetic forward curve is used as an interest rate benchmark. Why? When should I use the EDSF "E-curve"? Any references would be extremely helpful.
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177 views

How to calculate the pre-tax cost of debt for a mix of bonds allotted to a company?

I need to calculate the effective interest rate a company X is paying on the total debt it has been loaned (to arrive at the Cost of Debt) for the FY 2011-12. Its long term borrowings are a mix of ...
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34 views

Common point between IR and Vol option pricing models?

What is the common point between pricing models on options on Interest Rates and options on Volatility?
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328 views

How to think about dollar volume in Eurodollar futures?

This is a very basic question: Computing the notional volume for futures contracts usually consists of something like: $V_F = N * P * M * FX$ Where $V_F$ is the dollar volume of the futures ...
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98 views

Modelling interest rate: AR(2) modelling

I have a time series of spread that follows an $AR(2)$ (Autoregressive model of Order 2). I need an interest rate model that represents that dynamics. What model should I use?
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Are DV01 (or PV01) and IR01 one and the same?

IR01 measures the sensitivity of a portfolio or derivative to a parallel shift in the yield curve. Sometimes this is DV01 Dollar value (or PV01 present value). Is it always?
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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 ...
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105 views

Were can I find Historical Interest Rate Data?

Where can I find American historical Savings Account interest (Bank) rates? If you can, please attach corresponding links.
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1k views

Bloomberg interest rate interpolation

I have question about the linear interpolation of interest rates. I am unable to reconcile the Bloomberg methodology for calculating risk-free rate between maturities. In theory it is a straight-line ...
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What is the most amount of money the consumer would be willing to pay to play take this gamble?

Suppose a consumer has log-utility over wealth, defined by $u(W) = \ln(W)$. Suppose this consumer has $100$, and is considering taking a gamble in which the consumer flips a coin, and gets $20$ she ...
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214 views

inflation > interest rate? [closed]

Currently, the federal reserve interest rate is 0-0.25%, and the inflation is 2-3%. Does this contradict the no-arbitrage principle? (The arbitrage being: borrow money at 0.25% and invest it in the ...