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5
votes
1answer
224 views

Central bank interest rates: are they quoted annualized?

After a little research on interest rates of different countries I figured out that they are more complicated than I thought and the meaning of them varies country by country. For example, the U.S. ...
5
votes
2answers
262 views

Intuition behind interest rate models

I am modelling the 3M yield of US Treasuries using an ARMA/ GARCH approach. Most interest rate models (e.g. Vasicek) describe the process as follows: $r_{t}-r_{t-1} = some ARMA+ \epsilon_t $ ...
4
votes
3answers
74 views

CIR model and calibration

I am new to quantitative finance. We know that in the CIR model the short rate can't go negative. My question then concerns calibration of CIR to a ZCB yield curve. Is it (and why?) possible to ...
3
votes
2answers
61 views

How do we include inflation in our calculations? [closed]

How do we include inflation in our compound interest calculations? E.g. if we have current principal of 1000$ and the interest rate is 3% after 10 years we have ...
3
votes
1answer
572 views

What is lagged interest rate?

I am trying to reproduce a plot in "Statistics and Data engineering for Financial Engineering" by D. Ruppert. The author uses the risk free returns data available in the Ecdat package in R. ...
3
votes
1answer
355 views

Is inverted Japanese style curve persistent when negative rates are real / market - observed?

Are the inverted (Japanese style) governmental yield curves being a sign a recession/credit risk or should they be modelled as being due to a lack of liquidity? (...with such curves evolving into a ...
2
votes
2answers
100 views

Is there any template of hull white one-factor calibration model?

Recently I would like to look for excel template of hull white one-factor calibration model using swaption data for my urgent task? However, it seems that I cannot find suitable one in the web. ...
2
votes
2answers
75 views

What interest rate should I use for testing the covered interest parity?

I am doing an empirical test of the CIP from the recent financial crisis between Canada and the United States. I am using 1,2,3,6,12 month forwards (monthly data). What interest rates should I use? I ...
2
votes
1answer
40 views

Calibration of 1F Hull White short-rate model to market data

I want to calibrate the Hull White 1 factor short rate model to market data. The main purpose is to simulate interest rate paths, which I will use to calculate the net pv of banking liabilities. Some ...
2
votes
0answers
41 views

Formal Proof of Immunization Techniqu

Please correct me if I am wrong in understanding the Immunisation Technique behind bond interest rate risk management. It says that any change in interest rate can be neutralised by reinvesting the ...
1
vote
1answer
59 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 ...
1
vote
1answer
22 views

Compound interest calculator solving for time with deposits [closed]

I am attempting to solve a compound interest calculation for time given Principal = 100 Time(years) = t Rate(per year) = 8% Deposit(per month) = 5 Total = 300 I ...
1
vote
1answer
60 views

Immunization: Whats the best way to hedge my short interest rate exposure?

What's the best way to hedge a portfolio against a rise in rates? Portfolio: long bonds different maturities. a) parallel shift b) convex shift (short and long term rise more than mid term) How is ...
1
vote
3answers
246 views

Is an economy where money yields interest able to be sustainable and healthy? If yes, how?

There are two points that concern me Loans If someone takes a loan of let's say 1000\$, he has to pay back the money with 5% interest, i. e. 1050\$. But where do the 50\$ come from? They didn't ...
1
vote
3answers
172 views

How often do banks update forward points?

My understanding is that forward rates are calculated by comparing interbank interest rates of the 2 currencies for a currency pair, with the points being the difference between spot and the forward ...
1
vote
0answers
52 views

Interest Rate Risk - The Greeks

IR Delta and Gamma. Can someone please explain if my understanding is accurate as relates to a 2yr interest rate swap? You are considered to be long Delta in an interest rate swap if you are ...
1
vote
2answers
36 views

Compound Interest Calculation (Years + Months)

My question is with regards to the calculation of "Compound Interest". I have the formula below where I would get an answer to the total value of the investment over a period of "years". $A$ = ...
1
vote
0answers
75 views

How to measure interest rate risk of an equity?

What is the best method to measure interest rate risk of an equity? For example: I am looking to determine the change in price based on a change in yield. I currently have a position in XLU and ...
0
votes
2answers
69 views

Relationship between interest rate and corporate bond yield?

I have been reading articles on liability driven investing, a technique used to increase the correlation b/w assets and liabilities of a pension plan. It appears that they use AA rated corporate bond ...
0
votes
1answer
26 views

Compound and continuous interest in the context of debt

I'm trying to figure out the concepts "compound and continuous interest". This article explains the material very well in the context of a savings account. However, I find it difficult to transfer my ...
0
votes
0answers
27 views

Convert 90-Day Tbill to risk free rate on continuous basis

I am trying to use the BS formula to compute the value of a call option. To do that I need the risk free rate on a continuous basis. As far as I know, people typically use the 90 day TBill as a proxy ...
0
votes
1answer
66 views

Why QuantLib assumes zero rates to discount factor is continuous?

https://github.com/lballabio/QuantLib/blob/0ec43027834220baf0a554d68de79a159a2c5489/ql/termstructures/yield/zeroyieldstructure.hpp ...
0
votes
1answer
22 views

Force of Interest Compounding at Annual Rate i

I'm working through some actuarial practice and am lost as to what's going on with the differentiation here (it's been a while since I've had calc): Derive an expression for $\delta_t$ if ...
0
votes
0answers
58 views

Should portfolio be optimized by marking to the future than marking to market (excluding currencies)?

Observing the negative interest bonds in Switzerland, Denmark, GErmany the value of higher presently (credit-free) outgoing cash flows seems less important than the value of lower future (credit-free) ...