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Forward Curves and Par Yield Curves

I'm recently reading a research paper on the yield curve by Salomon brothers and in it it states that when the forward curve is above the par yield curve, it is seen as cheaper. If for example, the ...
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2answers
125 views

How to price an European call on zero-coupon from the yield curve?

It is known that the price of an European call of maturity $T^*$ on zero-coupon of maturity $T$ is given by $$p(0,T)= B(0,T^*)\mathbb E ^{\mathbb Q_{T^*}}\left[ (B(T^*,T)-K)^+\right]$$ where ...
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535 views

Interpolating spot rates given intermittent coupon-bond prices.

I'm trying to bootstrap spot rates given coupon-paying bond data. To simplify my problem, assume we are working with only 3 given data, the price/coupon rate on semi-annual bonds maturing in 0.5, 1, ...
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56 views

Zero rate vs. yield on coupon bearing bond

in Hull's solutions manual of Options, Futures & Derivatives (8th edition), there's question 4.7, in which is asked to put the following in descending order: a) the five-year zero rate, b) the ...
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51 views

Yield to Maturity

For a bond with market price $P_t$ and fixed payments $c_n$, I'm told the yield to maturity is given by the solution $Y$ to the equation $P_t=\sum_{n=1}^N c_n e^{-Y(t_n-t)}$. Firstly, I'm not great ...
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498 views

Bootstrap yield curve with QLNet / Quantlib

I am trying to grasp QLNet (C# version of Quantlib, all the functions of Quantlib have the same name and work the same way, so if you just know Quantlib, you can still help me), especially for pricing ...
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84 views

Setting input parameters for Nelson Siegel Svensson model

I am trying to determine the parameters for the Nelson Siegel Svensson model and am solving a Non-Linear Optimization problem to do this. I am trying to solve: $$ \min_\theta{\sum{(p_i - \hat ...
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893 views

Par Yield Curves vs Zero Curves

Does it make sense to look at par yield curve for German bonds in the current environment? Because low rates mean that a lot of bonds are trading above much above par (even around 150!). I would ...
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44 views

Looking for the conventions for EONIA swaps used to define EONIA swap rates

I'm trying to recreate some historical curves using EONIA swap rates. Unfortunately I can't find a concrete specification for the swaps. Without knowing if there are intermediate coupon payments, I ...
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103 views

Stub rate and first fixing in IRS

I have 2 questions that probably are related. Suppose there is an IRS that pays a 2% fixed rate every 6 months and receives the Libor 3 months (but paid every 6 months). The swap starts today (March ...
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148 views

Investment: Bond vs Equity

I was talking to a friend recently and he asked me the following question. If I have a device which perfectly (with 100% accuracy) predicts that both a bond (e.g. AAA rated government bond) and the ...
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515 views

Zero Curve Calculation for AUD, CAD (post LIBOR scandal)

In the end of May 2013 British Bankers Association (BBA) stopped publishing LIBOR rates for Australian and Canadian dollars in a light of recent scandals. LIBOR rates were essential for creating zero ...
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26 views

Constructing NS-Svensson parameters with zero coupon AND coupon bonds

I am in the process of calculating sovereign zero coupon yield curves using the NS-Svensson parameter for a number of countries. Due to data constraints, I would like to use the information from price ...
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1answer
127 views

Understanding how to obtain Nelson Siegel Svensson parameters

I am trying to determine the parameters for the Nelson Siegel Svensson model and am solving a Non- Linear Optimization problem to do this. I am using the procedure presented in this paper. The way I ...
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1answer
40 views

How do I interpret yield curve data points given by the US Treasury?

Given the Daily US Treasury Yield Curve Rates for a specific date I will fit the curve with the cubic spline method, but first I need to know how to use the data points given by the Treasury. For ...
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69 views

Basic questions on the yield curve

When people say "yield curve", do they mean yield/time curve, or yield/price curve? It seems that most of the time, people refer to yield/time curve, as wikipedia suggests. Though sometimes, people ...
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843 views

Bloomberg Zero Coupon Rates

As some of your may know from my other posts, I am working on a Dynamic Nelson Siegel (DNS) based relative value trading model. On simulated data (which satisfies all the assumptions) of the DNS it ...
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93 views

OIS discounting pre and post crises

I have a Dynamic Nelson Siegel (DNS) based rv model. I want to know if I can use pre and post-crises curves interchangeably in my calibration and out of sample testing. I.e. those without OIS ...
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957 views

Deriving the par-yield curve

Given for example 6 bond prices and their respective 6 cashflows over a time period of 6 years, I have managed to derive the zero-coupon yield curve using the bootstrap method. However, it got lost ...
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25 views

Smoothening yield curve by minimizing forward curve slope

I am using government bullet bond data and have bootstrapped a yield curve by solving the following optimization which minimizes unweighted price error: ...
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1answer
54 views

Weights Blowing up in PCA

I'm using daily settlement data to get yield levels for a couple of products. From this data I am doing PCA on a rolling collection of the yield levels. I have been using sci-kit learn's PCA function, ...
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46 views

Term Structure and short rates

If I have a term structure/yield curve given by: $$f(t, T) = f(0, T) + σ^2t(T − \frac{t}{2}) + σB_t $$ and want to find the short/spot rate $r_t$, is this simply: $$f(t,t) = f(0,t) + ...
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51 views

Which bond corresponds to which curve?

Bond X has a coupon Bond Y is a zero-coupon bond (Maturity 2 years) Bond Z is a zero-coupon bond (Maturity 10 years) The following graph is given: X-axis: yield curve, Y-axis: price Question: ...