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2answers
223 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 ...
0
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1answer
39 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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0answers
33 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) + ...
3
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2answers
142 views

IR Yield Curve and Fixing Dates

Consider two FRAs. 3x6 , Effective 3 months from now, terminates in 6 months. The floating leg payer pays 3-month LIBOR. Fixing date for LIBOR 40 business days. To price this at par, the fixed leg ...
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1answer
80 views

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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1answer
55 views

What is a Basis Swap Curve?

I know what a Swap Curve is. But I don't understand what a Basis Swap Curve is and how it is constructed? Need some guidance on this.
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1answer
69 views

Building curves using onshore or offshore JPY overnight rates?

I am trying to build Japanese Yen interest rate curves. When defining the curve instruments for the 'OIS' (discount) curve (aka TONAR), I am uncertain as to which rate to use for the overnight deposit ...
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1answer
50 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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0answers
47 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: ...
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2answers
259 views

What is the yield on an infinitely lived ZCB?

I guess the price of a Zero-Coupon Bond with infinite maturity should go to zero, what about its yield? I am asking this because I was dealing with the yield curve and its asymptotic properties when ...
2
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1answer
135 views

Forecast 3m LIBOR USD. Budget purpose

How can I calculate/budget/find a expectation for the 3 month LIBOR for the next 3monts-4 years? I am calculating a CF scenario on USD 3month Libor + margin. With swaps and fixed rate this is easy, ...
2
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1answer
122 views

Does Nelson-Siegel require adjustments to yield curve input data?

I am attempting to gain a better understanding of the limitations of the Nelson-Siegel model as described in Estimating the Yield Curve Using the Nelson-Siegel Model. As I have been playing around ...
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2answers
107 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 ...
1
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1answer
160 views

Par and Zero Coupon Yield Curves

The government par yield curve shows a marginally lower yield than the Government zero coupon curve. What is the reason for this in general.
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2answers
140 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 ...
3
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2answers
194 views

How can an inverted yield curve in a liquid market exist?

Take a liquid market like US T-bills, notes and bonds... Who would want a long-term security that yielded less than the short? Even if someone is a long-term lender, why wouldn't they hold the ...
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2answers
134 views

Who determine Sport rate curve (Yield Curve)

My study was in a Mathematical modelling, we studied much about theory, equations, how to resolve equation, how to implement, but we don't understand well where these equations come from. My ...
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2answers
519 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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2answers
182 views

Looking for a pricing library supporting Mutli-curve Framework

I am looking for a builder of Yield curves by tenors (O/N, 1M, 3M, 6M, 12M) respect to a given discount curve based on multi-curve framework as described below : Interest-rate Modelling with Multiple ...
2
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1answer
171 views

Pricing a bond contract from the yield curve

When giving a particular class in financial mathematics for a student I saw a problem in a list of exercises that says: How to calculate the price at 15 December 2010 of a bond paying a coupon of ...
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2answers
492 views

Why is “full” Yield Curve (term structure of interest rates) 3 component based?

I am trying to understand bond-valuation and construction of yield curve. I don't have any exposure to bootstrapping or what-so-ever as of now. So it's appreciated to have an example but not too ...
2
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2answers
4k views

What is the Swap Curve?

What is the so-called Swap Curve, and how does it relate to the Zero Curve (or spot yield curve)? Does it only refer to a curve of swap rates versus maturities found in the market? Or is it a swap ...
2
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1answer
431 views

Cost of Carry Bear Flattener

I was reading a report last week that “the carry on a 2s5s gilt curve flattener is negative to the tune of 10bp over 6 months” and I realised I have little understanding of this concept and ...
2
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1answer
137 views

Comparison of multicurve calibration methods

It seems that there are mayor softwares around offering a multicurve framework based on bootstrap. I find this puzzling nowadays, given the distinct advantages of best-fit optimization methods and ...
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0answers
164 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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1answer
89 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 ...
0
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1answer
585 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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3answers
404 views

Deriving Interest Rates

I am trying to teach myself about interest rate swaps, how they are priced, etc... Easy enough - just comparing cash flows of fixed and floating rate bonds. However, what I'm struggling with is how ...
1
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1answer
47 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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1answer
2k views

Calculating instantaneous forward rate from zero-coupon yield curve

I have a big dataset containing zero-coupon bond yields with different relative maturities. I fix a time horizon on my dataset and I want to calculate instantaneous forward rate. I'm going to write ...
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5answers
15k views

how to derive yield curve from interest rate swap?

According to some textbooks, to derive the yield curve, quote overnight to 1 week: rates from interbank money market deposit, 1 month to 1 year: LIBOR; 1 year to 7 years: Interest Rate Swap; 7 ...
2
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0answers
199 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 ...
1
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1answer
236 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 ...
1
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1answer
474 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, ...
3
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1answer
174 views

Attributing the change in NII to Shift, Twist and Butterfly

The movement of the zero rate curves can be decomposed into a shift movement (the level of interest rates) and a twist movement (the slope of the curve) and butterfly (the curvature of the curve). If ...
2
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1answer
103 views

Economic indicators leading the yield curve

There is a lot of research on how the government yield curve can be used to predict the economy. The government yield curve is often seen as a leading indicator. But for which variables is the curve a ...
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1answer
405 views

How to manage evaluation date changes in QuantLib while using ImpliedTermStructure Class

I will not attach the whole code 'cause it would be just a huge waste of space and it would be not useful for this question's purpose. What I am going to attach here is a snippet code and its output, ...
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1answer
213 views

“Friendly” papers about maximum smoothness yield curve modelling

I'm currently looking to implement some version of the yield curve modeling techniques in the maximum smoothness framework. The papers I have found so far explains the theory pretty well, but I find ...
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1answer
605 views
0
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1answer
861 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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0answers
272 views

Implied term structure from risky discount curve: does it make sense?

We know that, taken every discount curve, it's possible to calculate its forward rates according to our tenor preferences. We know also that it's actually possible to extract an implied term ...
3
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2answers
294 views

Question on yield curve fitting from Wilmott on Quant Finance p.529

My last question is related. At the top of p. 529, it says, "From the Taylor series expansion for $Z$ we find that the yield to maturity is given by $$-\frac{log ...
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1answer
334 views

Yield curve fitting example in Wilmott on Quant Finance p.528

In Wilmott on Quantitative Finance Vol. 2, p. 528, Section 31.4.2, is given a power series expansion for a zero coupon bond $$Z(r,t;T)=1+a(r)(T-t)+b(r)(T-t)^2+c(r)(T-t)^3+\dots$$ then it says to ...
3
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1answer
404 views

How does the 2-factor Hull White model propagate the forward rates curve?

I've been trying to get a grasp on some of the basics of interest rate modeling, and am looking to simulate rates using the 2 factor Hull White model, which I am aware offers a more realistic model of ...
2
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1answer
339 views

QuantLib error with qlPiecewiseYieldCurveData() on qlPiecewiseYieldCurve() with ZeroYield and ForwardRate

I'm using QuantLibXL to build a discount curve, a zero yield curve and a forward curve of the EURIBOR rate (QuantLibXL is downloadable here). I've built an object of class ...
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1answer
706 views

Bond curve extrapolation

What are the best methods to extrapolate bond yields from an existing curve that doesn't extend quite this far? For example, how would one come about finding a theoretical bond yield for a 40 or 50 ...
0
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1answer
474 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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6answers
6k views

Why is an inverted yield curve a problem?

Immediately preceding the worst of the financial crisis, my professors all pointed out to me that the yield curve had inverted -- short-term yields were more risky than 20-year or 30-year Treasury ...
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0answers
160 views
2
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3answers
130 views

What do these maturity codes mean?

In fitting a curve I found that people are using the following tenors: U1 Z1 H2 M2 U2 Z2 2Y Could you please let me know what exact time periods they stand for? Is there a web page describing ...