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I don't do TRI, so I may be wide of the mark, but: Euribor is not an instrument. It originated as a fixing to reflect the cost of borrowing for a term (here 3m) in the interbank market. But it is not an instrument, so there is no return to reinvest, nor an instrument to reinvest in. Instruments that do depend on 3m Euribor are FRAs, Futures, IRS, and then ...

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It really depends on what you're trading on. Very often, butterfly trades are simply mean reverting trades. For example, you may look at 2s/5s/10s (typically on a regression or PCA-weighted basis) and see whether it's trading at "extreme" levels relative to history (i.e., are 5s trading rich or cheap relative to where 2s and 10s are trading). This can be ...

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You have already said that the negative KRD is not unusual, given that your are looking at an MBS, I recall a very lengthy discussion on a related matter elsewhere which I assume does not need to be repeated here. I know very little about MBS in general and cannot look at details on the particular issue. However, given that you are looking at KRD you are ...

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It is a Wiener integral as your integrand is a deterministic function of time. It is known that the Wiener integral is stationary gaussian process with independent increments. So $z(t) \sim \mathcal N\left(0, \int_0^te^{-2k(t-s) }~ds\right)$ and $(z(t)-z(s)) \amalg z(u), \ \forall u,s,t \in \mathbb R_+ \text{ such that }u\leq s, s\leq t$ or alternatively ...

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You might be able to forecast interest rates using the yield curve itself. I am writing this on the fly so idk where interest rates are at right now but say if the one year US treasury is at 1% then the expected rate for the 2-yr should be 2% ( since you can gain 1% for one year and at maturity purchase another one year treasury and gain another 1%)... But ...

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I would put it a bit differently. You can do 2 things: Either you apply an optimization/fitting procedure that has all the bond prices as inputs and zero rates for the chosen maturities as outputs. The objective function is the deviation between the discounted (by the to-be-found zero-rates) cashflows of each bond and the traded bond prices. To find a ...

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The important thing to know is that the par curve, the zero curve, the forward curve, and the discount curve are just transformations of each other; they contain exactly the same information (see What is the Swap Curve?). I think the confusion arises because many books tell you to connect the yields to maturity of benchmark bonds and call it the par yield ...

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negative convexity, most likely, will imply that bond has embedded option. i.e. bond holder sells call option to bond issuer. therefore you'll have negative gamma position = collect option premium and short volatility.

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You're thinking of a "cross-currency basis swap", not a CCS. A CCS is a floating-for-floating swap that would, for example, let you switch 3m SHIBOR into 3m USD Libor. A cross-currency basis swap, on the other hand, is a swap of funding spreads (loosely speaking, LIBOR - OIS equivalent). It's essentially the liquid way of exchanging currency for long ...

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I am not sure what you are asking but the example below might be useful : if you are talking about foreign denominated bonds then, Current USD/CHN exchange rate = 1.5 %YTM in CHN = 14% %YTM in US =3% Then USD/CHN on maturity will be = 1.5*1.14/1.03 = 1.66

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I am going to assume that the only thing you are interested in is convexity and the many other aspects as well as the suitability of focusing on a single measure are not addressed. In such a general setting more positive convexity provides, as you have already outlined, for the potential to increase prices at a faster rate as a response to interest rate ...

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The NS model should be fit directly to bond prices. If you have the prices of all the Treasuries, you should use those directly. See this paper for how the Fed does it http://www.federalreserve.gov/pubs/feds/2006/200628/200628pap.pdf The "Daily Treasury Yield Curve Rates" are already fitted par yields (they're fitted using a cubic spline model to on-the-run ...

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you can view a bond as a floating rate note plus a swap from floating to fixed. Floating rate notes are always at par after coupon payments (ignoring credit risk...) so the pricing of a bond is the same as that of a swap. So the pricing of a callable bond is the same as that of a cancellable swap. A cancellable swap can be viewed as a swap minus the ...

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There was a pretty good article covering this in Wilmott Magazine a while back. It covered the somewhat more general case of Callable Constant Maturity Swap Steepeners. You can ignore all the machinery around the CMS coupons if you are just treating standard callable bonds. That is to say, in Equation 8, you just need to set the multiplier $m$ to zero. ...

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That's queer that you found nothing. Perhaps this project will be helpful. Let me know if you have questions about it.

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