# Tag Info

4

This is called on the run/off the run arbitrage, a type of convergence trade. The basic idea is that as the liquidity premium disappears for the on-the-run issue, the price will fall and converge to the price of previous issues. Here are a couple papers - http://people.stern.nyu.edu/lpederse/courses/LAP/papers/SearchBargaining/VayanosWeill.pdf ...

2

Look into OLF's Findur http://www.olf.com/software/financial-capital.html highly customizable trading platform, will not give you everything you mentioned out of the gate but has capability to get there with some development effort

0

Z-spread is the all-in spread, meaning spread from the risk profile AND from the call risk. The OAS factors out (subtracts) the additional spread associated with the embedded option, so the OAS will be lower. It's more useful than Z-spread because it allows for apples-to-apples comparisons between bullet maturities & callables. Remember, Z-spread is the ...

3

It's hard to be sure without seeing the inputs, but I'm guessing that the implied curve changes shape because the original curve does (which you can see from your output: except for the 1-year and 5-years points, the actual discounts are different). The reason the original curve changes is probably the different position of weekends or holidays (so that, ...

1

Normally, you do indeed add a credit spread $s$ to the risk-free spreads to price the bond. That is, if the coupons are $c_i$ at times $t_i$ and the notional is $Y$ then you price it as $$R\!B(t) =Y \exp{\left( -\int_t^T s(x)+r(x) dx \right) } +\sum_{i \ni t_i>t}^{N_c} c_i \exp{\left( -\int_t^{t_i} s(x)+r(x) dx \right) }$$ Normally you have too ...

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Suggest the worked examples in Chapter 5 (and for credit spreads, Chapter 17) in van Deventer, Imai and Mesler, Advanced Financial Risk Management, 2nd edition, 2013, John Wiley & Sons, Singapore. Good luck.

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I think you are just inverting the stuff. (Like I did) You consider Z-spread what, in fact, is OAS. OAS: discount to add to treasury excluding the option price. (Z-spread of an equivalent bond with no option) Z-spread: discount to add to treasury for the option bond (thus accounting for the option). It is misleading because "Option Adjusted" calls for a ...

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