New answers tagged fixed-income
For the value of the bond it can not matter what your domestic currency is. Thats why your first approach is correct. If no market price is available you can value the bond usind DCF with JPY interest rates (plus spread), because it pays interest in JPY. If you convert this JPY Cashflows later in USD that is your private fun, and is not a feature of the ...
There is no need to resort to negative-coupon bonds. A negative $R_t$ is simply a negative payment. For a simple example, build a portfolio consisting of being long a $n$ maturity bond paying a coupon C on $t \in \left\lbrace 1, 2, ..., n \right\rbrace$ and short a zero-coupon bond with face value $V > C$ maturing at $t^*$. Then, $R_t > 0$ for $t \ne ...
There's a lot of intracacies involved and you've got several options. Let's go through an example, using the current front-month 5-year contract FVU6 (FV expiring in September 2016). CTD Yield: The cheapest-to-deliver ("CTD") into FVU6 is the 1.625s of 11/30/2020 and its yield to maturity as of last close is 1.075%. You can simply use this as a proxy as ...
The answer is NO, with very few exceptions There might be bonds with negative coupon(s), and the Bloomberg search even finds some, but there are plenty of reasons why negative coupons are impractical. Instead of having negative coupons on the issue, there are bonds with low or 0 coupons, issued at a premium and having a negative yield. Here are some of ...
If I have understand right what you are looking for, I think that Nelson–Siegel Model can halp you, google it. Hear some readng: Nelson-Siegel model
You're missing something important. Sovereign credit ratings are very misleading when the sovereign can print its own money (like the UK). I would argue that every country is AAA in debt of its home currency, since its central bank can just print money to pay off the debts. There are examples when a sovereign chooses to default on its own currency, ...
Per @dm63, these yield curves are basically smoothed curves that best fit the prices/yields of bonds traded in the secondary market. However, they reflect much more than market expectations. Refer to Deriving Interest Rates for details.
Yes, yield curves are a pictorial representation of the current secondary market yields of government securities (gilts, in the UK). These market yields are determined largely by expectations about what the central bank will do to short term rates over time.
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