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2

The best solution is to matrix-price these bonds first. For each bond, either find a comparable bond or use your own judgment to determine the appropriate spread to a benchmark curve (e.g., OAS to LIBOR), then use the daily LIBOR curve and the corresponding OAS to obtain the daily prices.


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The CME' Fed Fund Futures are what you are looking for. http://www.cmegroup.com/trading/interest-rates/stir/30-day-federal-fund.html On settlement day they settle at the average overnight rate set by the Fed during the contract month.


1

There could be many reasons: You're using on-the-run yields, but the Fed's fitted curves are off-the-run yield curves. You're using only a few points on the curve, the Fed uses virtually all outstanding issues. The optimization, as you stated, is unstable. There's also no guarantee that the Fed's parameters are necessarily the best. If you look at the ...


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if I short the futures, at expiry I'll lose if 3 months LIBOR goes higher than the initial forward price If you short the future and LIBOR rate goes up you will actually make money, not lose money. If you short a Eurodollar contract you are effectively locking in that interest rate. Here's an example. Say it's December 2015 and you need to borrow 1M ...


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Conceptually, let's say you sell a bond three months after the previous coupon date. Because you've sold the bond, you won't receive the next coupon payment, which happens in three months' time. But you deserve half of the next coupon payment, because you've held onto it for half the coupon period. That's what accrued interest is. Accrued interest, in ...


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US Treasuries follow the Actual/Actual day count convention, so you can't make the assumption that there are 180 days in a coupon period. Let's assume that the settlement date (T + 1 for US Treasuries) is 8/6/2015, the previous coupon date for a bond is 7/31/2015, and the next coupon date is 1/31/2016. Then the number of days in the coupon period is 184 ...


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Your term_1, which represent the zero coupon rates, are expressed in %. You have to divide the values by 100 to compute discount factors.


0

First of all you need to get the YTM. The parametric model has an economic interpretation so coupons would mess the estimation and the interpretation of your model. Because of that the values of both taus must be restricted so you can avoid multicoliniarity. If they are the same you are saying that both curvatures are on the same tenor but then your model is ...



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