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  • 21 votes cast
Apr
25
comment Pricing foreign currency bonds - which approach is more theoretically “sound”?
Thanks Joshi. Interesting. I think the bonds are traded in Japan off Japanese curves. Am I understanding your meaning of "value is where it's trading" correctly?. I agree that the CDS spread is not ideal, but compared to actual traded spreads it seems fairly close.
Apr
25
comment Pricing foreign currency bonds - which approach is more theoretically “sound”?
Hey Alexandre, thanks for the comment. I favor #1 because I don't believe you can get USD yields on JPY security. Most JPY buyers will compare your security to JPY available yields. Buyers wanting USD yields will simply go for USD denominated securities. A mix of the two approaches does not really work because you can't discount USD cash flows at JPY yields. If you did that, I would buy a USD security discounted and USD yields and sell it you discounted at JPY yields - hence arbitrage. There IS a relationship between fx and interest rates and these two approaches should be identical in theory.
Apr
25
asked Pricing foreign currency bonds - which approach is more theoretically “sound”?
Apr
2
answered EUR issuance using forwards to hedge FX risk
Mar
2
comment Basket option pricing: step by step tutorial for beginners
Is this the title of the paper? The link no longer works. "American Basket and Spread Option pricing by a Simple Binomial Tree"
Feb
9
awarded  Commentator
Feb
9
comment Is the value of fixed swap leg independent of X, where the Floating Rate is say, LIBOR minus X%?
By NPV I simply mean the fair value of the swap on the trade date. Discount floating leg bearing libor with a Libor/Swap curve will lead to the floating leg having fair value (NPV) of 100 (or 1). The fixed rate on the fixed leg is set so that NPV of the fixed leg is also 100. The net of these two legs equals zero. Which is what the theoretical value of the swap should be at trade date. In practice banks introduce various spreads (profit, funding, credit risk, ...) making the swap a liability at inception to the counterparty, but that's a different topic.
Feb
8
answered Is the value of fixed swap leg independent of X, where the Floating Rate is say, LIBOR minus X%?
Feb
6
revised Equivalency of FX forwards and FX fixed for fixed swaps? Are they still the same under multiple curves environment?
edited body
Feb
6
asked Equivalency of FX forwards and FX fixed for fixed swaps? Are they still the same under multiple curves environment?
Feb
6
comment Is an FX forward with delayed settlement still a derivative?
Thanks, this is helpful. I can see this being the case if this is a gross settled forward. What do you think the implications are if it is a net settled forward in USD, the domestic currency of the entity entering into the forward with a bank.
Feb
6
revised Is an FX forward with delayed settlement still a derivative?
added 334 characters in body
Feb
5
asked Is an FX forward with delayed settlement still a derivative?
Jan
21
accepted Where do swap rates and/or long-term forward rates come from?
Jan
21
accepted Valuing corporate EUR loan of US entity? Which discount rate to use? US or EU?
Jan
21
revised Valuing corporate EUR loan of US entity? Which discount rate to use? US or EU?
edited title
Jan
21
asked Valuing corporate EUR loan of US entity? Which discount rate to use? US or EU?
Nov
30
awarded  Popular Question
Aug
27
awarded  Taxonomist
Feb
19
accepted What is the proper discounting of PIK and non-compounding bullet loans?