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location Switzerland
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visits member for 1 year, 7 months
seen Apr 4 at 18:06

Aug
15
comment How popular is the IRR as a tool for capital budgeting, nowadays?
what I meant is that you make the comparison of "standard" IRR with the funding rate in order to decide if investment is profitable or not, assuming that all CFs are discounted at it. But this does not correctly take into account the RF/devaluation of the different future cashflows, as the FUTURE interest free risk rate is unknown, while you assume that you keep getting funded at the CURRENT funding rate, in a dynamic analysis (you estimate future parameters). By saying that the future funding rate is going to be the RF and future investment R=RF, you are almost sure to make a true assumption.
Aug
14
comment What is the difference between Option Adjusted Spread (OAS) and Z-spread?
Mathematically, there is an interesting paper related to the non-linearity of this relationship (practically credit spread/o), in "Next Generation Models for Convertible Bonds with Credit Risk", p70, at wilmott.com/pdfs/030813_ayache.pdf
Jun
19
comment Is it possible to model general wrong way risk via concentration risk?
Hi @Quartz, I have re-edited the question.
Nov
30
comment Why for one year (and not two or three) government bonds (there is a spike for Switzerland & Denmark)?
Less demand for the 1year in Denmark because of the eurozone resque fund to come (anticipated/known few months in advance). Is Switzerland expected/going to issue 1Y positive bonds as well? Nov 27: The eurozone rescue fund opened books this morning via JP Morgan, Morgan Stanley and Natixis at guidance of 0.23% to 0.25% with pricing scheduled for later on Tuesday. The transaction will be rated A-1+/P-1/F1+, which are EFSF's short-term debt ratings.
Oct
16
comment Why for one year (and not two or three) government bonds (there is a spike for Switzerland & Denmark)?
Yes. There is definitely a pulling of the rate at 1 Y
Oct
11
comment Why for one year (and not two or three) government bonds (there is a spike for Switzerland & Denmark)?
Hello @John, I have posted the values for Denmark that I am talking about.
Oct
4
comment Government bonds with negative yield
Cash is limited and the monetary mass is not sufficient. Also cash is on its dissapearance road. Here there is the governmental view of the French government, to replace cash with software money, for example economie.gouv.fr/files/rapport-moyens-paiement-2012.pdf. A sort of English-ed version: knowledge.wharton.upenn.edu/article.cfm?articleid=3017
Oct
3
comment How to limit the nbr of cross-gamma calculations in a delta-gamma VaR calculation?
Does it happen you to know an article detailing the cross-gamma effect in credit risk?
Sep
28
comment Government bonds with negative yield
Yes. But you are still exposed to the credit risk of the company issuing the bond.
Sep
26
comment Is inverted Japanese style curve persistent when negative rates are real / market - observed?
This is a site with real-time governmental bonds (for Switzerland): forexpros.com/rates-bonds/…
Sep
26
comment Is inverted Japanese style curve persistent when negative rates are real / market - observed?
@John, I do not know how to add pictures to this forum, but this type of curve is what I mean (except that it is also exsting for bond yields): creditwritedowns.com/2012/06/…
Sep
21
comment Is inverted Japanese style curve persistent when negative rates are real / market - observed?
Thanks @John. Could you give your opinion now ?
Sep
19
comment Observed market price for the August-Greece-paid bonds where the NPV of the bond or of an option?
ETFs Playing Bigger Role in Junk-Bond Market: Funds are poised to overtake credit derivatives as method of speculating on high-yield debt. Bloomberg, September 17 treasuryandrisk.com/2012/09/17/…
Sep
12
comment Should portfolio be optimized by marking to the future than marking to market (excluding currencies)?
I mean marking to the t_f - "future"'s market, not to t_0 -today's market: it is the value at t_f that counts. It is a sort of liquidity premium/spread for a given liquidity horizon: Say you have i_0=10^9 CHF invested/given at t_0 and you want/need to be sure that you have l_f=9*10^9 CHF liquid/received at t_f. Than you optimize/calibrate your model to show that you have l_f at t_f, and not to have i_0 at t_0.(Because the utility of the l_f is larger than the utility of i_o where involving in the utility your line of business: FX, if you want to pay retirement, fixed equity if in housing...)
Sep
7
comment Observed market price for the August-Greece-paid bonds where the NPV of the bond or of an option?
by the defintion of the NPV, one is supposed to have a model which has the NPV of the bond equal to the market value. The way to do the calibration is via the (credit) spread, which is supposed to express in a continuous way the rating state/probability of default. But (from the accounting point of view) one does not discount the incoming cash flows based on the credit state of the borrower, because it has already entered in the interest rate that you are charging for giving the principal away :(
Sep
7
comment Observed market price for the August-Greece-paid bonds where the NPV of the bond or of an option?
Thank you, @BlueTrin. NPV is supposed to be the difference between an investment's market value and its cost. The market value has been very low. There are 3 options: 1. the cost of the investment is negative, 2. the NPV did not match the market value (it should be even lower than the market value), 3. this definition of NPV is no longer exact. What you are talking about is the expected (credit) gain, which favours option 3?
Sep
7
comment Observed market price for the August-Greece-paid bonds where the NPV of the bond or of an option?
Thank you, @BlueTrin. NPV is supposed to be the difference between an investment's market value and its cost. The market value has been very low. There are 3 options here:
Aug
30
comment Need advice on finding forward spot rates
if these were actual data, at the moment you raised the question, does it happen you to have the observed values for the rates you were asking? (What was the 3ML after 3M, what was the 6ML after 6 M, etc) And could you say the currency these Libors are for?
Aug
30
comment What distribution to assume for interest rates?
Hello @Bob Jansen : You could try Monika Piazzesi, the "Affine Term Structure Models" chapter, if you want to enter/modify the basis. Or you can see the work of Krippner, for example "Measuring the stance of monetary policy in zero lower bound environments", if you want to cut to some final ideas.
Aug
28
comment Separated software and physical cash flows modelling and pricing to be used with negative interest rates?
No. The shadow pricing of goods theory can explain the presently observed negative interest rates bonds. A shadow interest rate shows when the expected return is greater than interest rate (as firms wish to borrow more at given interest rate than they can) and opportunity cost of funds is greater than interest rate. Considering two additional nettings (over the software and physical currencies) at the level of the modelled portfolio, the treasury department does the asset versus liability management. Frequency, magnitude, settlement methods do get involved in such a modelling.