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Treasury Futures Roll Hedges

When you trade the US Treasury futures roll, why do you hedge with SOFR futures contracts for TU and FV and why do you hedge the stub (with SER futures weightings)?
wer_asd24's user avatar
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Expected return on treasury basis trades

There have been a lot of articles on Treasury basis trades. What types of levels are targeted in this trade? Am I correct in seeing that the basis seems to be less than 10 cents in the dollar so ...
wer_asd24's user avatar
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Basis for Forwards

Does the concept of a "Basis" for a forward based product make sense, or is it only ever explicitly for Futures? I understand the concept could mean the Forward Spot - Spot, but am not aware ...
ESN's user avatar
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1 answer
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Is the Forward Price of a bond subject to the Pull to Par?

From my understanding: FwdPx= SpotPx - Accruals + Financing Assume that the yield curve is flat/or that the bond yield stays the same the next day, i.e. that the market is unchanged and that the only ...
Giuseppe's user avatar
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clarifying Treasury basis carry [duplicate]

I'm going through the classic The Treasury Bond Basis by Galen Burghardt. In the book he states, "...if the yield curve has a positive slope, carry for someone who is long bonds and short futures ...
xxtensionxx's user avatar
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2 answers
38 views

Basis risk between future and a non-dividend paying stock

I am a bit confused about the definition of basis risk, and how it applies to a zero dividend stock. A study manual that teaches me about that mentioned basis risk happens when there are mismatches in ...
Preston Lui's user avatar
1 vote
1 answer
313 views

Carry/slide on Treasury CTD basis position

I'm trying to understand whether a long CTD basis position needs to incorporate slide/roll when computing basis net of carry (BNOC). I am told the answer is no but I am not sure why. I am well aware ...
Transcending's user avatar
1 vote
0 answers
125 views

Gross Basis - Bond Futures

Just want to confirm - Gross Basis for Bond A, deliverable into a Future: Gross Basis [A] = Clean Price [A] - Futures Price x CF [A] where CF [A] = Conversion factor of Bond A. Is this due to: Gross ...
user65739's user avatar
3 votes
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222 views

Futures basis (Bond) optimal delivery

i have a confusion regarding how the basis converges in a couple of scenarios. Lets assume I am long UST CTD Basis Say the curve is upward sloping: optimally, i would choose to make delivery of the ...
user65739's user avatar
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0 answers
67 views

Single Curve Problem - due to Basis [duplicate]

I recently came across the single curve problem that states that we need differenct curves for discounting cashflows and projecting forward floating rates. On google I am not able to find a proper ...
Maths student G's user avatar
4 votes
0 answers
150 views

Why exchange basis exist in swaps

For example, swaps traded in CME versus LCH are quoted with slight difference? how do we decide the theoretical boundary of the basis ? what factors need to be consider? I think the principal to ...
Peaceful's user avatar
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2 votes
1 answer
429 views

Why has cross currency basis become higher since the 2008 crisis?

The impact of cross currency basis on FX forward pricing has become more noticeable since 2008, diverging significantly from the interest rate differential, what are the fundamentals behind this ...
Nicolas B's user avatar
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1 answer
95 views

Is there any data sources for historical arbitrage basis (e.g. on-the-run/off-the-run basis)?

I hope to get data going back as far as possible. Someone must have computed these things, but not sure if anyone has shared these data online? If not, if you know how I can get the data for the ...
Slow Learner's user avatar
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1 vote
0 answers
546 views

Bootstrapping EURIBOR curve

I’m trying to bootstrap a 1m, 3m and 6m euribor curve. The data I’m using is 3m Euribor swaps, 1m/3m basis spreads and 3m/6m basis spreads. I’ve successfully used quantlib to bootstrap a 3m curve but ...
AB100's user avatar
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9 votes
1 answer
659 views

Why were Laguerre polynomials a good choice of basis functions for American Monte Carlo?

I am implementing LSMC to price American options based on a custom model. I now need to make a choice of basis functions, so I am looking for the theoretical justification for using Laguerre ...
user54908's user avatar
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4 votes
1 answer
264 views

Why was CDS-bond basis close to zero before the financial crisis?

For instance, see the evidence here: This paper claims that this arises from the fact that cash bond and CDS have different margins, and thus it is cheaper (funding wise) to hold CDS positions. ...
Slow Learner's user avatar
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2 votes
1 answer
717 views

FX Hedging costs when using 3m FX Fowards vs XCCY swaps for an IG Bond

Suppose I want to hedge the FX exposure of an USD Corp Bond(held to maturity) to GBP and I can choose between rolling 3m FX Forwards and XCCY swaps. How can I estimate the difference in the hedging ...
Gigi B's user avatar
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1 vote
1 answer
267 views

Implied funding/repo rates from Credit Default Swaps

One of the differences between a CDS and a bond is the funded vs unfounded nature of the two. Given that is the case, at least some portion of the CDS-Bond basis should be driven by an implied repo/...
CreditNecromancer's user avatar
1 vote
0 answers
311 views

Cross Currency Swap Bids and Offers?

Could someone please explain why certain Cross currency pairs like EURUSD or GBPUSD show higher bids then offers in Bloomberg? e.g for a 5y GBP/USD Xccy Swap bids could be at -5 bps and the offer at -...
Johnny Treawoski's user avatar
2 votes
1 answer
1k views

DV01 on LIBOR vs. SOFR basis Swaps

If I had entered into a USD 10mn pay SOFR, receive 3M LIBOR swap with a 5yr maturity, I would have had a positive NPV of about 80k by the beginning of March due to the massive drop in SOFR (1.55 to 0....
Penelope's user avatar
2 votes
1 answer
521 views

Negative Carry when Yield Curve is Downward Sloping

I am currently reading "The Treasury Bond Basis", and have a question regarding negative carry. The book states that the carry of a vanilla treasury bond will be negative when the yield ...
basisnerd123's user avatar
1 vote
1 answer
209 views

How to construct a GBP FVA curve from a USD FVA curve

Our business funds itself in 2 currencies, USD and ZAR. As a consequence we have a USD funding curve. I need to price a GBPZAR cross-currency swap (XIRS) against a counterparty with which we have no ...
acchan94's user avatar
1 vote
1 answer
2k views

Duration of a futures contract

I have tried to find an answer to this question but have come up with nothing. So, it is my understanding that to find the duration of a futures contract (assuming no switch risk), all you need to do ...
basisnerd123's user avatar
1 vote
0 answers
80 views

Futures Carry for Index Spread Trade

This question is about a leveraged trade involving index futures. Let's use an example of buying two contracts YM futures and selling three contracts RTY futures. CME will give the trade a margin ...
NEO ULTRA's user avatar
1 vote
0 answers
61 views

yield versus duration in cash-and-carry (basis) trade

I am trying to run a cash-and-carry (basis) trade. I'm having trouble understanding how to weigh the tradeoffs between yield, annualized yield and duration/time to expiry. Suppose we are in a ...
Snapula's user avatar
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1 vote
0 answers
117 views

Different FEDFUND INDEX use for Basis swap with LIBOR and SOFR

I am trying to understand the compounding in Basis Swap. I had 2 type of basis swap trade as below USD SOFR FF BASIS LCH – compounded FF (USD-Federal Funds-H.15-OIS-COMPOUND) USD LIBOR 3M FF 3M BASIS ...
Rachel's user avatar
  • 111
1 vote
1 answer
509 views

why is ADBSC currency positive?

Hi guys I am new to cross currency. Could anyone explain why ADBSC <curncy> (Australian Dollar 3 month cross currency basis) in Bloomberg is always ...
Fabian Tan's user avatar
2 votes
2 answers
550 views

Cross Currency Swap - is par basis supposed to change while OIS discounting rate is changing?

Assume a USDJPY cross currency basis swap priced using usd ois & usdjpy basis curve as discounting, and usd libor & jpy libor as projection curve. Now if usd ois is moving in the market while ...
pqsn's user avatar
  • 49
1 vote
2 answers
2k views

treasury bond cash future net basis

In the cash bond and future basis trade, the net basis is like the option (quality option and time option) premium, right? So, it should be positive. Sometimes I see it went to negative, so does this ...
tennisboy's user avatar
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0 votes
1 answer
702 views

Cross Currency swap - Bond Yields arbitrage

Could somebody explain me step-by-step how can I compute the cross-currency yield of a bond bought by a foreign investor and x-ccy swapped back into his domestic currency? I basically would like to ...
Dr Brownian's user avatar
2 votes
2 answers
700 views

Reference on Futures basis trading strategy

I have heard that it is possible to trade on the futures basis. In my understanding, the futures basis is essentially the difference between the futures price and the underlying asset (also referred ...
JejeBelfort's user avatar
  • 1,219
3 votes
3 answers
861 views

How can we compute the daily drop in gross basis?

Background The implied repo rate (IRR) is essentially the carry for going long basis (buying the deliverable bond and selling the futures contract). For this reason, it rises in value day-by-day as ...
quanty's user avatar
  • 439
2 votes
1 answer
2k views

Why z-spread differs from CDS spread in 1 period example

Suppose we have a 5% (paid-annually) coupon bond with 1-year to maturity. We also have a 1-year CDS with a single payment paid annually (running spread with zero upfront). Assume that the underlying ...
cpage's user avatar
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1 vote
2 answers
2k views

bootstrapping a basis curve to get a forward basis curve

Suppose I have a trade whose payoff underlying is 3m libor minus 1m libor. The standard approach is to bootstrap separately 2 projection curves: a) a 3m projection curve, b) a 1m proj curve. However, ...
Randor's user avatar
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1 vote
2 answers
2k views

tenor basis swap spreads and compounding

Let's say I have a 3mv6m tenor basis swap that is quoted at a spread of x bp (and it is a spread on the 3m leg while the 6m leg is the flat leg). Nowadays, I think the convention in most currencies is ...
Magnyz's user avatar
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4 votes
1 answer
5k views

Intuition behind the tenor basis spread in basis swaps

Reading myself into basis swaps, I was wondering a couple of things. Say, one enters into a 1y - basis swap where party A agrees to pay 1M-LIBOR each month and party B agrees to pay 3M-LIBOR every ...
user39039's user avatar
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1 vote
2 answers
4k views

Basis risk, spreads and discounting

There is a lot of information to be read on basis risk, spreads and discounting. After reading some information, I have an idea about what basis risk is about and why this type of risks should be ...
user39039's user avatar
  • 451
1 vote
1 answer
7k views

Convert 3M rates to 6M rates using Basis Swaps (3M vs 6M)

How can I convert a 6M Libor rate e.g. 1Y Tenor to a 3M Libor rate using a basis swap 3M vs. 6M? I wanted to know the math and also an example would be great. Update: Example: ...
JonDoe's user avatar
  • 137
1 vote
2 answers
880 views

FX risk of basis swap in foreign currencies

As an US investor, if I enter a basis swap in a foreign currency (say Euribor-Eonia basis in EUR), and book my trade using USD. I must have some sort of FX risk, right? How do I hedge such risk? I'd ...
Will Gu's user avatar
  • 712
3 votes
1 answer
556 views

Basis swap pricing dynamics

The existence of basis spreads leads to that e.g. a 6M forward rate has a different price than two after each other following 3M forward rates. This due to that the 6M forward rate has a higher credit ...
karamell's user avatar
  • 131
2 votes
2 answers
9k views

Tenor basis spreads 1mv3m vs 3mv6m

I was reading this article on Tenor basis spreads(http://www.garp.org/media/1160302/052913_tenorbasisspread.pdf). Why is the tenor basis spread for NUSD for 1mv3m negative and NUSD for 3Mv6m positive?...
lakshmen's user avatar
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