Questions tagged [bond]
A bond is a fixed-income instrument generating cash flows at some specific dates in the futures. These cash-flows depend on the interest rate of the bond, which can either be fixed or variable. It is a debt instrument acting as a loan made from the buyer to the seller.
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Mean-reversion strategy with bonds
I’m developing a mean-reversion trading strategy involving two bonds and have successfully identified a cointegrating relationship between them. This gives me a hedge ratio (beta) for my positions. ...
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How is yield calculated for a portfolio?
If you have a portfolio of US government bonds and treasury futures, and you want to calculate the yield of the portfolio, how would you do this?
Would you say $\sum_{i=1}^n w_i y_i$ where $w_i$ is ...
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End of Month Switch Option calculation in Burghardt's Treasury Bond Basis
Burghardt, in his book, outlines the way one can value the government bond basis and value its richness/cheapness.
The steps are the following:
Calculate historical betas for yield changes
Create a ...
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Verifying if a Function is a Radon-Nikodym Derivative for changing the numeraire
I am analyzing the following function within a financial mathematics framework:
$$
f(t) = \dfrac{B(S; S) \cdot m(t)}{B(t; S) \cdot m(S)}
$$
where:
$$
B(t; S) := \mathbb{E}_{t}^{\mathbb{P}} \left[\exp\...
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Why do people speak of yields on bond futures when their expected return is 0?
There are several questions on this site asking about the "yield" of a bond futures contract.
See e.g. How do I calculate yield from a bond futures contract?
However, the expected return of ...
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Dumb question / thought - bonds and taxes [closed]
This is probably a very dumb question and can extend to non-bond securities but bonds were the simplest example of this:
For simplicity's sake just assume rates are zero and a there is a 10% coupon 5 ...
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Spread vs midswaps
I am trying to understand what the spread vs midswaps is. If I take the bond XS2696780464 as an example. I've shown the bond description/info and YAS below.
In YAS (third picture), if I fix the issue ...
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Can someone explain to me how equity linked autocallable notes are structured and why they're hedged with an autocallable swap OTC?
My basic understanding is that the note is constructed with a zero coupon bond where the discounted amount is used to fund the equity linked return but how does this work exactly?
Also, does the note ...
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Bond Prices verse Yields [closed]
So maybe this isn't the right place for this question as it could be construed as an open-ended market speculation question the way I frame it, but I am trying to solidify my knowledge in regards to ...
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How to convert 3M IRS rate to 6M IRS rate without using basis swap?
I have a spot curve where the front-end points (1Y, 2Y) have a fixed/float frequency of 3M3M, while the rest of the points are 6M6M. I want to build a full 6M6M curve.
My question is: How can I derive ...
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Bond Futures why CTD driven by yields?
Can you please explain with a numerical example why long duration bonds (low coupon, long maturity) are CTD when yields are significantly greater than the contract standard coupon and when yields fall ...
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Modeling Yield Scenarios and Curve Shocks for Bonds
I would like to do the following:
Given a basket of bonds I want to generate different yield scenarios at a future time $T$ for the different bonds in my basket. I also want to see how I can shock the ...
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Intraday government bond data
Is there any place where I can access intraday government bond price data, historical and/or ticker?
Thanks
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Is fitting a curve through the ytm of UST bonds a par curve?
I'm wondering if fitting a curve through the yields given from market prices for bonds represents a par curve?
I've seen this question which is similar: Deriving the par-yield curve
My understanding ...
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How do you calculate the YTM of a multi-currency portfolio?
I would like to know how to calculate the aggregate YTM of a portfolio with bonds of different currencies
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Factor model bond futures
I was reading the Lehman Brother Multifactor Futures Model and there are a few things I don't understand in the way they implement their model.
Firstly, they look at the fitted yields. When they look ...
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Are there closed formulas for non-callable defaultable floating rates in a reduced form models?
currently, I am evaluating for my company the possibility to price defaultable bonds with stochastic default intensity. Precisely, I am considering using the G2++ model where one factor is the ...
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Short bond convexity
Assuming you need to pick a bond to short. Is it better a bond with large or small convexity (all other things being equal)?
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How to value 3mo SOFR Spreads one year out, 2yr out
How does one value a 3mo spread spread in the far out future from present if fomc meeting schedule is only published for one year, and even with fomc's dot plot, it just shows the median expectation ...
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Modified Duration vs. Real-World Bond Price and Yield Changes
We know that modified duration at time $t$ of a bond with maturity $n$ is defined as:
$$
D_{nt} = - \frac{1}{P_{nt}} \frac{\partial{P_{nt}}}{\partial y_{nt}}
$$
And the definition of a derivative is:
$...
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Price of options when exercise date doesn't match nodes of BDT Tree
I think I'm missing something obvious here, but here I go.
I'm studying pricing of bonds with embedded options using Black Derman Toy.
I understand tree construction and its application for simple ...
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What is the Italian BTP yield calculation in last period?
I chose this example becuase it highlight two aspects I can't reverse engineer and can't find any official source documentation.
BTP: IT0005518128: 1/Nov/2022 -> 1/May/2033 at 4.4%.
If this bond is ...
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Pick the price of plain bond off Hull-White Tree
Since we can use Hull-White tree to calculate the price of a option embedded bond, which can be achieved by the QuantLib pricing engine TreeCallableFixedRateBondEngine, can this engine be also used to ...
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Proving that Convexity approx. equals Duration squared but something goes wrong?
I am trying to derive a formula for bond convexity that I saw in a textbook which states that
$$\text{convexity} = \frac{\text{Macaulay duration}^2 + \text{Macaulay duration} + \text{dispersion}}{(1+\...
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Estimating the price of an illiquid 5y bond futures contract
Say I know the price of 10y Gilt futures, 10y Treasury futures, 5y Treasury futures, and GBPUSD futures.
I am asked to produce a quote on 5y Gilt futures using only this data. What is a sensible ...
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Parallel shift in spot yield curve moves the IRR of a bond portfolio in the same direction: Analytical Proof
I am trying to prove that a parallel shift in the spot yield curve will as its effect have the IRR of a bond portfolio move in the same direction and by the same amount.
I have tested this on few ...
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Market Data UST
There a lot of new market data providers for retail algo traders.
For example the famous one for option is Theta Data Net and for Equities it is Polygon IO. You basically get all the greek/price data ...
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Bond Basis (non CTD)
I had a query regarding the trading of non CTD (but deliverable) basis. Obviously someone can buy non CTD basis (buy cash / sell bond future), with the hopes this widens, clearly I would not want to ...
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Recommended Setup for QuantLib-Python AmortizingFloatingRateBond
I am trying to model a term loan in QuantLib-Python that makes quarterly interest payments at CME Term SOFR 3M + 10bps + 525bps paid in arrears with a 2 business ...
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Why is accrued interest prorated linearly?
Cashflows from coupons and principal are discounted using the YTM to get PV of the bond in dirty price.
as shown here in this question
Misunderstanding of 'day counts' and accrued interest
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Deriving solution to bond pricing equation
Consider the Vasicek model for the spot model:
$$
𝑑𝑟 = (𝛼 − 𝛾𝑟)𝑑𝑡 + √𝛽𝑑𝑊
$$
Suppose $𝛾 = 0.1, 𝛾 = 0.1$, and the volatility of the process is 0.02. The spot rate is
10%.
Assume the form of ...
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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 ...
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Calculating spread on a par rate curve given bond’s coupon and yield
In Tuckman and Serrat’s Fixed Income Securities, they give an example of a bond and state its coupon and yield.
They also provide an HQM par rate curve and quote the bond’s spread to this curve.
How ...
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Securities lending vs repo transactions
I have recently started on a repo/SBL trading desk and I am struggling to understand some theory. Normally, in a secured hard-to-borrow secured transaction, I pledge general collateral, receive the ...
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Setting up QuantLib to get correct yield for bond with long first payment period
I am dealing with fixed rate bonds. There is one particular bond, 34659UAC0, that caught my eye. This bond has a first coupon period of a whopping 5 years, followed by regular periods of 6 months. My ...
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India 10yr Government security/bond yields
Which sites can provide historical data for India 10year government security which is monthly. Im assuming yield implies total return data (including dividends/interest) reinvested. Im a newbie so pls ...
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Bond basis arbitrage
The popular media refers to US.bond future basis trades in some contracts as arbitrage..they cite that as the future trades richer to cash hedge funds can buy basis and make money.
I'll assume they'...
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Simulating the Term Structure of Interest Rates in the CIR model
I have successfully implemented the CIR model of the short rate, and now want to use these short rate paths to construct distributions of various tenors - 2y, 3y, 5y, 10y for example - across the ...
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Constant maturity bond fund returns in downward sloping curve
Assume the following:
we are running a constant maturity bond fund (10yrs)
all zero coupon bonds
to maintain the maturity, we buy bonds of 10y and sell the 9y bonds 1y later
price of 10y bond is 100, ...
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GBP OIS Curve - Zero Rate Curve Calculation in Quantlib
I am new to Quantlib and I am looking to create a Zero Rate Curve from GBP OIS to then use to calculate the present value of fixed rate bonds.
I have Looked at the documentation:
https://quantlib-...
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Why are random coupons not priced using risk-neutral evaluation?
Assume a fixed coupon bond has a coupon which, randomly, is 5 % or 4 %, each occuring with a 50 % probability. The issuer flips a coin on payment date to decide which it should be.
I would value this ...
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Bond curve fitting, practical question
when fitting gov bond curves, What are different logic's used by traders to set the weight for the different bonds ?
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DV01 for Bond Forwards
Does anyone know how to get the DV01 of bond forwards from Bloomberg? I used FPA to get the forward price but can't figure out how to get the DV01.
Thanks!
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Autocall Selling Process [closed]
I'm new in structured products and I need some help for understanding some stuff on autocall.
When a client gives his money to the bank for investing in an Autocall, this money goes in a ZCB and in ...
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In the life of a bond future contract, can a bond be removed from the delivery basket?
It is clear that a bond can be added to the delivery basket in the life of a contract. For example, a new issuance. But can a bond be removed from a basket?
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Question about (lLack of) Risk Neutral Bond Pricing in Duffie & Lando (2001)
I have been reading this famous paper of Duffie & Lando (2001) and I have a question regarding how they calculate the price of a bond (the reader of this post will not have to dive deep into the ...
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Instantaneous forward rate and bond prices
Let $P(t,T,T+\tau)$ be the time $t$ forward price for a zero coupon bond (ZCB) spanning $[T, T+\tau]$, and $f(t,T)$ be the time $t$ instantaneous forward rate to time $T$. The relationship between the ...
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Par Yield vs Spot Rate Term Structure
Using bootstrapping, i can derive spot rate curve from Treasury par yield curve. I added a couple extra maturities to the par curve, 60 year at +10bps to 30 year, then hold flat for the next 50 year. ...
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QuantLib calculations for a Canadian corporate fixed rate bond differ from BBG YAS
I am pricing a non-callable, fixed-rate, Canadian corporate bond with the following parameters:
Name
Value
CUSIP
12657ZAT0
Evaluation Date
2/14/2024
Settlement Date
2/16/2024
Bond Issue Date
3/6/...
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