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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32 views

Optimized search for yield-to-worst of a callable bond

Suppose that I need to find the yield-to-worst of a callable bond, and that the option is American (call any time). The bond may have step-up coupons and/or non-constant call price (oprion strike). ...
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30 views

Discount margin on FRN - widening but bond price increasing?

Why would a bonds discount margin widen but its price increase? Shouldn't the price be falling when margins are widening? Looking at the bond pricing formula, if the price is higher doesn't the rate ...
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43 views

Bond one period holding return definition

In the literature I am reading Crump & Gospodinov Deconstructing the yield curve, Federal Reserve Bk of NY, Staff Report 884 (2019), I came across the definition for a one period holding return of ...
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20 views

Hedging with a different underlying - bond options case

I'm working on government-bond options pricing (Black-Scholes world, nothing fancy). In EUR, that's pretty much a "non market" in the sense that there's pretty much no quotes, so no implied vols, no ...
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31 views

Is callable bond pricing available in Quantlib XL?

I am able to find documentation for pricing callable bonds in Quantlib Python or C++, however, I am struggling to locate it for Quantlib XL. Is there a way to price callable fixed-rate bonds in ...
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79 views

Constructing an arbitrage opportunity for a company involving Forwards

Let's say an investor enters a long forward contract on 100 units of underlying assets $S$ and maturity $T$ = 4 years. The asset $S$ pays no dividends and the spot price of one asset is $S_0$ = £5. ...
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33 views

How are the notionals on proceeds-weighted bond butterflies calculated?

Most LDI (Liability-Driven Investment) accounts construct bond butterfly (fly) trades by weighting them according to proceeds. This creates two constraints: The fly is duration-neutral (the usual ...
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43 views

How required yield affects price of the bond and how the durations changes

can somebody answer, those two theoretical questions? How does the bond price depend on the desired yield (market interest rates)? How the duration changes if we have a shorter / longer maturity and ...
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83 views

Duration of portfolio equals to zero

I am solving the following problem: Consider a 2000 dollars bond with maturity of 5 years and a half-year coupon of 25 dollars at a nominal interest rate of 8% p.a and a consolidation bond (...
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38 views

Quantlib for Amortizing securitized loans with option for prepayment

I have not had much experience with QuantLib, but from a brief look through the docs it doesn't necessarily seem suited to my task. Consider a mortgage backed loan. There are various options on ...
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63 views

Bonds are traded and settled at clean price or Dirty price? [closed]

Are Bonds are traded and settled at clean price or Dirty price ?
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Discount factor in Hull-White model

Consider a Hull-White model $dr(t)=\left(\theta(t)-a(t) r(t)\right) dt + \sigma dW(t)$ with parameters $a=0.1$ $\sigma=0.3$ $\theta(t)$ was calibrated to match $P(0,t)=\exp(-\mu t)$ with: $\mu=0.2$...
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How to proof the formula to be martingale under ITO process?

How can implies that is a martingale when using the defaultable bond price?
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69 views

Bond arbitrage in practice

If we have the following term structure for riskless bonds: \begin{array} {|c|c|} \hline \text{Maturity} & \text{\$1 Zero-Bond price}\\ \hline \text{0 years} & \$ 1.00 \\ \hline \text{1 years}...
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56 views

What does volume dimension means?

In an exchange documentation, I see a definition for Volume Dimension parameter, Volume dimension: Shares are normally traded in Quantity, bonds in Nominal. Ok I can understand quantity but what ...
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77 views

Is this regression suitable for fixed income products (negative interest rates)?

I am currently looking at a regression which tries to model EWMA volatility in the presence of negative interest rates. The regression is as follows and uses absolute return instead of relative in ...
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60 views

Calculating bond prices from constant maturity yield

Goal: turn a constant maturity yield time series into bond prices. The federal reserve has great data series including this one. This is a time series of historical treasury bond yields and I need to ...
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42 views

Bond whose amortization scheme initiates at a later time in its life?

Is there any type of bond whose amortization initiates at a later time in its life? For example the first year we observe interest-only payments and after year 1 there initiates an amortization ...
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63 views

Time to Put or Call a Bond

I was studying putable bond and callable bond on my own, there is an exercise question that was a little confusing to me: I understand what the answer explains, but I am confused that, is a bond "...
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32 views

Shift from stocks to bonds in the 1987 crash [closed]

I read that a potential reason for the stock market panic of 1987 could be the rapidly increasing long term US interest rates: the yield of 30Y US Treasury Bonds increased from the low of the year, 7....
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73 views

Why is higher the call price, the higher the price of a callable bond?

I am preparing for FRM level 2, but I ran into a question whose answer was confusing to me: In the answer, it says "all other things remaining the same, the higher the call price, the higher the ...
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180 views

What does it mean by “A one period bond is a claim to a unit payoff.” from Cochrane?

In the textbook Asset Pricing by John Cochrane, on p. 19 (corresponding table on p. 18), he claims that A one period bond is of course a claim to a unit payoff." What does he mean by "a unit ...
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64 views

Getting Bond Price Data

I am on my thesis about Hull-White model and I need the bond price to calibrate the parameters. How can I get historical bond price data instead of historical bond yield data?
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144 views

Cap price as bond options

I am currently struggling with model calibration of the Hull-White (or Vasicek) model to Caps and Floors. My main problem is that I am confused about the notation. In Brigo & Mercurio (2006, p. ...
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234 views

Calculating the Macaulay duration of a floating-rate bond

I am new to the pricing of bonds: Suppose that I would like to price a floating-rate bond with par value \$100, with maturity at $T$ years from now, paying coupons semi-annually. Suppose that $r_{n-...
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Expected Yield to Maturity & Default Risk Premium

For a corporate bond, which natuarally has a default risk, the expected yield to maturity (EYTM) is defined as the probability-weighted average of all possible yields. Hence, for a 10-year zero-...
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72 views

Is there any difference between “shorting a bond” and “selling a bond” concepts? [closed]

Shorting a bond means borrow it form other and sell. It seems to me that this operation is the same as just simply issue a bond. Am I right? If yes, then why do we use "shorting" terminology for bonds?...
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Nelson & Siegel model (Fixed Income Securities)

I am well aware of the basic model formula and for what it is used, theoretically speaking, however I cannot find any concrete, problem solving exercises. Soon, I will have to deal with this problem ...
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What is the most recent measure of the US Municipal Bond Market Size (Capitalization)?

$3.853 trillion in second quarter of 2018 according to Fed. Today?
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Are Muni REVENUE bonds secured or can the local gov. use the revenues for other purposes not paying the bond holders if its going bankrupt? [closed]

Municipal bonds are of two kinds: GO (General Obligation) Bonds or Revenue Bonds. My question on Revenue Bonds is: are the revenues from the specific project secured or can the local government use ...
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Derive the discount bond prices of the Vasicek model by the PDE approach

The question is shown above. Anyone can help me?
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124 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 ...
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25 views

What MIPS (Municipal Inflation Protected Securities) are out there besides the two DFA ones?

DFA has DMREX AND DCARX. Are there others? I'm specially looking for high quality, medium or long duration MIPS but a list of anything would help.
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159 views

Calculating bond forward rate/price

What's the difference these two methods on calculating the bond forward rate/price. First of all I'm assuming forward rate is the same as forward price in this context, if this assumption is false, ...
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42 views

Can a bond be denominated in another security?

Could a bond be issued that's denominated in securities like ETF shares or stock shares? Of course most people would not want to buy it, but is it possible? I know it's possible to short a security, ...
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156 views

Origin of the $-\frac{1}{P}$ in Macaulay Duration?

Changes in the yield curve affect the total return of a coupon bond instrument, hence I want to compare different bond instruments in how sensitive they are to $y$. Well, I just take the derivative, ...
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87 views

How are returns on Bond Funds (or ETFs) calculated?

For example, if we consider the fund "iShares Core U.S. Aggregate Bond ETF (AGG)", I am trying to figure out how the yearly/Monthly returns are being calculated. I extracted the historical NAV values ...
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If 10s20s steepener have equal DV01 weighting on each swap then why does convexity play a role in MtM

Receiver Swap 10yrs Notional: 1,000,000 DV01: +1,300 Tenor: 10yrs Rate: 4% Payer Swap 20yrs Notional: 500,000 DV01: -1,300 Tenor: 20yrs Rate: 5% Looking at this fictitious example, I want to ...
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165 views

How does the securities lending market work?

After doing some research, literature suggests that "most" securities lending happens over-the-counter (OTC) as opposed to securities trading which is mostly done through a centralized electronic ...
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84 views

Fastest way to calculate YTM from bond price

I would like to calculate YTM for every top of the book update on the 10-year note traded on Brokertec. There is no closed form solution so have to use a root finding method like Newton-Rhapson. It ...
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113 views

carry for a sovereign bond

For sovereign bond, I saw two carry calculations: one would be forward yield - spot yield, the other would be spot yield - repo rate. I would assume these 2 methods result in same or very close result....
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116 views

Bond strategy in rising rate environment

During a period of rising interest rates, it makes sense for investors to either swap out their longer term bonds for shorter ones, or simply invest in shorter maturity bonds in order to reduce ...
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57 views

How I can calculate index bond market

I know that some of the bonds on the market have been manipulated by investment funds. I could identify these bonds. I have classified similar bonds in terms of risk, maturity and Duration. I have ...
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71 views

EONIA capitalisé jour tr eur: can't find index data! Do you know what kind of index is?

To get EONIA capitalisé jour tr eur index returns (monthly returns from 01/2007 until the most recent) is challenging. First i googled the index name searching for the ISIN or the index provider ...
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58 views

Clarification on certain finance terms surrounding bonds

Whilst revising for my upcoming financial mathematics exam I've been struggling to get to grips with certain terms/ phrases used when studying Bonds. I am very new to Finance and get confused very ...
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Finding the redemption yield of a bond given a capital gains tax

Let's say a bond has a face value of £$100$ with semi-annual coupons at a rate of $3$% p.a which is redeemable at par in $10$ years. Assume an investor purchases the bond for £$92$ on the day it is ...
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85 views

Zero-coupon bond pricing equation derivation

I'm trying to understand how in Chawla's paper that I've linked below, how he obtains equation (2.5) for the zero coupon bond pricing equation? The equation is: $\frac{\partial B}{\partial t} + \...
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60 views

Interest rate equation from bond price?

If a zero coupon bond price at time $t$, with maturity $T$ ($t<T$), is denoted by $B(t;T) = B(T;T) e^{(-\int_{t}^{T} r(s) ds)}$ where $r(t)$ is a known interest rate. How does this transform ...
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107 views

How do I derive a blend of a 3Y future and 10Y future risk?

So I have a portfolio of Govt. bonds that I'm trying to hedge with futures. Let's take one of the bonds out of the portfolio as an example. In bloomberg, every bond and its future counterparts has a ...
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130 views

Pricing a government bond

I am reading the "Bond" article on investopedia on stumble on the way they price a government bond. Say that the interest rate at time $t=0$ is $r=10\%$. I buy a government bond with face value 1000\$...

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