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Questions tagged [bond]

The tag has no usage guidance.

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1answer
56 views

Calculating value of bond

The bond has a facevalue of 40 and maturity of 20 years. It produces 0 coupon payments during the first 6 years but pays coupons of 2 annually during the last 14 years. The discount rate is 7%. The ...
2
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1answer
33 views

Markowitz portfolio risk with PV01 instead of variance

As the PV01 ($= dpdy \times notional$) of a bond is a measure of its risk, as well as its price return variance, could we measure the risk of a bonds portfolio with the Markovitz portfolio variance ...
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Monte Carlo VAR with differente asset classes

I have found a very useful post regarding the use of Monte Carlo simulaton to obtain portfolio Value at risk, based on Cholesky decomposition, random variates, etc. This post I'm talking about is: Is ...
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2answers
62 views

Why do constant maturity bonds account for modified duration?

One can create a constant maturity treasury (CMT) by building a zero coupon discount curve and generating constant maturity bonds from that curve. This allows one to look further back than is possible ...
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34 views

bond portfolio calculation

Ok I got this weird question, which for some unknown reason I was surprised to be unable to resolve at all after thorough search ... I got a 10year bond with annual coupon 5% semiannual payment, 91-...
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1answer
52 views

Bond is maturing in 10.25 years, YTM calculation

Bond is maturing in 10.25 years and has an annual coupon rate 4.15% paid semiannually and price 92-12+ I need to calculate yield to maturity Ok so I know that 92-12+ is basically 92 + 12/32 + 1/64 =...
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1answer
56 views

Bond Overall Return vs Yield to Maturity

I've been working on what I had hoped to be a simple model demonstrating that a bond "returns" its yield-to-maturity over its life. However, whatever data I use, I end up with a return that is a ...
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1answer
37 views

Question regarding coupons for government bonds

I was looking at government bonds/treasuries and I wondered if my line of thinking is correct: 1) In general, how is the coupon set? I found out that usually they are auctioned for (a bit) less than ...
2
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2answers
103 views

Why does the YTM equal the coupon rate at par?

I know the YTM of a coupon bond is the interest rate $i$ which verifies $ P =\frac{C}{(1+i)} + \frac{C}{(1+i)^2} + ...+ \frac{C}{(1+i)^n} + \frac{F}{(1+i)^n} $ where $P$ is price, $C$ is the coupon ...
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2answers
85 views

How does one price the market value and estimate the fair value of a bond futures roll?

Consider the current situation: we are entering December, meaning that the December futures are being rolled into the March futures (i.e. traders are selling their holdings of December futures ...
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0answers
22 views

Bond Index Return from Yield Curve Data [duplicate]

I am trying to compare fund returns with benchmark returns. I have some yield curve data (some of them calculated by Bloomberg) but not bond price or return data. Is there any way to get bond returns ...
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2answers
91 views

Can two bonds have same yield and price but different convexity?

In the market, if there are two bonds that have the same yield and price, then the higher convexity bonds will be more attractive. However, this would mean the market would increase the price of the ...
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0answers
47 views

Duration of a FRN in continuous time interest rate model

This question was inspired by my attempt to understand the duration of a floating rate note, or FRN for short. Several answers, like this, say the duration of a FRN is just time to next coupon payment....
2
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1answer
129 views

Bond PDE under an Affine Jump Diffusion model

Under the Jump extended Vasicek model, the dynamics of the short rate are as follow : $$dr_t=\kappa(\theta-r_t)dt+\sigma\sqrt{r_t}\,dW_t+d\left(\sum\limits_{i=1}^{N_t}\,J_i\right)$$ where $N_t$ ...
1
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1answer
55 views

Inflation Lag Bond Valuation

Question: On 1st March 2006 a government issued a large tranche of an index-linked bond having a term of 6 years. Coupons of 4% p.a. were payable half-yearly in arrears and the bond was redeemed at ...
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1answer
100 views

What is the value/price of a bond paying floating rate

I am going through J.C.Hull for swaps. Where he says we can value a swap using bonds. Let $B_{fl}$: value of floating rate bond, $L$ notional principal. Why is $B_{fl} = L$ just after a payment ? What ...
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0answers
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Convertible bonds pricer - implementation

Where I can find numerical implementation (in any programming language) of convertible bonds pricer based on the following article: E. Ayache, P. A. Forsyth, K. R. Vetzal, "The Valuation of ...
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1answer
73 views

Intuition and reasoning behind conversion factor calculation for bond futures

I am currently reading the chapter on bond futures from J.C. Hull. The author states the procedure for calculating conversion factor as The conversion factor for a bond is set equal to the quoted ...
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1answer
39 views

What discount rates should I use to price municipal bond with unknown market price

I have a payoff structure but I do not know the price of bond. The bond is municipal. What discount rates should I take for each period in order to calculate its fair price?
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3answers
71 views

heding bond risk with swap

How would a bond trader hedge his/her interest rate risk? A nature way is to hedge it with interest rate swap. Is this a choice in practice ? is their any risks associating with this hedging strategy. ...
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1answer
59 views

Why is the number of accrued days equal to one on coupon dates for NL/365?

Accrued day should be zero on coupon dates. This is true for all day count conventions. However, I found that Bloomberg returns 1 accrued day on coupon dates only for NL/365 day count. Bond example: ...
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1answer
100 views

How should we calculate the duration of a convertible bond?

For callable bonds we can use the effective duration to approximate the modified duration, since the future interest rates will affect the expected cash flows. For convertible bonds the underlying of ...
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1answer
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Units of Modified Duration and Macauley Duration

I know that the unit of the mod. Duration is % (actually no unit, because every number can be written as %) and the Macauley Duration has the unit time. If you want to convert the Macauley Duration ...
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3answers
137 views

YTM of “very-seasoned” bond issues

There is a liquidity premium between on-the-run treasury issues and off-the-run issues with similar characteristics. This is why when building a yield curve, typically on-the-run issues are used to ...
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0answers
20 views

Duration Calculation with Delayed Amortization

I am trying to calculate Duration for a bond with a 10 year maturity, but experiences 10% Amortization over the last 5 years. It also has a 5% coupon. I am interested in the answer, but more ...
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23 views

Pricing European Call on Coupon Bond in Lattice

What's the best approach to pricing a par call option on a coupon paying bond? Is it to discount the greater of the price and strike through the lattice? And for this, is the price used the dirty or ...
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1answer
56 views

How to compare bonds in terms of volume traded in Bloomberg Excel Add-in?

I want to compare how much bonds of a handful of companies have been traded over the last years and pick the most traded bond for each company via the Excel add-in. One example of what I have tried ...
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1answer
104 views

What's the most accurate benchmark index for US corporate and treasury bonds

I'm looking for an index for US corporate bonds and US treasury bonds to benchmark my strategy. I could easily use some ETFs as the benchmark for the recent years but I need data for the time range <...
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2answers
41 views

Australian Treasury Bonds - Price Calculation with Accrual

In this document ASX Interest Rate Derivatives (on page 7) the Australian Commonwealth Treasury Bond (paying semi-anually) is valued as $$ P = v^{f/d} \cdot \left(\frac{c}{2} + \frac{c}{2}\cdot\sum_{...
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1answer
70 views

different Z-spreads for a same company

A same company has two different bonds. I expected the Z-spread to be close for both bonds (since my representation of the Z-spread is the spread due to credit-risk proper to the company). Here is an ...
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0answers
15 views

How to compute historical bond drawdowns from yields

I came across a very interesting article which shows a picture with the drawdowns bondholders would have faced by investing in Fixed Income since 1919. However, the picture I get looks a bit ...
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1answer
140 views

How to compute bond drawdowns?

I came across a very interesting article which shows a picture with the drawdowns bondholders would have faced by investing in Fixed Income since 1919. The data is based on the Moody's seasoned AAA ...
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2answers
73 views

credit spread ajustment considering currency

I would like to understand what is credit spread basis currency ajustment. credit spread implied by a usd bond won't be the same as one implied by a chf bond, isn't it ? Do you have any elements (...
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1answer
105 views

Bond SDE under its own forward measure

I am trying to write the SDE for a forward bond, $dP(t,T_1,T_2)$, under the $T_1$-Forward measure, $Q_{T_1}$. I can easily do this by: Writing the equation of $dP(t,T_1)$ and $dP(t,T_2)$ under the ...
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2answers
160 views

why the implied repo rate is higher when choosing the last delivery date to deliver rather than first delivery date

there must be something very basic that I did not get.... I am reading a book. And it says the implied repo rate is defined as IRR = ( invoice price / cash bond price - 1) * 360/ n, where is the ...
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55 views

repo rate v.s. reverse repo rate

from a book, I read that repo rate is usually higher than reverse repo rate. i.e., the rate to financing a long security position is higher than the rate to lend cash using securities as collateral. ...
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0answers
57 views

how to calibrate hull white model

Under the hull white model, I know that $\theta(t)$ is earned from the cubic spline curve of the treasury yield curve. But I don't know how to calibrate volatility and mean reverting speed parameter. ...
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51 views

Should risky gov't bonds be treated differently from riskless ones when it comes to risk computation?

If I were computing: YTM, DV01, OAS, Spread Duration for risk-free gov't bonds (eg, US Treasuries, German Gov't Bonds), and suddenly I'm adding risky gov't bonds to my portfolio, should the ...
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1answer
110 views

why the financing cost of a bond is repo?

In a repo transaction, the cash borrower pays an interest in repo rate for borrowing the cash. On the other hand, the cash lender gets a bond as collateral. In this transaction, it looks like the ...
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1answer
75 views

what is the underling of treasury bond future contracts? and what determine/drives bond future's theoretical/market prices? [duplicate]

Am I right that the underlying is a basket of deliverable bonds? If this is the case, how is the bond future prices actually determined? If there was only one bond in the deliverable set, the bond ...
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30 views

Bond Data on UK corporate

I have got data from FRED on Moody's Seasoned Aaa Corporate Bond Yield. Does anyone know where I can get such UK data on this? If not, would using exchange rates and the interest rate parity theorem ...
1
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1answer
73 views

Macaulay's Duration with Zero Rates

The definition of Macaulay's Duration is the weighted average maturity of cash flows and is calculated as- $$D_{mac}=\frac{\sum_ttPV(C_t)}{V}$$ where $PV(C_t)$ is the present value of the cash flow ...
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59 views

How to determine the default probability of a county in a bond that is not in its native currency?

Disclaimer: This post is cross posted in here also. Consider the following case: Country P uses the currency Euro and gives p percent interest on a one year bond issued in Euro. Country Q uses the ...
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1answer
95 views

Using DayCounter ActualActual.ISMA in QuantLib

Suppose we have a semiannual coupon bond. The calculation date is 5/8 2017. The ex-coupon date is 4/20 2017 and next coupon date is 10/20 2017. ...
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0answers
40 views

How to find the maximum clean price during lifetime of a bond

I'm trying to find a solution to following question: If I'm buying a bond and assume an upward sloping yield curve, than this bond will (under certain circumstances) experience price gains during his ...
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1answer
72 views

Derivative of Time Value of Money by time [closed]

I'm struggling with a (probably very simple) problem. What i like to do is the following: Lets assume we got a bullet bond (no calls, etc) which is currently trading above par. Under the assumption ...
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1answer
89 views

Accrued Interest on a bond [closed]

If I were to price a bond on one of its coupon payment days, does that day's coupon payment gets added to the cashflows, if so, do we just discount that by 1 (same day)? ie, C1*df1 + C2*df2 + ... ...
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2answers
160 views

Corporate Bond Yield Curve

I am an intern in a mutual fund and they have asked me to create in house yield curve for different type bonds in their portfolio I need to know on what basis are different yield curves made. For ...
2
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1answer
55 views

Optimal number of nodes for binomial lattice?

Let's suppose one is valuing a Euro call on a ZCB in a Black-Derman-Toy lattice. How many nodes/levels of discretization are optimal? Obviously too many creates computational issues and too few ...
2
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4answers
139 views

Intuitively, why does liquidity premium contribute to bond yield?

According to the Wikipedia, "The upwards-curving component of the interest yield can be explained by the liquidity premium... Liquidity risk premiums are recommended to be used with longer term ...