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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1answer
46 views

Does credit default swaps have interest rate duration and credit duration?

Will a CDS have interest rate duration and credit duration? It does seem likely that the value of the CDS would depend on the underlying interest rate, or the spread. But when I try to Google this I ...
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40 views

Replicate an fixed income index in python

I am trying to replicate an fixed income index in python through linear programming. Data for all bonds in the index are available as well as index values. I intend to first create a free portfolio ...
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25 views

Bond VaR with z-spread

I want to calculate VaR for bonds using historical z-spread changes. I want to apply the changes to the present day z-spread, reprice the bond and obtain the PnLs from which I can calculate VaR. But ...
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38 views

Publicly traded instrument analogous to a bond with discount rate equal to a stock dividend rate

Suppose we have a stock paying a stochastic dividend at rate $q$ in a zero interest rate environment. Is there a publicly traded (non-over-the-counter, meaning not specially designed for an entity) ...
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51 views

Using QuantLib for bonds with irregular coupon payments

Could you please help properly use QuantLib python library to estimate different metrics of bond with uncommon coupon payment periods? For example, I have a bond, which pays coupon each 182 day (26 ...
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39 views

How to find G-spread

I have the following info with me: Bond settlement and maturity date, g spread for each bond, yield to maturity and duration. I need to find G-spread for 1y, 2y, .. 10y How can I do it? Finance newbie ...
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56 views

Short Eurodollar futures front v back month

What is the difference between shorting the front month, rolling it into a back month vs just shorting the back month? For example: shorting the front month and rolling the short every 3 months until ...
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51 views

Why is an FRN price equal to par on every reset date?

In the book "The money markets handbook" by Moorad Choudhry, it says that "on the coupon reset date an FRN will be priced precisely at par". Why is this? Would it not discount the ...
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37 views

Bootstrapping semi annual bond

I have a bond that pays out semi-annually. The coupon is 0.14, which means it pays 0.7 after 6 months, and then 100.7 after another 6 months. I need to find the discount factors by bootstrapping. Is ...
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Synthetic bonds with FX futures

FX futures price in the interest rate of different currencies, so can you use US treasury bonds (for example /zn) and FX futures (for example SGX USD/CNH FX Future) to create a synthetic bond of a ...
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60 views

A list of the 01's in the corporate bonds

I have frequently heard terms like DV01, CV01, PV01. Where can I get a list of these glossaries to study? I am not looking for a detailed explanation, just really a list.. Once I have the list, I can ...
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33 views

Liquid products/indexes to hedge/price a corporate bonds portfolio

Generally, for a corporate bonds portfolio, what are the common risk factors that's hedge-able through some liquid products? I know we can hedge the rate-risk through treasuries. We have some ETFs for ...
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44 views

Different methodologies of building indices

Say have a basket of coupon bonds $B_i$ with $i \in \{1, ..., n\}$. Those bonds have different characteristics one from another. For example they differ in maturity, face value and coupon outstanding. ...
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148 views

Quantlib Black Model for Commodity Options (Interest Rate Options) is extremely light on gamma and price vs BBG, is model incorrect?

I am using the QuantLib developers example to try and price a TY option. The Delta is pretty close but the price and gamma are way off (almost by a factor of 2). Am I using the model wrong or is the ...
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63 views

Callable Corporate Bonds: Why Issue a Callable Bond That Has a First Call Date <6 months to Final Maturity?

My understanding is that firms typically issue callable bonds to benefit from possible refinancing in a lower interest rate environment. What, then, is the point of issuing a bond, say, today (06/30/...
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Why are bonds usually issued at par?

Bonds are not always issued at par, but they often are. From a standard finance theory perspective, this cannot be justified. For investors, the division between coupon and principal returns is ...
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79 views

Correlation between corporate bonds and treasury

What aspects decide the correlation between US corporate bonds and US treasury ? I was told that some corporate bonds are more sensitive to treasury than others. Sectors or maturity?
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97 views

Duration of Floating rate bond

I have read in several places that the duration of a floating rate bond is simply the time until next coupon payment, because the upcoming coupon payments are not known. I have 2 questions here: Why ...
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22 views

end of month is being applied to the termination date in quantlib schedules

According to the QuantLib-Python Documentation for the Schedule function endOfMonth : If the start date is at the end of the month, whether other dates are required to be scheduled at the end of the ...
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62 views

Why is the DV01 of a CDS roughly equal to the DV01 of a par bond issued by the same reference entity?

The claim was made in this link: https://www.investment-and-finance.net/derivatives/c/cds-dv01 But I don't understand why that is.
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54 views

Decomposing bond futures into the cheapest-to-deliver underlying bond

For a regulatory perspective, I need to decompose bonds futures into the underlying cheapest-to-deliver (CTD) government bonds on a given date. Suppose I have a 100 bond futures position on date $d$. ...
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45 views

Treasury Benchmark and Bond Pricing

I'm trying to figure out the connection between the following quantities but no luck so far. ...
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41 views

Bond Future and Bond Yield relation

I recently read, that yield changes during a short time window can be approximated by dividing the returns of futures on the bond by its Duration. Has anybody heard this before and can shed some light ...
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1answer
116 views

Determining bond price based on diffusion process for the short rate model

Suppose the diffusion process for the short rate $r_t$ under the risk-neutral measure $Q$ is given by: $$ dr_t = \theta(t)dt+\sigma dZ_t $$ where $Z_t$ is a Brownian motion. I am trying to show that ...
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36 views

Pricing bonds with different coupon frequencies

Suppose that I have to price a bond that pays fixed rate coupons every three months but all other bonds of that issuer pays coupons every six months. Furthermore suppose that the six months bonds are ...
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124 views

What does it mean for a coupon bond to have “par value”?

I am doing the Interest Rate Models course on Coursera. In the third lecture of the second week, the lecturer provides this lemma: Lemma 1 A coupon bond has par value at $T_0$ if and only if its ...
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43 views

Pricing a amortizing callable danish mortgage bond using quantlib

I am trying to price a callable fixed rate amortizing danish mortgage bond. since QuantLib only has CallableFixedRateBond i have created a dervived class called <...
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92 views

Total Return Swap on Single Govt Bond Marked to Market Calculation

Looking to understand how to value a TRS on single 10y UST during the life of the trade. Here is an example of trade parameters. 10mm constant notional 1-year maturity I am performance leg payer / ...
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37 views

Where to find Historical price data (csv preferable) for global Gov bonds and markets. All dollar denominated?

I'm doing a lengthy backtest on a certain portfolio and i've managed to get FTSE 100 data going back to 05-30-1990, where could I find data for global Government bonds going back to that date? A csv ...
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75 views

Coupon Adjusted Spread vs Z-Spread

Hi so I'm trying to figure out how to adjust for the coupon value in the Z-Spread of a given bond. For example we can take UKRAIN 9.75 11/28. The coupon is 9.75 which is quite a bit higher than the ...
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59 views

Cauchy-Euler ODE with indicator function in coefficient

Consider the following Cauchy-Euler ODE, which is in particular the asset pricing equation for a (perpetual coupon defaultable) bond: $$\frac12 \sigma^2 V^2 F_{vv}(V,t) + \mu V F_{v}(V,t) - r F(V,t) + ...
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Derivation defaultable bond price in Leland 1994 (Merton)

Consider the model in Leland (Journal of Finance, 1994). The partial differential equation that describes the price of the (perpetual coupon defaultable) bond is: $$\frac12 \sigma^2 V^2 F_{vv}(V,t) + \...
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Pricing kernel representation

I am reading this paper https://mpra.ub.uni-muenchen.de/4969/1/MPRA_paper_4969.pdf pp.6-7 on discrete-time bond pricing. The model adopted is a a common affine model, the short rate follows \begin{...
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Can you use the Svensson model to fit a smoothed curve for yields on coupon paying bonds rather than spot rates?

i've been struggling to find an answer to this question online, I know most applications of the model are used on zero (aka spot) rates. But could you use yields from a sovereign yield curve (i.e ...
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90 views

Conversion factor for futures hedging?

I had a question regarding conversion factors and treasury futures in the context of hedging for DV01. In my textbook, in order to calculate the hedge ratio they give this formula: $$ HedgeRatio= \...
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2answers
143 views

What is the Q-dynamics of affine bond prices when r is described by the given model?

Assuming an Affine term structure model, where bond prices arebe defined as: $$P(t,T)=\exp({A(t,T)-B(t,T)r_t)}$$ and describing the Q-dynamics of the short rate according to the model: $$dr_t=ar_tdt+\...
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How do I calculate the bond index in case of the presence of corporate actions? to prevent a change in the value of index due to corporate actions?

I want to make index for the bond market, I read several methodologies and I didn't find a divisor in the equations used for bond index calculation. As i know from the stock indices that a divisor is ...
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2answers
139 views

Extracting the OAS out of an MBS?

I was reading about OAS and I'm wonder how one could "extract" (or "capture") the OAS out of a product by hedging out all the other risks. One of the explanations I got from OAS ...
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40 views

How is Inverse Super Floater built?

I am pretty new to fixed income and came across to a product called Inverse Super Floater. I am wondering, what are the components of this product assuming issue price of 100 (redemption amount of 100 ...
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1answer
97 views

Day-Count-Conventions T-bills, T-notes and T-bonds

I have a question regarding the day count conventions for T-bills, T-notes and T-bonds. So far I haven't found an official page that clearly states which method is used and I don't own bloomberg etc. ...
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44 views

Nominal bond yields vs. TIPS yields?

I am struggling with understanding the difference in yields between nominal bonds and inflation-adjusted bonds. With inflation adjusted bond like TIPS, every coupon payment in addition to the face ...
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80 views

What are some advanced methods for bond risk transformations?

Consider a portfolio of bonds within a given yield curve (e.g. Gilt curve), consisting of positions in every bond in the curve. I'm looking for ways to transform the risk of the portfolio into ...
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30 views

Scale price and returns

Through Bloomberg I have downloaded some data related to the Bloomberg Euro Aggregate Bond Index, however I think I am wrong. I was convinced to have taken the historical prices of the index (in ...
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35 views

How to compute the yield to maturity on a zero-coupon 3 year bond in this case?

Suppose I have the following problem: We have data on three bonds: a one-year zero-coupon bond (bond A), a twoyear zero-coupon bond (bond B), and a three-year bond with an annual coupon equal to 5% ...
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34 views

Carry and expected return of a short bond basis position

If we assume net basis is 0, the bond trades above par, the bond’s yield > than the term repo rate, what is the expected pnl of being Short the ctd vs long futures? I would have thought the ...
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3answers
219 views

Carry and Pull to Par of a bond

I am of the understanding the true carry of a bond is yield - repo rate. And not simply coupon + repo cost because this doesn’t ...
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32 views

Euribor + margin

I have this bond assigment where I have to calculate the CF each quarter, given a constant EURIBOR3M rate of -0,539%. There is also a 1,6% margin per annum that I have to take into account. The ...
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How accurate is YTM as a reference measure of non-holding-to-maturity return?

We need to offer an estimated return of a non-hold-to-maturity strategy. Essentially, we borrow money from the market and buy a bond. Instead of holding the bond to mauturity and locking in a return ...
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73 views

Is the price of the following inflation derivative observed/traded?

Let $M_{t\to t+2}^{\\\$}$ be the pricing kernel (SDF) from period $t$ to $t+2$. Let inflation over period $t$ to $t+1$ be denoted by $\Pi_{t \to t+1}$. Is it possible to observe the following quantity ...
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Using compound interest rate in wrong way

I will explain the problem with an example. Today (14/03/2021) y agree a Zero-Coupon Mortgage with a nominal of a milion dolars an with an annual interest rate compounded annualy and with an ACT/360 ...

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