Questions tagged [callable-bonds]
The callable-bonds tag has no usage guidance.
21
questions
2
votes
0answers
54 views
Back testing fixed income for bond portfolio management
When doing back test trying to replicate a paper, how do you handle bonds that are maturing in an index?
Say I was trying to create a strategy, how do I account for bonds that mature in terms of ...
0
votes
0answers
36 views
Incorporating Accrued Interest to price fixed income callable bonds in short rate models
I am using the DerivaGem software provided by Hull & White (available at DerivaGem 4.00a) in Options, Futures & Other Derivatives. I am attempting to back propagate a bond to obtain the ...
1
vote
1answer
65 views
taxonomy of bond/fixed income exotic coupon features?
I suppose this is essentially a literature recommendation.
I am looking for a list of exotic/nonlinear/complex features that can be included with bonds/loans/fixed income products.
A (somewhat ...
0
votes
1answer
60 views
Duration and convexity of an open term loan/bond!
Imagine an open term loan with monthly interest payments of [x]% and the principle due when the loan is closed. Both the lender can call the loan, and the borrower can return the loan (with no penalty)...
0
votes
1answer
83 views
Yield to call on American style callable bond
(Assuming current bond price is quoted and maturity, par value, strike price all known..)
I was wondering how do we calculate yield to call on American style callable bonds after the call date has ...
0
votes
0answers
37 views
callable bonds with FDM
I am thinking of implementing a model to price callable bonds on a finite difference grid. I wonder how the Price to worst yield model will relate to it in terms of risks(or should do). What I expect ...
0
votes
0answers
33 views
option value for yield to worst model
I would like to understand if there is a way to imply the option value from the bond price for a callable bond. I understand the mechanics of calculation of the worst yield in the presence of many ...
0
votes
1answer
79 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/...
1
vote
1answer
121 views
Why do a callable bond always have higher yields?
In an american callable bond there is an expectation for the issuer to prepay its debt prior to maturity. I understand that this reduces it's value and therefore, higher yield.
But another way to ...
0
votes
1answer
115 views
Risk measurement of multicallable bonds
Assume you have bought a multicallable bond where the issuer has the right to redeem the notional at various dates, e.g. a $10$ yr maturity, $5$% coupon yearly and each year one call date. Next, ...
2
votes
0answers
215 views
how do traders typically hedge a callable zero coupon bond?
i've seen termsheets of callable accreting notional swaps where the accretion rate equals the fixed coupon rate. apparently these are used to hedge callable zcb's. but it doesnt seem to make sense! ...
1
vote
2answers
97 views
What are clean price and accrual of a called bond
I found that after a bond is called (after the call effective date), BBG still shows bond prices for a few more days.
Take XS1648303813 for example, it is called on 24th Sep 2020, but it has prices ...
2
votes
1answer
204 views
Any good papers on Fixed Income Option pricing?
Whilst I have managed to find plenty of material on pricing of Interest Rate Options (i.e. Caps, Floors, Swaptions, spread-options, etc.), I haven't really managed to find any solid papers on the ...
3
votes
1answer
192 views
Misleading Yield (Callable Bonds with call price 100)
When looking at Callable Bonds, I've noticed that we often have a call price of 100 with a call date a few month before expiry. For example:
US09681MAS70: coupon <...
3
votes
1answer
235 views
Cox-Ingersoll-Ross: Monte Carlo Simulation
I am trying to build a Monte Carlo simulation in Excel (yes, far from optimal) for valuation of a callable bond. I have some experience with MC simulation on path dependent derivatives with stocks as ...
0
votes
0answers
17 views
What are some robust Contingent Capital Instrument available?
I recently was made aware of the existence of Contingent Capital Instruments like CoCo Bonds. I was wondering if there are other robust options available for Big Banks in this domain?
5
votes
1answer
159 views
Why are negative option prices possible for callable US treasury bonds?
I am not familiar enough with the theories of option pricing to understand how negative option prices are possible. I found two research papers indicating that negative option prices are indeed ...
0
votes
1answer
2k views
Calculating YTM for a floating rate bond
I am trying to understand how YTM's are calculated for floating rate notes. I have had a go at calculating it and I am always a few bps off for every FRN I try to calculate. Does anyone have any ideas ...
3
votes
1answer
782 views
Pricing a callable bond
I have read the Lehman Brother's paper on OAS which I mostly understand, they outline how to find the OAS for a callable bond of which the formula is effectively (ignoring refinancing costs):
Market ...
8
votes
1answer
1k views
Callable bonds with very short call period. Purpose?
Looking at a portfolio of bonds, I've come across a large number of callable bonds with relatively long maturities (20 to 30 years) but very short call windows. In other words, the first and only call ...
