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Callable Bond Delta Profile

I am analyzing a callable bond with 10 Years of maturity coupon paid monthly at market rate plus the spread of 25 bps. The bond has an American Call option embedded. The strike price of a bond option ...
Add's user avatar
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How would one calculate yield to first call for a debt security which is currently and always callable?

If an asset manager has multiple extended warehouse lines outstanding and each one is currently callable (some with penalties, some without), is it simply the case that a ‘to first call’ performance ...
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Pricing a zero coupon callable bond

Suppose I have a 20-year zero bond with a call date in 10 years and a zero interest rate of 2%, which is currently valued at a Z-spread of 100. Now I would like to evaluate the right of termination ...
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Pricing a floating rate callable bond with rate scenarios, please help!

I need to price a floating rate callable bond in Excel. I am new to this and struggling to find good information on this specific situation. I have several rate scenarios until maturity, i.e. the ...
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Pricing a (general) callable floating rate note

I have a question generalizing this situation: Pricing Callable Floating Rate Note. I want to price a callable floating rate note, where the coupon can also be capped and the reference index can be ...
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Is z spread always ‘better’ than nominal spread?

If nominal spread is the addition to the treasury yield at the WAL of the risky bond cashflows (to worst) necessary to make the npv of the cashflows equal to a given price, and z spread is the ...
slothish1's user avatar
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Can effective duration > modifed duration for a callable bond? I get that in QuantLib

I am using QuantLib to create a CallableFixedRateBond. I set up the HullWhite model as the pricing engine and compute effective duration and modified duration. Given the price of the bond is heavily ...
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Will be callable bond called or not? Estimating probabilities

Suppose we have a callable bond in the market. The problem is to find out the probability of being called and the probability of being held until the maturity. My approach for this problem is the ...
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Macaulay Duration of a Callable Bond [closed]

I could not find any formula of Macaulay duration for a callable bond in the literature. Can anybody show how to derive it or give a reference where it is already obtained. EDIT My goal is to find a ...
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Pricing a callable bond in a minimal way

I am looking for a minimal way to price callable bond from a defaultable issuer. The idea is to assume that we are in a deterministic world (i.e no volatility). I tried a methodology but I am not sure ...
mazalaza's user avatar
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TBA - what is and isn't a TBA? (help please)

this is probably a naming issue - but i am totally confused as the documentation is never clear. I understand well what a generic TBA is, what is a "STIP"? is it also a form of TBA? One doc ...
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Pricing fixed rate redeemable bond

A redeemable fixed rate bond has a yearly payment schedule $T_1,\ldots,T_m,\ldots,T_n$ : at each $T_i$ is paid the coupon $c$ (I assume the year fraction is approximativately $1$) (and a notional $X$ ...
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290 views

Call probability of a callable swap

For one call date, The call probability is just the probability that the swap rate for the remaining life of the swap is below the strike rate. This is easily obtainable in a normal vol model, it is : ...
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Why do bonds with a shorter next call dates have shorter extension risk?

I was reading a research article and I'm not really understanding why. Is it to do with the option premium being priced in at the beginning?
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Tree Pricing FRN Implementation

When pricing a bond via a short rate model on a tree, it seems natural to include intermediate time steps in addition to those corresponding to cashflow dates (i.e. for bonds with American style ...
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Z spread for callable bond

I see many definitions online for z spread with formulas written for a bond, how do they change if the bond is callable? Or is z spread calculated to maturity in this case?
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How to spot optimal exercise level of issuer-callable bonds with autocallable bonds call level?

I'm looking for a bit more background on a question that came up here: Our traders use some sort of Longstaff-Schwartz to calculate the optimal point when to call an issuer-callable bond. My question ...
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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 ...
the_brass_bottle's user avatar
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1 answer
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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 ...
Tom Weston's user avatar
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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)...
AnonnonA's user avatar
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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 ...
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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 ...
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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 ...
Medan's user avatar
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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 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 ...
Oliver Mohr Bonometti's user avatar
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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, ...
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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! ...
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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 ...
Peaceful's user avatar
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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 ...
Jan Stuller's user avatar
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3 votes
1 answer
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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 <...
Phil-ZXX's user avatar
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3 votes
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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 ...
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How can i calculate the yield given price, or price given yield for a callable bond, with several callable dates and strike prices (quantlib)

...
Jose Andres Riveros's user avatar
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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?
noisyoscillator's user avatar
5 votes
1 answer
234 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 ...
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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 ...
NewInvestor's user avatar
3 votes
1 answer
1k 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 ...
Simon Nicholls's user avatar
8 votes
1 answer
2k 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 ...
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