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Questions tagged [fixed-income]

Securities which obligate the borrower/issuer to make payments on a fixed schedule. Fixed income securities include sovereign, corporate and municipal bonds, corporate loans, and securitized lending (e.g., ABS). "Fixed" refers only to the schedule of obligatory payments, not the amount, and may include inflation linked bonds, variable-interest rate notes, and the like.

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1answer
52 views

Cox-Ingersoll-Ross Zero Bond Put Option

according to Brigo & Mercurio (2006): But how is the Zero bond Put of the CIR model? I couldn't find any information about that. Thanks in advance. Regards Chris
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1answer
50 views

Hedging a trade for PCA component neutrality

Suppose I am given a set of financial instruments, e.g. {1Y, 2Y, ..., 30Y} interest rate swaps or {Barclays, Lloyds, .. } FTSE100 companies. It doesn't matter which so let's go with IRS. I have ...
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2answers
64 views

Is my thinking on futures implied repo correct?

I am building analytics for futures and have a theoretical understanding. If implied repo > actual repo then I can short futures and go long the security and finance it in repo. ON my Bloomberg ...
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1answer
45 views

Floating Loan Valuation and Par Value

Why is it true that the value of a floating rate loan is equal to its par value at payment dates? How can one show this mathematically? I want to understand this both conceptually and mathematically.
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16 views

How do you find a company average quality of income ratio?

Do you divide the weight average number of shares outstanding basic and diluted/by the net income? Or just add the current year and prior year quality of income ratio divide by two?
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1answer
48 views

Treasury auction trading strategy (tails vs stop throughs)

All Treasury auctions stopped through this week across the 2, 5, and 7 year auctions. People are saying that dealers lost because dealers typically short then when-issued bond and cover at the ...
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2answers
252 views

Best topics to begin Quantitative Finance Research/Programming

I have a background in mathematics (Functional Analysis and Probability Theory) and am looking to acquaint myself with research in quantitative finance, particularly with a programming component. ...
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25 views

Question regarding loan tape data when thinking about providing credit facility to bank

I have few questions regarding loan tape data such as this one: Data Say that I as a fund want to provide a credit facility to this bank and am given this loan tape data. (1) What observations / ...
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0answers
24 views

Hedged portfolio dynamics under T-forward measure

I'm looking to find the hedging PDE for a multi-currency derivative $u(F_d, F_f, X,t, T)$ under the T-forward measure, using the delta-hedging argument (F - forward rate, X - forward FX rate). ...
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38 views

Fixed rate bond pricing issue in Quantlib

I cannot retrieve the same price for a fixed bond using quantlib. ...
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0answers
51 views

Dealing with day counts that span a weekend

Consider the following security: CUSIP: 3130A3GE8 Federal Home Loan Bank Maturity: 2024-12-13 Coupon: 2.75 % (CPN) Previous Coupon Date: 2019-06-13 Today is ...
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50 views

Estimating Market Price of Risk

I need help with estimating market price of risk. Assume money market account and two risky assets which exposed to same two sources of risks follow process: $dM(t)=rM(t)dt$ $dS_1(t)=S_1(t)(\mu_1dt+\...
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101 views

Using Python Quantlib's FittedBondDiscountCurve as Evaluator of Parametric Curve - Errors

I am using Quantlib's FittedBondDiscountCurve in Python 3.7 and setting MaxIterations to 0, and giving a guess_solution, which then turns the routine into an evaluator for the parametric form I choose,...
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44 views

Quesion about the VBA function of continuous cap look up [closed]

Here is the VBA function to calculate the cap price Can anyone tell me what is N and t0? From the textbook, N = the number of reset (or payment) dates and t0 = time until the first reset date. But ...
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1answer
92 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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0answers
82 views

pca for yield curve

I used Principe component analysis on yield curve data this was the result ...
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2answers
97 views

Misunderstanding of 'day counts' and accrued interest

I'm totally new to the fixed income world. My goal with this question is to gain an understanding how interest is accrued day-by-day for a particular instrument. This will obviously be done by an app ...
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26 views

Positive carry with negative yielding bonds when repo is negative

Could someone please explain to me how positive carry is achieved when the repo rate is negative? For example I can see the German repo rate is -0.57% and the 2 year German bund is -0.78%. So to ...
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2answers
70 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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33 views

To price Municipal Bonds and risks I want to know the percent of unfunded pension liabilities ($3.8T) to total state and local gov liabilities

Unfunded pension liabilities keep growing and this seems alarming to both pension holders but also Municipal Bond holders. I would like to know how large this problem is to better price Munis and ...
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0answers
50 views

Extract list of tickers bloomberg api [closed]

Does anyone know what is the python equivalent to the BQL.Query/BSRCH functions from the Excel API? I am essentially trying to get a list of tickers for all government bonds from a certain country ...
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1answer
51 views

Why do some mutual funds or indexes have an average effective maturity that is way larger (2-4 times larger) than the average effective duration?

I would like to know if this difference occurs when the coupon payments are very large and/or if there are other reasons.
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1answer
71 views

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 ...
2
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1answer
76 views

Stochastic Processes (Applying Ito's Lemma on Ho-Lee Model )

I seek a basic form (SDE) to understand the Ho-Lee model. I already understand the models from Vasicek, Merton and Cox-Ingereoll-Ross, etc.. For example, \begin{align*} dX_t &= -1/2 \alpha X_t ...
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26 views

Markovian short rate in HJM framework

In Bjork it is proven in proposition 20.5 that a forward rate dynamics: \begin{equation} f(t,T) = f(0,T) + \int_0^t\alpha(s,T)ds + \int_0^t\sigma(s,T)dW(s) \end{equation} imply a dynamics for the ...
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2answers
95 views

Carry vs Roll-Down on a zero-coupon IRS

I am trying to understand the differences between carry vs roll-down on a zero-coupon interest rate swap. Lets say we have a 10 day ZC IRS, meaning we will only swap once on maturity. We are a payer ...
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17 views

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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16 views

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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2answers
77 views

How do the following aspects lead to U.S. Repo shortfalls

A major theme in the markets this past week has been the repo rate hikes and the sudden disappearance of liquidity. Although most are confused as to the main reason, there seems to be a consensus on ...
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0answers
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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0answers
38 views

Difference between spread duration & IR duration for a fixed rate bond

I am struggling to comprehend the difference in impact between spread duration & IR for a fixed rate bond when yields move. I know that both measures would be the same for a fixed rate bond but ...
2
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2answers
143 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, ...
2
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1answer
62 views

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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3answers
80 views

Systematic credit “liquidity provider” strategy

I was reading a piece published by Bloomberg today, where it says the following: “A systematic process lends itself to providing liquidity rather than taking it because our models have views on ...
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1answer
97 views

How would this 10s/20s steepener work

Say I'm interested in a trade that wants to execute a 10s/20s steepener This is done via a receiver leg on the 10s and a payer leg on 20s Look at the following example (the figures are all ...
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2answers
77 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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3answers
112 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 ...
3
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1answer
81 views

Investor rationale behind inverted yield curve

I just had a question regarding investors/markets rationale behind the cause of the yield curve. Assuming that investors believe that rates will be lower in the future and are pessimistic about the ...
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0answers
45 views

Autocorrelation in daily bond returns

I've been examining the returns of a few government bond series around the world. I found out that some have a positive daily autocorrelation. It's not big, but still seems at odds with efficiency. ...
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2answers
88 views

Carry & roll - question regarding the repo transaction

Could someone please explain the carry and roll trade that a lot of traders are doing with negative euro debt? I read an example that they borrow in the repo market then buy a longer dated bond to ...
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2answers
93 views

Stress testing fixed income Yield curve with Nelson Siegel

I am attempting to stress test the Zero coupon Yield curve using The Nelson Siegel model as described in the following papers : Generating Yield Curve Stress-Scenarios Representative Yield Curve ...
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1answer
56 views

impact of bond futures conversion factor on calendar spread trading

i have a quick question about conversion factor and his implication in calendar bonds roll trading. I go short on a calendar roll (short front+long back) which has the same cheapest to deliver. The ...
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2answers
74 views

Libor Forwards from Swaps

I am trying to understand how to interpret a few forward curves that I grabbed from Bloomberg. In Bloomberg, you use ICSV command and choose the USD to Libor swap curve. I did this and grabbed the 1mo,...
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2answers
1k views

How exactly are corporate bonds priced at issue

I am interested in Debt Capital Markets but I am struggling to understand how bonds, particularly corporate bonds, are priced initially. I know that a company will tap an investment bank as book ...
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1answer
55 views

Negative 2y swap spreads

2y swap spreads have dipped below zero for the first time. Can this stay negative and invert more? If my math is correct, the negative swap spread for the 2y leg suggest that the expected path of 3-...
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1answer
38 views

How to understand interest rate bid/ask and apply client mark-up in Tom/Next Rollover Swap Point Calculation

When I am reading materials in swap point calculation for FX Tom/Next Rollover, I am confused with the market interest rate bid/ask. Using an example: I traded on ...
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1answer
58 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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2answers
81 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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1answer
56 views

Calculating theoretical spot rates of treasury bonds beginning with treasury bills

In Introduction to Fixed Income Analytics by Frank Fabozzi, p. 41, there is an example how to calculate the theoretical spot rate of a 1.5 year treasury bond with a 3.5% annual interest and semiannual ...
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1answer
67 views

Daily accruals - when does it accrue?

Is there a convention on when interest should be accruing? That is, does interest on a bond accrue during the business day, or does it accrue overnight? Are you able to point me in the direction of a ...