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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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How to apply multiplicative price seasonality to bond prices in quantlib?

Can someone please give a brief or any link which explains how to apply multiplicative price seasonality to inflation linked bonds in Quantlib using python modules. Have gone through most of the ...
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1answer
62 views

Cross currency basis swap for bonds

Running a cross currency swap on a GBP issued 2.75% 7yr bond (i.e a bullet), with funding in USD so need to determine the equivalent in USD. The GBP bond trades at circa 180bps over the Gilt. ...
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Perpetual bond valuation between coupon dates

According to this Derive Perpetual Bond Price , I learned how to derive the formula of perpetual bond. However, I still have some questions. Firstly, do I need to change the formula when valuing the ...
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1answer
57 views

Treasury Futures Wild Card Option equation

I am confused about the equation on page 13 (upper right) from the CME: https://www.cmegroup.com/education/files/treasury-futures-basis-spreads.pdf The equation calculates the move in the CTD that ...
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43 views

Negative vega on IR swaptions mid curve

Why do IR bermudan options have negative vega on midcurve? Does it have something to do with mean reversion and a way of lower the price vs market prices?
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62 views

Why are KRDs calculated by shifting the par curve?

When we compute Key Rate Duration, why is the par curve the right curve to shift instead of the spot curve?
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1answer
70 views

Calculate forward discount factors and forward reference rate when discount factors are known

I am trying to learn how to value interest rate swap through portfolio of FRA's(forward rate agreement).But I have got stuck in calculation of floating leg. Here is the scenario as given below for ...
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2answers
62 views

Possible first rate cut by Fed - spot vs forwards

This may be my first rate cut since I joined the industry. I've only see rate hikes and I've been reading through literature from back in 2007 when the Fed last cut rates to get a general feel for how ...
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1answer
91 views

Fair price of a coupon paying bond

Consider a coupon paying bond with a maturity of $3$ years, that pays coupon annually. Let $c$ be the coupon rate (percentage) and let $F$ be the face value. This means that the holder of the bond ...
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3answers
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Definition of the field YAS_RISK for bonds on Bloomberg terminal

The Bloomberg terminal has the following definition for the field YAS_RISK (SP190): "Indicates the price sensitivity given shifts in interest rates." It does not specify, however, what currency is ...
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1answer
42 views

CDS Credit Default Swap PnL

I estimate daily pnl on a CDS position using the spread change times the CS01. However I would like to estimate the PnL for a longer trade that has gone from a 5Y CDS to a 4Y with associated coupon ...
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1answer
49 views

Fixed Income Attribution

Q: In the passage below, is the implied forward rates (expect return) considered the same as the market implied return from forward rates (unexpected return)? For instance, Expected return = Implied ...
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1answer
58 views

Calendar roll terminology (buy vs sell)

I am trying to get the direction/terminology correct in futures calendar trading. Let's say I have two calendar futures contract where the prices are 100 and 102 reflecting the front and back ...
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54 views

pricing deliverable vs non-deliverable fx forwards

I am trying to link these two questions together Pricing a regular FX forward This is a contract (say USD vs JPY) where you exchange 2 currencies at maturity at a pre-determined rate, while no ...
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1answer
97 views

Calculation of Bond returns [closed]

Given that I have a portfolio of High yield bond with USD 50.
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2answers
89 views

Is there an inverse relationship between (future-spot) price and yield?

If the difference between futures and spot prices rises will the yield for the current bond increase as well?
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1answer
54 views

How much senior debt could be issued? [closed]

Is there a limit on how much senior debt could be issued? If a company issues a small amount of debt relative to its assets and wants to issue more could it still be called "senior" or it would have ...
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Bond spreads - SQASW

I posted this question in the finance/economics arm but someone suggested this would be a more relevant place. I have attached a photo of a list of bond issuance's in Australia. Could someone please ...
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bond yield forecasting

About the problem of interest rate forecasting I find various paper that address the problem from the perspective of risk premia and affine term structure model. For example Cochrane and Piazzesi (...
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1answer
87 views

How to quantify the coupon effect?

I'm reading Moorad Choudhry's book "Advanced Fixed Income Analysis" The first chapter briefly touches on the coupon effect which I understand from other sources is the effect of pricing an annuity (...
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1answer
35 views

Funding Treasury net basis trades and balance sheet

I am trying to extend my understanding of Treasury futures net basis trading by understanding the funding markets. If net basis is cheap, an investor can buy the basis. This means that the investor ...
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1answer
103 views

How to compute the Carry + Roll-down of a bond with QuantLib?

I’m new using QuantLib (I have no idea how to use it) and I would like to know how to calculate the C+R of a bond, say the current 30Y. The textbook definition of C+R is the P&L due to the ...
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1answer
89 views

Why is Plain-Vanilla Bond most common bond in the market? [closed]

I have very straigtforward question (in my perception): Is there any study/research/evidence that provides insights on the following question(s): Why is plain-vanilla most common bond in the market? ...
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1answer
67 views

Quarter-end repo spike (Why not lock in longer repo)

There has been a lot of discussion regarding quarter end repo spikes as dealers reduce their balance sheet. I've been reading it all over Bloomberg and I saw overnight GC as high as 3.6% on my screens....
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Credit default swap replication by corporative bonds

I want to get literature or information related with the topic of CDS replication for those counterparties that do not hold. But that have traded bonds (with different degree of liquidity). What could ...
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1answer
89 views

Interest Rate Futures Question from Hull, 8e

There is this question 6.16 in Hull, 8e: Suppose that it is February 20 and a treasurer realizes that on July 17 the company will have to issue \$5 million of commercial paper with a maturity of 180 ...
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2answers
436 views

Quantitative strategies in the Fixed Income space

I'm looking to learn more about systematic strategies in the the fixed income space, particularly in Rates products (anything from simple cash to inflation or vol). I've been reading a couple of ...
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1answer
98 views

What is the intuitive explanation for the spot risk in an FX swap?

I am familiar with FX swap and the basis/IR risk they carry. However, know that they have a very small spot risk component which arises from the present value of future cash flows different from the ...
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48 views

Spread duration and spread risk for a T bill

How is the spread duration/ spread DV01 for a T bill computed. For a bond paying fixed coupons, the spread DV01 is generally taken to be the yield DV01 (yield sensitivity). But the bond equivalent ...
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1answer
95 views

stress testing zero coupon yield curve

i'm currently trying to stress test the zero coupon yield curve using daily observations from 2003 to 2019. Each Zero coupon yield curve originate from an actuarial curve with 37 tenors that range ...
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59 views

Spread Duration weighted OAS vs. Mkt Cap Weighted?

I am curious what the differences might be in rolling up OAS spreads across a portfolio by duration weighting vs. mkt cap weighting. @Alex yes I meant S.D. weighted not Duration weighted
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2answers
42 views

Threshold to consider the daily change of a bond price unusual?

In the context of compliance and market abuse monitoring, what relative change threshold would you choose to decide if transactions should be looked into? For example, if a bond price had a relative ...
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1answer
93 views

Valuing an interest rate swap using a par swaps curve?

I've worked through this problem already and was hoping for some feedback on my approach. The problem description is: You have a notional amount of 100 million paying fixed coupons of 8% annually for ...
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2answers
312 views

Carry and Rolldown of a Premium bond

I'm hoping that you may help me understand how the pull to par of a premium bond impacts the carry and roll calculations over a year. I understand that carry = Coupon income - cost of funds and that ...
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0answers
61 views

How to calculate the fair value of a futures roll and what are the practical uses?

Last month, I spent some time calculating the fair value of a futures contract in preparation for the current futures roll period. I've backtested it and noticed that fair roll generally gives me an ...
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3answers
79 views

How can we compute the daily drop in gross basis?

Background The implied repo rate (IRR) is essentially the carry for going long basis (buying the deliverable bond and selling the futures contract). For this reason, it rises in value day-by-day as ...
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2answers
59 views

Standardized numerical values for ratings

Is there a standardized way of transforming the ratings of any of the major ratings agencies (S&P, Moody's, Fitch) to a numerical value. Ideally, it might be possible to create a similar scale for ...
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Risk mapping a zero-coupon bond portfolio

I'm trying to understand example 2.6 taken from McNeil and Embrechts "Quantitative Risk Management". The example consists of obtaining the risk mapping of a portfolio of $d$ zero-coupon bonds. The ...
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1answer
90 views

How to derive and interpret the duration of a call option?

I read here that CFA students are taught that $$ D_{C} = \frac{\Delta_{C} D_{B} B}{C} $$ Where $D$ is the duration, $\Delta_{C}$ is the first derivative of the options price with regards to the ...
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1answer
247 views

CMS Pricing - Convexity Adjustment by Replication [closed]

I'm trying to learn CMS pricing, but didn't get the logic of this method. Previously cited articles about this method is pretty complex. I'd be glad if you can provide me with simpler articles or ...
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1answer
148 views

Measuring bond fair value (richness/cheapness) using basic regression models?

Background Due to the nature of the curve (bond curve, swap curve etc), bond traders typically have some model that allows them to measure the "fair value" (FV) of a bond vs other bonds on the curve. ...
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448 views

What is the trickiest thing to get right in Rates Quant recently (2019)?

What are the biggest challenges for Rates Quants in 2019? Most quants have been through a lot over the past years-shifting their SABR models in JPY swaptions, fixing the FVA models for negative rates, ...
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1answer
225 views

Trading Jargon - Interest Rate Swaps / Bond Trading

I was going through some reports but having hard time with the jargon. When I google them online I came across the page: http://volcurve.blogspot.com/2007/10/carry-and-roll-down-back-to-basics.html ...
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174 views

Interview question on interest rate spread trade

Consider this interview question: Tell me how you'd construct a risk neutral cross country trade on the 2 year – 10 year interest rate spread in Germany and the U.S. What does "risk neutral" mean ...
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60 views

Fixed Income portfolio type

Could someone kindly point me toward a primer that would cover the various type of fixed income portfolio strategies under modern portfolio theory ? In a nutshell, I would like to know what kind of ...
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2answers
127 views

Hedging treasury bond with Eurodollar futures

I was reading Interest Rates Markets by Jha, and on p. 214, he describes hedging a 5 year treasury bond with a ED future strip, as described below. He says the best hedging quantity can be generated ...
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Creating yield curve from exchange-listed products only?

For use in subset of my thesis, I’ve been given some exchange market data for several exchange-listed products, including Eurodollar rate futures as well US treasury futures and Fed Funds futures. I ...
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What are the trade offs when choosing a long term bond future to trade?

It seems that when trading long term bonds *** and choosing between the two offerings on CME one is presented with a Scylla and Charybdis decision. 1. VOLATILITY CONSISTENCY: Ultra U.S. Treasury Bond ...
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4answers
370 views

Bond ETF vs Bond Future for longer term holding

How would a long term investor go about evaluating the prospect of investing in a bond ETF vs a long position in a future of equal duration? Let’s asume this investment is in a taxable account. Let’s ...
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1answer
91 views

Good References for Treasury Futures Spreads

I’m reading the excellent Treasury Bond Basis by Burghardt. I was wondering if there’s a similar quality book/paper about Yield curve spreads using treasury futures (i.e. NOL, NOB, FYT).