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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2answers
47 views

Step-up bonds should be more, not less sensitive to market interest rates, shouldn't they?

I keep reading that "a step-up bond provides more protection to an investor in the face of market interest rate fluctuations", that "a step-up bond typically performs better than any ...
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28 views

Bootstrapping zero curve for obligor creates jumps spikes

I am constructing a zero curve for a super national obligor for the period 2007 to 2015. I am using the universe of bonds available on Bloomberg to construct the zero curve from maturities 3m to 50 ...
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19 views

Harvesting Bond Term Premium and Roll Yield using curve plays with Oanda Continuous Contracts

Oanda has their own product pricing and method of rollover that stitches the futures contract prices. I was trying to implement a strategy that accesses the bond term premium and roll over yield for ...
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1answer
40 views

What is the most convincing method/formula for carry and rolldown (in nominal terms) of inflation protected bonds

It is interesting that there is no thorough discussion and clear derivation on this per my search. I know TIPS are complex (compared to nominal bonds). The naive use of simple spot/forward yield ...
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38 views

Use of Macaulay Duration to calculate the Funds Transfer Pricing Cost of an Amortizing Mortgage

I am asked to comment on the Funds Transfer Pricing methodology used by our Treasury to assign a Cost of Funds to a Loan. This is the current methodology: Let us say there is a 2 year loan with an ...
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25 views

Forward Rates for bonds [closed]

In terms of forward rates for bonds, usually the convention is f(x, y) where x is the years from now that the bond starts and y is the duration of the bond. Given that background, how would one ...
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4answers
143 views

Eurodollar future vs Eurodollar forward contracts

You are considering two contracts: a Eurodollar futures contract with six months to maturity, selling at 5%, settled on three-month LIBOR, marked to market every day; and a Eurodollar forward contract ...
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1answer
65 views

What is the state of the art govie bond term structure recently

Specifically, the US govt bond market is segmented and the shape is difficult to model in a structural model, because recently there is a maturity gap from 12 to 20 year, and the front and back ends ...
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1answer
52 views

How can I simulate the Yield Curve?

I would like to simulate the Yield Curve and Yield Curve changes and then use this data to evaluate bond hedging strategies. I certainly need a model like Nelson-Siegel, but how can I simulate changes ...
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1answer
65 views

VBA Black Scholes Implied Volatility

I keep getting a Implied Vol. = to my initial guess, My code is as bellow ...
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6 views

Valuating risky annuities. (Default & Recovery)

As the topic says, I want to price a risky annuity. There are 2 things that I'm uncertain of. Whether the probability of default is correctly defined. Value of payments in the event of default. In ...
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1answer
44 views

Two year spot rate meaning

I am trying to understand the concept of spot rates better. Does a 2-year spot rate indicate the rate you get for a two year bond or the rate you should discount the second year cash flow for an ...
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1answer
44 views

What's the best way to create a Bond Portfolio for Duration and Convexity hedging?

I need to create a bond portfolio, hedge it with duration / convexity and simulate yield shocks to . How would you proceed when creating the bond portfolio? Government or Corporate Bonds (or mixed?) ...
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41 views

Bond Change in Absolute or Relatively Percentage

Since most of the bonds prices are quoted in price, for example, bond price of 103 means 103% of the principal or face value (ex. $1000). Suppose a bond has modified duration of 4.62 years. If yield ...
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1answer
44 views

How to handle ON, TN, and S/N in quantlib

I'm wondering how to precisely handle the quote convention of ON, TN, and S/N of FX quote. How to handle these convention in quantlib. Here is my code, is that correct? ...
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1answer
34 views

How can i calculate the yield given price, or price given yield for a callable bond, with several callable dates and strike prices (quantlib)

import QuantLib as ql ql.Settings.instance().evaluationDate = ql.Date(2,3,2020) maturity = ql.Date(10, 5, 2023) coupon = 0.09 issueDate = ql.Date(30, 12, 2019) frequency = ql.Semiannual dayCount = ql....
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46 views

how can i see the cashflows of a specific bond created in quantlib in Python? this is the code i have, how should i change it

This is the code i have, what would be the way to see the cashflows of this specific bond i created
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41 views

Hedging Bond portfolio with Futures

I am working on a risk department. Our portfolio contains mostly some long German bond 15y and we tend to hedge it through BUXL and BOBL via PCA but our 15y key rate duration is not properly covered. ...
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1answer
100 views

How to replicate the future instantaneous short rate?

Suppose we have an interest rate model $R(t)=\alpha(t)d(t)+\sigma d\tilde{W}(t)$, where the brownian motion is under the risk neutral measure. Suppose $S(t)$ is the price at time $t$ for a contract ...
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1answer
59 views

Valuing a floating-rate bond [duplicate]

Suppose we have a floating-rate bond with arbitrary face value. I am given to understand that the value of such a bond is the face value, at the time it is issued and also after each coupon payment. ...
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27 views

Fair value calendar roll

I am trying to replicate a sell side report that calculates the fair value of the calendar roll. I assume the proper way to do this is to get the forward prices for the cheapest to deliver securities ...
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27 views

Bond future pricing and credit spreads

I am trying to understand where the credit spread of the Cheapest to Deliver (CTD) bond should appear in the bond future pricing formula. I am following the pricing formula described here. I ...
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1answer
64 views

yield curve basics

Suppose we observe the following term structure (of annualised spot rates): 0-3 Months $\rightarrow$ 4.0%. 0-6 Months $\rightarrow$ 4.2%. 0-9 Months $\rightarrow$ 4.4%. Question1) How can we ...
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27 views

Is the value of an Asset-Swap (Underlying + Swap) the same value as a floating-rate bond with the same issuer, maturity, etc.?

I am trying to evaluate the impact of switching an Asset-Swap Package (fixed bond + Swap) into a floating rate bond of the same issuer with the same notional and maturity. My intuition would tell me ...
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25 views

relation between duration and credit risk

I am curious if there is a relation between duration and Credit risk measure for callable bonds. I recall seeing it somewhere but can't find the details. Credit risk measure would be sensitivity of 1 ...
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1answer
39 views

Why Bond pricing formula is changed? [closed]

When I first learn about finance, a bond with continuous yield was priced via $$Z = e^{-rT},$$ where $r$ is the yield, $T$ the time to maturity. But, when I learned about stochastic interest rate ...
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1answer
47 views

Valuation of a REPO

I thought I had a pretty good grasp on how to calculate this but I'm getting questioned on it and just want to be sure I'm not getting it mixed up. In my notation you enter into the repo contract at $...
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2answers
141 views

How do you calculate value at risk on a portfolio of fixed income instruments

I'm curious about this question both for a parametric "Delta" style approach and a Monte Carlo full revaluation approach and I will lead one question into the next. Taking the "Delta" approach first. ...
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1answer
28 views

What estimation method is best to conduct event study on unconventional monetary policy

I have collected bond yield data from 01/01/2008:31/12/2019 for several euro-zone countries. I would like to conduct an event study analysis of the main Non standard measures announced by central ...
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72 views

Libor transition to SOFR - swaps after 2021

Assuming that Libor will fully transition to SOFR by the end of 2021. How are swap rates after 2021 currently priced to reflect this? For example, if I am looking at 5 year US swap rate, doesn't this ...
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2answers
304 views

How could Renaissance Technologies have near real-time prices on corporate bonds and other debt? [closed]

Julie Segal, What Renaissance Technologies has that you don't..., Institutional Investor, October 17, 2017. Does this just mean they are aggregating data from vendors like MarketAxess? Or is ...
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23 views

How to short Turkey? How to get exposure to local currency-denominated debt?

After some research, I decided to open a short position on Turkish Lira (TRY), and I'm also looking to short TRY-denominated debt. To short the TRY-denominated debt, I'd need to short-sell a TRY-...
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12 views

Stale prices: Greek government bond yields

I am analysing the effects of some Central Bank's policies on asset prices. Among others, daily 5y and 10y Greek government bond yields are part of my dataset. Data are fromm Datastream. I know that ...
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1answer
126 views

Bond quotes to EDSF

I am having a hard time understanding what "EDSF" (Eurodollar Synthetic Forward Curve) represents as a bond pricing benchmark. I have seen bonds quoted as spreads to EDSF with maturities < 2 years ...
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1answer
66 views

Treasury zero coupon curve for discounting two bonds but OAS different on Bloomberg

Using zero coupon Treasury curve, I discounted a 10% coupon bond. Using the same curve, I discounted a 5% coupon bond. Both these bonds have the same maturity. Since I discount both these bonds using ...
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0answers
58 views

Bond Hedging: PCA and regression based hedge ratios

This is my first question and I would very much appreciate any help. For a project I am trying to compare different hedging techniques for hedging a long portfolio of bonds. I have a history of ...
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2answers
55 views

Bond interest rate, the relationship between a bond's interest rate and its present value, and discount rate [closed]

Consider this equation for calculating the Present Value of Bond that pays a coupon and its face value at maturity: C is the coupon, r is the interest rate on the bond, m is the number of times it ...
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0answers
38 views

Quantlib ZeroCurve interpolation

I'd like to check how QuantLib does interpolation on rates if I use ZeroCurve constructor. As it was mentioned here, by using curve.nodes() you can get a list of ...
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15 views

Historical data on european corporate bonds [duplicate]

I am trying to run a factor analysis on European corporate bonds and I need historical data since mid - late 90s on : 1.bonds listed 2.spread 3.firm´s total debt at the time 4.Sector of firm 5....
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40 views

$E_p(e^{-\int_j^k r(t)dt})=B(0,j)$

Consider $r(t)$ the spot rate of default-free interest where $B(t,T)$ represents the $T$-maturity zero-coupon bond price at time $t$. Also assume, we are taking the expectation under the risk-netural ...
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31 views

Fixed income management problem

First of all, hope everyone is safe and sound. I would like to describe the following scenario and my thinking Welcome any comments on my thought process!!! 3 swaps outstanding Pay fixed 100mln, ...
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43 views

Total Interest Rate Risk of a Fixed Income Portfolio

The classic Markowitz risk is $$f=\boldsymbol{x}^{T} \Sigma \boldsymbol{x}$$ Now say I have a duration vector $\boldsymbol{d}$ for my assets; and also correlation (of say change of yield) matrix $\...
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1answer
60 views

Show that a zero-coupon bond discounted by a bond with mautrity $T$ is a martingale under the $T$-Forward measure

Here's the exact question: Show that for any $s>0$, $\frac{P(t,s)}{P(t,T)}$ is a $Q^T$-martingale. Here's my attempt: Let $t^\prime < t$. First consider the case $s>T$. \begin{aligned} \...
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1answer
68 views

Normalizing with Sum of Zero-Coupon Bond Prices

Suppose you are receiving a payment $K$ at time $t_m$. Let $p(0,t_i)$ be the maturity-$t_i$ zero-coupon bond price at $t=0$. If we consider a discrete time $\{0,...,t_m\}$, what would it mean to ...
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1answer
89 views

Zero Curve from a par curve curve QuantLib

I'm trying to understand why pricing a par bond with zero curve, contracted from par bonds themselves doesn't give me par. (Based on examples here) ...
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1answer
76 views

Interpolation for discount curve building QuantLib for bonds

I'm trying to figure out how to build a discount curve to price bonds from spot rates using some advance interpolation methods like PiecewiseLogCubicDiscount. I know I can build this curve with ...
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28 views

How to model the different returns of agents with different information information

For a seminar, I would like to graphically represent the returns made by agents of different information standpoints. In other words, say I have a market tuple $(\Omega, \mathbb{F}, P,S)$ where $S$ is ...
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1answer
98 views

Difference between Price and Value in Forward and Futures

Consider forward and futures contract on a zero-coupon bond. Denote the time $t$ forward (contract) price on a $T_2$-maturity zero-coupon bond with delivery date $T_1$ as $F(t,T_1:T_2).$ Similarly, ...
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1answer
74 views

Zero-coupon Bond Price, Yield, and Forward Rate

Consider a discrete-time trading economy with varying maturities of zero-coupon bond. Let $p(t,T)$ be the time $t$ price of a zero-coupon bond maturing at $T$. Similarly, let the time $t$ yield on a ...
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52 views

Handling illiquid bonds in a fixed income index

I am trying to create a fixed-income index for my country's bond market. Among other things, I am interested in extracting the weighted average (by market cap) yield to maturity. In order to do this, ...

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