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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Accrued interest on RFR Floating Rate Note

On fixed rate bonds and IBOR based floating rate notes the next cashflow is known definitively in advance, therefore the accrued interest for a given settlement date is a trivial calculation typically ...
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treasury bond futures rolldown

Treasury futures contract has no carry, but what is its rolldown (if it exists)? In the above answer to carry, @Helin mentioned "...bonds have expected rolldown returns that will flow through to ...
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How to use DateGeneration with parameter Zero [closed]

what is the purpose of DateGeneration.Zero - the description is "No intermediate dates between effective date and termination date." is clear but how this is used. If there is example pls ...
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Bond Bid ask spread relative valuation

How can I use bloomberg and BVAL valuation quotes (AllQ),to determine whether BO spreads for a certain bond are too tight/or too wide,more than expected, shall I utilise comparable bonds,in which way? ...
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Defaulted bonds valuation [closed]

How can I value corporate bonds in default? I have access to both reuters and bloomberg terminals.
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What is the PDE for this interest rate derivative?

We have the following model for the short rate $r_t$under $\mathbb{Q}$: $$dr_t=(2\%-r_t)dt+\sqrt{r_t+\sigma_t}dW^1_t\\d\sigma_t=(5\%-\sigma_t)dt+\sqrt{\sigma_t}dW^2_t$$ What is the PDE of which the ...
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what is the rationale behind CTD (Cheapest to Deliver) mechanism in bond futures

why doesn't futures contract just stipulate a specific contract to be delivered. Is it because the futures seller cannot readily buy specific bond contracts?
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Quantlib t bills price using DepositRateHelper or FixedRateBondHelper

EDIT: I edit my question, as I didn't get any answers, my previous question was why in the python quantlib cookbook we see 2 different approaches for t bills 1. example using DepositRateHelper and 2. ...
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Discount factors curve shapes

I have 2 discount factor curves; DF 1 I expected every DF curve to have the shape of the 2nd one (almost a straight line), what does it mean economically when a DF curve has the shape of the 1st one? ...
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Help with Quantlib DepositRateHelper (unexpected maturity dates)

I've been working with the Quantlib DepositRateHelper and get some unexpected maturity dates and date pillars from the helpers when I have constructed them. In the example below, I have set a range of ...
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Quantlib Build a yield curve with 2 day conventions

I am following the example below; build a yield curve using tbills(deposit rates) and bonds, in the final step yield curve is built using deposit and bond helpers, but in the case where I have ...
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Python Quanlib : yearFraction returns same number when I change the valuation date

I am completely new to python/coding so apologies in advance if the question is too basic but I could not find the answer elsewhere. I am trying to calculate the daycount fraction from the settlement ...
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Mispricing models for non-equity asset classes

Despite risk-factor models like Fama/French (1993) or q-theory based models like Hou et al. (2015), others have proposed factor-models to capture mispricing in equities, e.g. Stambaugh/Yuan (2017) and ...
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Bloomberg FWCM vs FWCV

I'm helping my team to project 90-day T-bill forward rates. I have two options: using FWCM or FWCV in Bloomberg. My team has used FWCM. Today I opened FWCV and found that the rates for the same curve (...
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Intuitive way to think about Bond Futures in a long only cash portfolio

I think this is the intuitive way to think about specialness in bond futures, at least to my mind; therefore, I am wondering if my logic is correct: Cash Bonds have a forward price that is totally ...
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Construct yield curve using bonds and bills or bonds only? [closed]

I have: 3M,6M,1Y,2Y,3Y....bonds 1W,2W,1M,2M,3M.... bills To build the yield curve what is better: build a single curve using bonds+bills build 2 separate yield curves, 1 to price bonds made out of ...
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Tax obligation in collaterised loan

Typically physical assets e.g. gold are held as collateral for corporate loan. In case of default, the holder of the corporate loan (i.e. bank) can liquidate the collateral asset held to recover the ...
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Cost of Carry of a Steepener using Treasury futures

I want to get a sense of the cost of carry (pure carry in this sense - no rolldown) embedded in a dv01 2s5s steepener in treasury futures. The horizon is 3 months, or 0.25 years. The implied-repo rate ...
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How to value a bond with a credit spread

Suppose I have a bond, with a face value of 95, a coupon of 2%, and a maturity of 50 years. Suppose the discount curve is flat at 2%, and there is no credit spread. I am trying to calculate what ...
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Calculate Carry from Z-spread to Forward Spot Curve

I am considering a 5-year bond. I can buy this 5-year bond today, or I can buy it 3 months from now. My question pertains to carry on the forward position. If I buy the bond forward and use the ...
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Are there names from the third term onwards in the Taylor approximation for bond pricing?

The first terms are duration and convexity, but are there common names for the terms beyond this?
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FX Risk Reversal - RHS/LHS - Strike adjustments

I was wondering why ppl use the wordings being „rhs/LHS“ right hand side / left hand side when having an risk reversal for example Long EUR Call / USD Put and Short EUR Put / USD Call. Do they refer ...
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How to understand wedge?

It is heard that trading wedges (cap/floor straddle - swaption) is actually trading the correlation btw forward rates. How to understand this? Either swaption or cap/floor seem to be insensitive to ...
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Using LGD (Loss Given Default) in the trading of bonds

Do you use the LGD as a risk management tool when trading credit cash bonds? Or it's more for trading the loan product.
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1 answer
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the difference between CS01 and RS 1%

Please tell me the difference between CS01 and RST 1% (Relative spreads tightening by 1%) and how these two are used to monitor the credit flow traded product's exposures. Why would you use the spread ...
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Quanto adjustment for bonds

Is there a simple formula for quanto adjustment for a bond denominated in foreign currency? I have a couple of bonds traded in foreign currency but due to big bid ask spreads I cannot identify the ...
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How OIS swap rates behave when we receive or pay OIS swap rates?

I am reading a news article regarding how OIS swap rates behave when we receive or pay OIS swap rates. The article states that when we receive OIS swap rates it makes swap rates fall. When we pay swap ...
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How does one put on a 2s10s trade using 2 and 10 year treasury futures contracts when the CTDs are not 2 and 10 year bonds?

The CME describes how to put on a 2s10s trade in this screenshot: https://imgur.com/a/CPi2PVJ Looking at current 2 and 10 year futures the CTD is roughly a 2 year and 7 year respectively. Am I right ...
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stressed VaR and VaR [closed]

Can someone please explain to me how most banks calculate their stress VaR. is there a regulatory-defined time series, such as the 2008 to 2009 period, to apply to the current position? My ...
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How to choose limit prices on IR futures when targeting a specific 2s10s spread?

I understand the concept of DV01s and when doing an interest rate future trade I need to use about a 2:1 ratio when trying to trade the 2s10s. This is explained here: https://www.cmegroup.com/...
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Pricing Risk Parity w/ Futures

I want to be able to price a risk parity index using the following prompt expiry futures contracts available from ECBOT and GLOBEX. Using a synthetic portfolio priced by adding the CASH VALUE of the ...
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Calibrating the Libor Market Model Multifactor

I try to calibrate the multifactor libor market model as described by Veronesi: Fixed Income Securities. In his book he used a PCA approach: $$ dlog(f_n(t, T_i , T_{i + 1})) = μ_f^{i + 1}dt + S_1 (T_{...
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How to correctly trade/price a x-mkt "Yield Curve "Box" " Trade? From Risk Weight onward

I see a lot of discussion/commentary of 2s10s box trades? Typically a US-CDA 2s10s trade. I understand that the fundamental concept is a flattener in 1 jurisdiction and a steepener in another. Meaning,...
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Comparative statics on $c/r$ using fundamental asset pricing equation

Consider the fundamental asset pricing equation for a perpetual coupon bond: $$rP = c + \mu P' + \sigma^2/2 P''$$ with standard boundary conditions $P(\bar x) = \bar x$ and $\underset{x\rightarrow \...
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Definition of continuously compounded yield for perpetual defaultable coupon bond

In continuous-time asset pricing, the price of a defaultable perpetual coupon bond is given by $$P(V) = \frac{c}{r}\left[ 1- \left(\frac{V}{V_b}\right)^{-\gamma}\right] + (1-\alpha)V_b \left(\frac{V}{...
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How to compute bid and ask price for bonds using TRACE data?

I am wondering whether there is a standard way in the academic literature on how to compute bid and ask prices for corporate bonds using the TRACE database. Even though TRACE is very popular dataset ...
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Is there any way to get cashflow amount including cashflow date in QuantLib?

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Business day convention in fixed income

I have a question regarding the business day convention. Suppose I have a bond that matures on the 17th of September 2023 and pays an annual coupon of $1%$. It has a $30/360$ day-count convention and ...
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Implied repo rate and slope of the yield curve

In page 34 of "Treasury Bond Basis" (Third Edition) by Burghardt et al, it says: If the yield curve has a positive slope, carry for someone who is long bonds and short futures is positive. ...
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Are risk-free-rate bonds and cash fungible?

I had a thought experiment: suppose you wanted to borrow an equity security from me (perhaps to short sell it). I ask you for collateral and a borrow fee, and in exchange you get the stock. If you ...
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Is there a dollar index against emerging market currencies

Is there a dollar index against emerging market currencies? The conventional dollar index (ticker DXY) is just an index against a few developed market currencies (the DXY is a weighted geometric mean ...
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Stripped treasury bond prices

I saw this paragraph in the SHV prospectus The Underlying Index is market valueweighted based on amounts outstanding of issuances consisting of publicly issued U.S. Treasury securities that have a ...
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The PDE of an Interest Rate Swap - ImplicitFinite Difference Method

Context: I'm stuggling to implement an implicit finite difference scheme on an Interest Rate Swap (IRS) with a single factor short rate model: I was following the textbook(Daniel J. Duffy - Finite ...
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Bond forward arbitrage relationships

I am trying to see if the following statement is true or not and I would really appreciate your help. The statement is as follows: $\forall $ Tradable Asset $V(t)$, $$ E[\frac{P(t,T_{i})P(T_{i},T_{i+1}...
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Understanding the Effective Duration and Convexity from Yield Book across MBS coupon stack

Yield Book, based on the 8/10 close, shows that the Effective Duration on 2.5s are greater than 3s and so on as we go up the stack. But with the PMMS at 4.99% on 8/10, I don't see how Eff. Duration, ...
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Negative Accrued for treasury bonds?

I am looking at some spreadsheets that show the US treasury bonds have some negative accrued. Why would that be the case? Shouldn't bond accruals always be positive?
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How does Bloomberg bootstrap CASH Instruments?

Given the following datas : If we do the bootstrap methodology for CASH Instrument we gotta : Calculate the DF associated to the Market Quoted Rate (2.91157). For the 3M Fixing we have : T = 0.26115. ...
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ML/AI in fixed income vs equity

From my perception of learning different ML/AI applications to finance I found there are lots of them in equity and not as many in fixed income. I wonder if the markets are different in some ways and ...
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Calculate Bond Price knowing Z-Spread

From my point of view, to calculate the price of a bond, we just need to add the discounted cash flows. The discount factor calculation is as follows: In my theory knowing the z-spread of a bond I ...
2 votes
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Munk (2011) exercise 3.6

I'm trying to solve the exercise in Munk (2011). The exercise reads: "Find the dynamics of the process: $\xi^{\lambda}_{t} = \exp\left\{-\int^{t}_{0} \lambda_{s} dz_{s} - \frac{1}{2}\int^{t}_{0} \...

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