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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Question for CFA II, formula of portfolio sensitivities

I am studying CFA II and got the Qs with the below formula. I like to work out the proportional changes after yield curve shifted and just wondering how to calculate here. the changes in level are ...
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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 ...
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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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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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Why is carry divided by DV01 to scale it?

If I understand correctly, 6M carry in a fixed-floating interest rate swap should be the difference between the fixed and floating leg. When I read this on Page 2: https://corporate.nordea.com/api/...
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Convert UST Yield Curve to Spot Curve (Zero Coupon) using bootstrapping

Having the following UST Active Curve : Tenor Tenor ticker bid_yield Coupon 1M 912796XM Govt 1.891 0 2M 912796XV Govt 2.225 0 3M 912796V6 Govt 2.52 0 6M 912796XS Govt 3.026 0 1Y 912796XQ Govt 3....
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Is there a word or phrase with similar meaning to bond yield, but meaning yield on the actual price paid for a bond some time ago?

This is what I am looking for: (coupon amount) / (the amount that I actually paid for the bond some time ago)
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Treasury Bond Clean Price - Quantlib

The clean price of the Treasury 10 year bond on 6/30/22 is 98.8046 according to Bloomberg. The settlement day for treasury bonds is 1 day. I think this still means the clean price of bond is 98.8046 ...
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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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How to construct portfolio from monthly strategy that unwinds one year later?

In Rebonato and Hatano, The Economic Origin of Treasury Excess Returns: A Cycles and Trend Explanation (May 23, 2018) SSRN, there's a monthly long/short strategy that is only unwound after 1 yr. So ...
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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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ML/DS in fixed income asset management

I am new to the topic but I would like to read papers/books/anything interesting to learn more how ML and data science is used in buy side Fixed income Asset management firms. Factor investing/signals/...
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Ten Year Note Futures Implied Repo Rate calculation from CME Understanding Treasury Futures Document

I am trying to determine how CME calculated their Implied Repo Rates in table 3 on the penultimate page of the Understanding Treasury Futures Document: https://www.cmegroup.com/education/files/...
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How to scale t-bond yield movements on a chart to visualize its relative impact to the pricing of other assets?

How does one scale the 10yr yield on a chart to visualize its relative impact to asset valuations? I.e., so that the risk-free rate moving from 1->2% shows as a much larger movement than 11->12%....
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Can a Bond have FX Delta Risk?

Given we know the Notional Trade Price Currency in which the Bond Pays Coupons FX Rate from Bond Currency to USD Trying to understand if a Bond can have FX Delta Risk and how it should be computed?
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Economics of buying a dollar roll

This is a basic question. But I wanted to understand how a TBA short (buying the dollar roll) is economically short an MBS? For example, if an investor believes a specific coupon is rich, they could ...
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Comparing TBA and Spec OAS

For a specific coupon, if TBA TOAS is greater than a Specs TOAS, does that imply that the Specs are trading too rich to TBAs (given liquidity risk, payup risk, etc)? I realize relative value ...
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Why do some TIPS bonds have credit spread < 0 [duplicate]

If we look at the yield spreads on Bloomberg of some TIPS bonds, we see they have credit spread < 0 (i.e. their yield is even lower than their benchmark treasury bonds) Why is that the case. ...
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Macaulay Duration - Liability matching

Can someone provide a detailed example to prove the following statement: "When the investment horizon is equal to the Macaulay duration of the bond, coupon reinvestment risk offsets price risk.&...
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Bid/Mid/Ask credit spreads

I have seen in different terminals that credit spreads of a corporate bond (spread,Gspread,Ispread) can been calculated for different sides (ie Bid Mid,Ask Gspread). I wanted to ask if these spreads ...
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MBS Index replication month-end flows

Several investors track indices to gain exposure to specific asset classes. And these indices may be re-balanced on a monthly basis, based on market-cap etc which generates month-end flows from ...
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Why did Ginnie Mae MBS Net issuance decrease significantly in 2020-2021?

Net Issuance of Agency MBS can be thought of as driven by Existing Home Sales, New Home Sales, Cash out Refis, Amortization and Non-Agency MBS runoff. Based on this definition of net issuance, is ...
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MBS Dollar roll mechanics

Had a few questions on MBS Dollar rolls: How are dollar rolls affected by Interest rate Volatility? Does the OAS of underlying pools matter to dollar rolls, and if so, how do they affect it? Does the ...
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Interest Rate Volatility for Binomial Trees

Does anybody know where I can get the data or calculate interest rate volatility for modelling callable and putable bonds in binomial trees. I have swap curves data. Does any sources like Bloomberg ...
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Reasonable way to price swap under realized forwards assumption

I'm looking for a way to price swaps in QuantLib under the assumption of realized forwards, i.e. couple of weeks or months from today the yield curve would be the same as it is expected by the market. ...
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The price of liquidity

We are currently in the US Treasury roll period when investors are rolling from the previously issued notes and bonds into the currently issued notes and bonds, aka "Rolling from Off-The-Runs to ...
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Is it possible to simulate yield spreads for different bonds?

Let`s say I have different bonds from multiple issuers and I know the yield spreads for today. Is there a way to simulate those spreads for a future period like 1 month? I dont just want to simulate ...
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Treasury futures wild card option (Monte carlo simulation)

I recently joined a bulge bracket bank in New York City trading the long-end but mostly doing a lot of analysis until I get up to speed. I'm working on the Wildcard model which is going to be an ...
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Book recommendations for derivatives [duplicate]

I would like to ask you, if you could suggest me a good book regarding derivatives. Specifically, i would like a book which is more focused on how the derivatives are working and traded in practise ...
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Do you roll back the maturities and schedules when backtesting VaR for portfolios of bonds, options or future contracts?

I want to backtest VaR models which are applied to portfolios of products which have maturities (options and futures) and even schedules (bonds). I have a question which never came up when backtesting ...
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Bond value as a function of spread change and duration/maturity

I am trying to calculate the change of value in a universe of bonds given a series of shocks to the credit spread of each bond. As a constraint, the initial dataset only contains the spread change for ...
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Returns of an interest rate swap

I would like to calculate returns for a plain-vanilla (fixed-for-floating) interest rate swap. Consider, that I am long in USD 5-year swap rate, i.e. I'm holding a receiver swap for 5-year swap rate ...
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Model-Free Implied Volatility: Data of Expired Options and Bond Price

I am attempting to calculate Model-Free Implied Volatility for several equity indices (S&P500, NASDAQ100, CAC40, FTSE100, DJIA, EUROSTOXX50, NIKKEI225, NIFTY50). I wish to get historical data of ...
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Simple (?) question about expected bond returns

Newbie here. I should say upfront that I'm not a quant, just someone trying to broaden his knowledge of fixed income investing. I apologise in advance if I'm mangling some terminology. Imagine a ...
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How to calculate the yield of a perpetual bond that pays a floating coupon payment?

I know that perpetual bonds are becoming a rare phenomenon and that ones that pay a variable coupon are even rarer. However, I believe that there are such bonds out there, and I'm hoping that someone ...
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How to break down yield to maturity to different components?

Suppose we have the PV of a bond, as well as two separate streams of cash flows, say, $C_a$ and $C_b$ that make up the total annual cash flows $C$ (i.e. $C=C_a+C_b$). In other words, suppose we have, \...
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How can I optimize a Bond Portfolio in Practice?

I'd like to optimize a bond portfolio with different bond classes (government bonds, corporates, ...) and different ratings as well as maturities. Is this even possible to optimize such a portfolio? ...

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