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
58 views

Does credit default swaps have interest rate duration and credit duration?

Will a CDS have interest rate duration and credit duration? It does seem likely that the value of the CDS would depend on the underlying interest rate, or the spread. But when I try to Google this I ...
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42 views

Swap spreads behaviour before Treasury auctions

Not really a quant question but why would someone buy us swap spreads before a US treasury auction. I get the idea of bidding for the bonds and then using the swap leg to asw the bond but whats the ...
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41 views

Replicate an fixed income index in python

I am trying to replicate an fixed income index in python through linear programming. Data for all bonds in the index are available as well as index values. I intend to first create a free portfolio ...
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28 views

callable bonds with FDM

I am thinking of implementing a model to price callable bonds on a finite difference grid. I wonder how the Price to worst yield model will relate to it in terms of risks(or should do). What I expect ...
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24 views

option value for yield to worst model

I would like to understand if there is a way to imply the option value from the bond price for a callable bond. I understand the mechanics of calculation of the worst yield in the presence of many ...
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51 views

perpetual call time

I was checking a few callable perpetuals on Bloomberg and using their Yield calculated it is always shows Workout date to be the first call date for those bonds. I wonder why this is the case and if ...
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1answer
51 views

How To Properly use QuantLib to Replicate Excel's MDURATION Function

just wanted to ask how to use Quantlib on replicating Excel's MDURATION. Given the following parameters, I was able to get a value of 4.478837 via MS Excel's MDURATION Function. ...
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74 views

Quantitative interview questions - fixed income [duplicate]

I will pass a quant interview (fixed income). The interviewer said the questions do not have a right answer, they are not math exercises. He said the questions are like their job,the objective is to ...
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57 views

Short Eurodollar futures front v back month

What is the difference between shorting the front month, rolling it into a back month vs just shorting the back month? For example: shorting the front month and rolling the short every 3 months until ...
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51 views

Why is an FRN price equal to par on every reset date?

In the book "The money markets handbook" by Moorad Choudhry, it says that "on the coupon reset date an FRN will be priced precisely at par". Why is this? Would it not discount the ...
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75 views

Synthetic bonds with FX futures

FX futures price in the interest rate of different currencies, so can you use US treasury bonds (for example /zn) and FX futures (for example SGX USD/CNH FX Future) to create a synthetic bond of a ...
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A list of the 01's in the corporate bonds

I have frequently heard terms like DV01, CV01, PV01. Where can I get a list of these glossaries to study? I am not looking for a detailed explanation, just really a list.. Once I have the list, I can ...
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40 views

What is the way to calculate “Risky PV (Present Value)” (discounting including the probability of default) from bond yield curve?

Instead of using CDS spread to do risky discounting, I would like to use the bond yield curve. Can I directly use the discounting factors from the bond yield curve or do I need to figure out the ...
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51 views

Liquid products/indexes to hedge/price a corporate bonds portfolio

Generally, for a corporate bonds portfolio, what are the common risk factors that's hedge-able through some liquid products? I know we can hedge the rate-risk through treasuries. We have some ETFs for ...
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44 views

Different methodologies of building indices

Say have a basket of coupon bonds $B_i$ with $i \in \{1, ..., n\}$. Those bonds have different characteristics one from another. For example they differ in maturity, face value and coupon outstanding. ...
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64 views

Callable Corporate Bonds: Why Issue a Callable Bond That Has a First Call Date <6 months to Final Maturity?

My understanding is that firms typically issue callable bonds to benefit from possible refinancing in a lower interest rate environment. What, then, is the point of issuing a bond, say, today (06/30/...
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Why are bonds usually issued at par?

Bonds are not always issued at par, but they often are. From a standard finance theory perspective, this cannot be justified. For investors, the division between coupon and principal returns is ...
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111 views

What explains bond “convenience yields”?

Bond convenience yield refers to nonpecuniary benefits of holding bonds, that is, some benefit other than direct cash flows. Recently there has been much empirical academic research on such yields. ...
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1answer
54 views

Decomposing bond futures into the cheapest-to-deliver underlying bond

For a regulatory perspective, I need to decompose bonds futures into the underlying cheapest-to-deliver (CTD) government bonds on a given date. Suppose I have a 100 bond futures position on date $d$. ...
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2answers
84 views

Problem with bond.bondYield Quantlib

I'm having issues with a simple FixedRateBond bond yield calculation using QuantLib: ...
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45 views

Treasury Benchmark and Bond Pricing

I'm trying to figure out the connection between the following quantities but no luck so far. ...
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41 views

Option pricing under Vasicek, CIR, H-L and BDT model

I have implemented and calibrated recombining trees on Excel for the Vasicek, the Cox-Ingersoll-Ross, the Ho-Lee and the Black-Derman-Toy model. I now would like to price some options with these ...
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42 views

Covariance matrix of the returns of defaultable bonds

How can I compute the covariance of bond returns for a universe of bonds? Unlike equities, bonds have a finite maturity and thus there is a price path dependence as the bond matures and expires at par ...
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36 views

Pricing bonds with different coupon frequencies

Suppose that I have to price a bond that pays fixed rate coupons every three months but all other bonds of that issuer pays coupons every six months. Furthermore suppose that the six months bonds are ...
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56 views

How to backtest with fixed-income instruments

I'm running a backtest with the 5-yr and the 30-yr treasury bills going back to 1990, both with a weighting of 25%. How do I use their daily yields to adjust the portfolio through time? I've thought ...
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59 views

Book that considers stochastic interest rate models in discrete time?

Are there any books that covers interest rate swaps, futures, forwards etc. but have a discrete time model? I would like to go deeper into this without having to worry about the stochastic calculus. ...
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1answer
75 views

Coupon Adjusted Spread vs Z-Spread

Hi so I'm trying to figure out how to adjust for the coupon value in the Z-Spread of a given bond. For example we can take UKRAIN 9.75 11/28. The coupon is 9.75 which is quite a bit higher than the ...
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97 views

popularity of MOVE volatility index vs. (strikeless) TYVIX indices

I have a question about rates volatility indices and how indexation around this space seems to be fractured and relatively illiquid in comparison to the explosive success of the VIX index in equities. ...
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Pricing kernel representation

I am reading this paper https://mpra.ub.uni-muenchen.de/4969/1/MPRA_paper_4969.pdf pp.6-7 on discrete-time bond pricing. The model adopted is a a common affine model, the short rate follows \begin{...
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28 views

How to Calculate monthly excess returns from 3-Month Treasury Bill: Secondary Market Rate

I'm using portfoliovisualizer with their "dual momentum" function, I have selected out of market asset as cash, and left everything else as default - hopefully this link takes you straight ...
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1answer
85 views

Cash flow mapping on multi curve framework

I am trying to map cash flows according to FRTB pillar dates, on an Interest Rate Swap fixed Vs Euribor 6 months. Using the sensitivity preserving approach, under the OIS framework, this has to be ...
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72 views

What is “risk-hit ratio”?

In this article https://www.risk.net/awards/7741391/flow-market-maker-of-the-year-citadel-securities describing Citadel Securities the market maker, it says The firm’s electronically executed US ...
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1answer
145 views

What does a electronic dealer track in a RFQ market?

If you have mid price for rfq market in fixed income. What is the internal order book tracking at a bank? Customers dont place limit orders or do they? There arent any other market makers on your ...
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81 views

How is the “constant maturity” 10 year treasury calculated?

The Fed’s historical chart of the 10 year treasury yield is titled “10-Year Treasury Constant Maturity.” How exactly is the yield calculated?
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How do I calculate the bond index in case of the presence of corporate actions? to prevent a change in the value of index due to corporate actions?

I want to make index for the bond market, I read several methodologies and I didn't find a divisor in the equations used for bond index calculation. As i know from the stock indices that a divisor is ...
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1answer
155 views

How do I hedge yield spread?

We'd like to offer a product in which a notional amount $(N)$ is given, and the underlying is spread $(s)$ defined as, say, 30Y yield minus 10Y yield (both from treasury YTM yield curve). At the end ...
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2answers
140 views

Extracting the OAS out of an MBS?

I was reading about OAS and I'm wonder how one could "extract" (or "capture") the OAS out of a product by hedging out all the other risks. One of the explanations I got from OAS ...
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40 views

How is Inverse Super Floater built?

I am pretty new to fixed income and came across to a product called Inverse Super Floater. I am wondering, what are the components of this product assuming issue price of 100 (redemption amount of 100 ...
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1answer
104 views

Day-Count-Conventions T-bills, T-notes and T-bonds

I have a question regarding the day count conventions for T-bills, T-notes and T-bonds. So far I haven't found an official page that clearly states which method is used and I don't own bloomberg etc. ...
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44 views

Nominal bond yields vs. TIPS yields?

I am struggling with understanding the difference in yields between nominal bonds and inflation-adjusted bonds. With inflation adjusted bond like TIPS, every coupon payment in addition to the face ...
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80 views

What are some advanced methods for bond risk transformations?

Consider a portfolio of bonds within a given yield curve (e.g. Gilt curve), consisting of positions in every bond in the curve. I'm looking for ways to transform the risk of the portfolio into ...
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69 views

How to convert 3-month ED to 6-month LIBOR?

I know 3-month Eurodollar future prices and need to convert it to 6-month LIBOR. I calculated the 3-month LIBOR as : (100 - ED price) / 100 How to continue from here? Thanks for the help. Edit: I can ...
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3answers
115 views

TIPS (Treasury Inflation Protection Security) Information

I've recently been learning about TIPS and their role as an inflation protection instrument. If you buy a TIP even when it has a negative real yield-to-maturity, is it still possible to have a ...
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1answer
78 views

Bond's price expressed as a % of par

the following is causing a bit of confusion... In some countries, e.g. Brazil, I saw the bonds are quoted in "Unitary prices" (PU). If we pick an example where: ...
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35 views

Carry and expected return of a short bond basis position

If we assume net basis is 0, the bond trades above par, the bond’s yield > than the term repo rate, what is the expected pnl of being Short the ctd vs long futures? I would have thought the ...
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3answers
220 views

Carry and Pull to Par of a bond

I am of the understanding the true carry of a bond is yield - repo rate. And not simply coupon + repo cost because this doesn’t ...
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32 views

Euribor + margin

I have this bond assigment where I have to calculate the CF each quarter, given a constant EURIBOR3M rate of -0,539%. There is also a 1,6% margin per annum that I have to take into account. The ...
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84 views

How accurate is YTM as a reference measure of non-holding-to-maturity return?

We need to offer an estimated return of a non-hold-to-maturity strategy. Essentially, we borrow money from the market and buy a bond. Instead of holding the bond to mauturity and locking in a return ...
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1answer
62 views

yield vs OAS for floaters

I am wondering what metric is better at incorporating credit risk, is that OAS or effective yield for the floater coupon bonds? What intuition each of them carries out? When would I use or the other ...
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Is the price of the following inflation derivative observed/traded?

Let $M_{t\to t+2}^{\\\$}$ be the pricing kernel (SDF) from period $t$ to $t+2$. Let inflation over period $t$ to $t+1$ be denoted by $\Pi_{t \to t+1}$. Is it possible to observe the following quantity ...

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