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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23 views

Is there an Ops Risk in being short a bond on the redemption date?

I am trying to understand whether everyone needs to be long or flat when a bond is redeemed, or being short a bond at that time is also not an issue
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US Treasury 10 Year Note Futures Contract- Pricing

why is the CME/CBOT US Treasury 10 Year Note Futures Contract always priced above Par value, when the Acutal 10 Year Treasury Note is currently not priced above Par Value ? For example, the actual 10 ...
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58 views

Factor investing in government bonds

Could someone direct me to papers I can find on factor investing for construction of actual local bonds (not using etfs or sovereign bonds) in a portfolio for any local market. For me, I’m trying to ...
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23 views

Including Exogeneous variables in short rate models

I am trying to use short rate models (e.g. Vasicek, CIR or Hull-White) to forecast next one or two months yield curve. In this context, is there a way that I can include some exogenous economic or ...
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47 views

Quantlib match clean price with bbg clean price

I'm trying to match QL clean price with BBG clean price for POLGB 2.75 10/25/29 1029 priced for 15th of October 2021 for 2.5% yield. I'm not sure if my setup of bond is wrong or if there is a problem ...
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1answer
55 views

Duration and convexity of an open term loan/bond!

Imagine an open term loan with monthly interest payments of [x]% and the principle due when the loan is closed. Both the lender can call the loan, and the borrower can return the loan (with no penalty)...
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1answer
93 views

How to measure Steepener/Flattener/Butterfly sensitivity? (in 01)

This seems like a simple concept but I'm a bit lost. How can I calculate the dollar value sensitivity for a yield curve slope or butterfly position? I understand how DV01 can be calculated, but it ...
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1answer
48 views

Definition of OLOs Bond (Linear Bonds)

I'm hearing more and more about OLOs Bonds or Linear bonds, Can someone please explain the difference between this and classic bond ?
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1answer
60 views

How to calculate zero-coupon curve for Italian BTPs?

On the BTP curve, we have the following Bonds (just showing you an extract) I want to calculate z-spreads my self therefore I need the zero-coupon curve. How do I go about doing this? Do I look at ...
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2answers
173 views

How to minimize Nelson-Siegel parametric form

Problem I am given the following function to minimize (w.r.t. $\theta$) $$f= \sum_{k=1}^5 \Big [ \sum_{i=1}^{N_k} CF_{k, i} \cdot e^{-r(t_{k, i}, \theta)\cdot t_{k, i}} - P_k^* \Big]^2$$ where $\...
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49 views

When I borrow a bond, do I pay owner the coupons?

Or do I get to keep them for the duration of the repo transaction?
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56 views

QuantLib - Help buiding a simple T-Bond (Mischievous Pricing Conventions)

Im having a problem getting the right price for a simple T-Bond, maybe a Mischievous Pricing Conventions like Luigi says in his book. Im tying to price "912810SZ Govt" ...
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39 views

Question on estimating the probability of a bond being called

I'm doing a research on estimating the probability of a bond being called and found Sarkar's (2001) paper where a formula for this was derived using Ito's lemma as seen below: I have very little ...
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50 views

How to get a one day forward rate from OIS curve?

Let's say we have 1 month OIS Rate and a 2 month OIS rate. How can I construct a 1m1d rate? Bloomberg computes a lot of these one day rates for several months ahead. Thank you
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1answer
109 views

What maturity Treasury yield to use for risk free rate to compare against asset typically held for 10 years?

I have a quarterly return in quarter i for an asset which is typically held for 10 years. Which maturity Treasury yield should I use as a risk free rate in this context, and from what period? I ...
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1answer
77 views

Replicating Bloomberg Barclays index and sub-index monthly total and excess returns using constituent-level index-data

Bloomberg Barclays index returns (e.g. LF98TRUU Index "index_total_return_mtd" & "index_excess_return_mtd") and sub-index returns (e.g. BCBATRUU Index "...
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38 views

Inflation linked bonds

In the traders jargon, when they say they are long a linker, does it mean they bought a linker so they will gain from declining inflation or the other way around?
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42 views

Practitioner's explanation of the CIR short rate process

I understand intuitively that longer term bond interest rates are comprised of forward short rates. To be explicit, let me use the 10y bond spot rate as an example. The 10y bond spot rate is a ...
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53 views

Euro-Bund Futures fair value

I am trying to calculate the fair value via discounting the cashflows of the (synthetic underlying) for the euro bund futures (https://www.eurex.com/ex-en/markets/int/fix/government-bonds/Euro-Bund-...
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72 views

Hedging Curve Risk with Futures

Please help confirm/correct my understanding of hedging curve risk using futures. For example, if I purchased a 9y bond and hedged the duration risk (parallel shift) by shorting 10y treasury futures ...
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1answer
66 views

Yield to call on American style callable bond

(Assuming current bond price is quoted and maturity, par value, strike price all known..) I was wondering how do we calculate yield to call on American style callable bonds after the call date has ...
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62 views

Schedule, Yield-to-Maturity, and NPV of Fixed Rate Bond from QuantLib Python

I would like to price a fixed rate bond using QuantLib Python. The pricing is fine, however I would like to understand how to extract the Yield-to-Maturity (YTM) of the fixed rate bond, that is, the ...
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2answers
130 views

Is there a mathematical relationship between the spread on a collection of individual assets and the spread of a portfolio?

If the spread on each individual asset in a portfolio is known (and the duration and market value of these assets is also known), is there a relationship that can be used to deduce the spread on the ...
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1answer
110 views

Fixed Rate Bond Pricing using QuantLib Python

I have tried to price a fixed rate bond using Python QuantLib and I verified my answer using a DCF model. Below are my codes for the pricing of the fixed rate bond using Python QuantLib: ...
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1answer
170 views

Difference arising between Dirty Price and NPV using QuantLib Python

I have used QuantLib Python to price a fixed rate bond. My codes are as follows: ...
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61 views

ECB PSPP bond purchase program

Can someone please explain why the net purchases done by the ECB for certain months are negative for certain countries ? I thought the ECB only buys bonds no ?
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1answer
77 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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48 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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54 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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31 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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28 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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53 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
61 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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88 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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1answer
61 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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69 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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1answer
81 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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81 views

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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1answer
46 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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1answer
57 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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47 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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1answer
72 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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1answer
131 views

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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120 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
67 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
97 views

Problem with bond.bondYield Quantlib

I'm having issues with a simple FixedRateBond bond yield calculation using QuantLib: ...
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0answers
47 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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45 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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43 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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38 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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