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.

582 questions
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Derivation of CIR interest rate model [duplicate]

I am trying to understand the derivation of the Cox-Ingersoll-Ross interest rate model. This has a stochastic differential equation of the form $$dr=(\eta-\gamma r)dt + \sqrt{\alpha r} \space dX$$ ...
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Reconstruct yield curve from principal components

I am currently building a model which aim is to model shocks to the yield curve (i.e. 25bps hike in the short rate). Currently I am looking at a swap curve from which I derive the PCs. Assessing the ...
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Duration of a FRN in continuous time interest rate model

This question was inspired by my attempt to understand the duration of a floating rate note, or FRN for short. Several answers, like this, say the duration of a FRN is just time to next coupon payment....
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What is the value/price of a bond paying floating rate

I am going through J.C.Hull for swaps. Where he says we can value a swap using bonds. Let $B_{fl}$: value of floating rate bond, $L$ notional principal. Why is $B_{fl} = L$ just after a payment ? What ...
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Convertible bonds pricer - implementation

Where I can find numerical implementation (in any programming language) of convertible bonds pricer based on the following article: E. Ayache, P. A. Forsyth, K. R. Vetzal, "The Valuation of ...
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Calculating excess returns

I would like to know if I am calculating these excess returns correctly. I have here an R dataframe with weekly 3-month treasury bill rates, and the arithmetic ...
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Swap Curve and Forward Libor Rates

How does the (interest rate) swap curve incorporate forward libor expectations?
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Why do Treasury Futures settle at maturity with higher yield-to-maturity than the corresponding spot rate? [duplicate]

Absolute beginner on bonds, trying to understand why spot rates seen for US-T don't seem to line up with CME futures for ZT/ZB/etc at their maturity. For instance, ZB-U8 seemed to settle at 140-27 on ...
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Lottery calls on municipal bonds

I'm trying to independently price several municipal bonds with lottery calls. Based on market prices/yields I can tell that the price, ytw, etc. is not based upon the first viable call. What is the ...
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Bond and Stock Relationship

Is there any formulair relationship between the price of a corporate bond and the stock on the same company?
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Using above par zero coupon bond to build a zero coupon curve

Should I discard bonds above par (zero coupon bond with market price over par value) when I build a zero coupon curve? Most of the academic textbooks use bonds below par as inputs to build Zero ...
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How should we calculate the duration of a convertible bond?

For callable bonds we can use the effective duration to approximate the modified duration, since the future interest rates will affect the expected cash flows. For convertible bonds the underlying of ...
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YTM of “very-seasoned” bond issues

There is a liquidity premium between on-the-run treasury issues and off-the-run issues with similar characteristics. This is why when building a yield curve, typically on-the-run issues are used to ...
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Strategy in steepening curve environment, stable spreads - HotS interview problem

The following problem was found in "Heard on the Street": You construct a yield curve for (coupon-bearing) treasuries. A particular five-year corporate zero-coupon bond has a default risk ...
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Zero Coupon Curve and Floating Rates Notes pricing

Simple question: Can I use a Zero Coupon Curve (using Treasury or Swap Curve) to price floating rates notes (FRN)? I am building a classic Zero Coupon Curve, however I wonder if I can use it to ...
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how to change the value set by the addFixing method in QuantLib

Suppose we have had constructed an index for forecasting future interests of a floating bond, and as suggested by the official document, I used addFixing method to set a past fixing for the current ...
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Why Arent There Long Rate Models?

You have short rate models, https://en.wikipedia.org/wiki/Short-rate_model, but there doesnt seem to be any long rate models. I find this weird as in options modelling you model the whole smile, not ...
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Hedging Ratios for Fixed Income Instruments

If you buy a corporate bond and you want to hedge the interest rate risk, how would you know how many interest rate futures/swaps to hedge the bond with? The same with an MBS security, if you want to ...
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Pricing European Call on Coupon Bond in Lattice

What's the best approach to pricing a par call option on a coupon paying bond? Is it to discount the greater of the price and strike through the lattice? And for this, is the price used the dirty or ...
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How to calculate implied repo of a hypothetical bond that has not been issued?

I want to calculate the implied repo to a delivery date for a series of bonds that have not been issued yet. Do I make assumptions about the bond yields on some trade settlement date and the futures ...
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How to compare bonds in terms of volume traded in Bloomberg Excel Add-in?

I want to compare how much bonds of a handful of companies have been traded over the last years and pick the most traded bond for each company via the Excel add-in. One example of what I have tried ...
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For a fixed-fixed cross currency swap, can I use a curve with two floating legs to discount the cash flows?

I'm doing a USD to INR fixed-to-fixed cross currency swap. The default curve has a fixed and a floating rate. However, the curve that I'm looking to use has floating rates on both legs. Would this ...
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What's the most accurate benchmark index for US corporate and treasury bonds

I'm looking for an index for US corporate bonds and US treasury bonds to benchmark my strategy. I could easily use some ETFs as the benchmark for the recent years but I need data for the time range <...
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Credit Spreads and Relative Value : floating vs fixed bond

I would like to study if, in these weeks during the italian credit crisis, floating govy bonds were more resilient than fixed govy bonds. For each floating issue (CCTS) I chose the fixed issue with ...
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A basic question about short-rate models

Sorry, if it's a very rudimentary question. I mainly practice tax but have to deal with financial transactions from time to time where I have to benchmark option prices. I have usually used Hull's ...
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Repo advantage relative value (Treasury) [duplicate]

If a Treasury issue is trading special (100bp repo advantage vs GC in overnight repo), and it's worth -10bp in carry (assuming duration is 10) and the error to the Treasury spline is -5bp, would this ...
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How to compute bond drawdowns?

I came across a very interesting article which shows a picture with the drawdowns bondholders would have faced by investing in Fixed Income since 1919. The data is based on the Moody's seasoned AAA ...
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Say I am a long a 10Y US govt. bond and short (i.e., pay fixed) a 10Y US IRS. The swap spread moves, for example, from -0.25 to -0.3. What do I need to calculate P&L (approximately)? Are such ...
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Fallback Interest rate volatility for OAS model

The Bond OAS computation model used in our bank (The model was created in the 90s and the people who worked on it then are no longer part of the company) uses a fallback interest rate volatility of 27....
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Effect of volatility on Option Adjusted Spread

In the calculation of the Option Adjusted Spread, what effect will increasing the volatility have on the OAS number. The volatility only determines the ratio of the interest rates of different nodes ...
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why the implied repo rate is higher when choosing the last delivery date to deliver rather than first delivery date

there must be something very basic that I did not get.... I am reading a book. And it says the implied repo rate is defined as IRR = ( invoice price / cash bond price - 1) * 360/ n, where is the ...
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repo rate v.s. reverse repo rate

from a book, I read that repo rate is usually higher than reverse repo rate. i.e., the rate to financing a long security position is higher than the rate to lend cash using securities as collateral. ...
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OAS of a perpetual bond

How is the OAS (Option Adjusted Spread) of a perpetual bond with embedded option calculated? My specific point of doubt is the maturity that has to be used to construct the binomial tree for ...
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Difference Between FRA and IR Future pricing [closed]

[original question was to know the difference between IR fut and FRA] Turns out that FRA and IR Futures are just the OTC and Futures counterpart of the same underlying, that is, the interest rate. ...
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Adjusting for term structure of repo rates to get apples to apples picture

I'm looking at term repo rates and need to get a measure that removes the curve component so I can make an apples to apples comparison. I think the concept is similar to taking two Treasury bonds and ...
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How to adjust butterfly 2s5s10s swaps trade for directionality?

I am looking into a 2s5s10s swaps idea using a 50-50 weighting scheme, where it's 2 times the 5 year minus the 2 year and 10 year. However, there is a correlation between the butterfly spread and the ...
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why the financing cost of a bond is repo?

In a repo transaction, the cash borrower pays an interest in repo rate for borrowing the cash. On the other hand, the cash lender gets a bond as collateral. In this transaction, it looks like the ...
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what is the underling of treasury bond future contracts? and what determine/drives bond future's theoretical/market prices? [duplicate]

Am I right that the underlying is a basket of deliverable bonds? If this is the case, how is the bond future prices actually determined? If there was only one bond in the deliverable set, the bond ...
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Chat bot for traders [closed]

In the framework of my internship at a bank, I want to write a chat bot program in Python that allows our bond traders via their Bloomberg terminal chat box application to type in structured command ...
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What is the formula for the forward price of a inflation linked bond assuming there are coupons in the interim period and the deal is collateralised?

t2=forward settlement date P=Spot clean price AI0=Spot accrued interest r=repo rate t1=coupon payment date AIt2= accrued interest of the forward settlement date t0= now Proceeds Method: F(t2)=(...
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Bond Data on UK corporate

I have got data from FRED on Moody's Seasoned Aaa Corporate Bond Yield. Does anyone know where I can get such UK data on this? If not, would using exchange rates and the interest rate parity theorem ...
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Where can I download 10 year Treasury prices in OHLC format?

I'm looking for treasury prices (not yield) in OHLC format. On websites like this you can see it has intraday data, so we could drive an OHLC from it? But I can't find a website that lets me download ...
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How to change the YieldTermStructureHandle's referenceDate in QuantLib

Suppose we have already known the dates and rates of a spot rate curve, and I passed the data to the ZeroCurve class to construct a discount curve for bond pricing. What I wanna find is how to change ...
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Treasury spline curve, practical question

Wouldn't fitting a spline curve against 300+ Treasury bonds be similar across the street? I know there's different ways to fit/interpolate points to create a spline curve and I understand that every ...
The definition of Macaulay's Duration is the weighted average maturity of cash flows and is calculated as- $$D_{mac}=\frac{\sum_ttPV(C_t)}{V}$$ where $PV(C_t)$ is the present value of the cash flow ...