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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41 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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37 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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47 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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73 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
165 views

Discount margin on FRN - widening but bond price increasing?

Why would a bonds discount margin widen but its price increase? Shouldn't the price be falling when margins are widening? Looking at the bond pricing formula, if the price is higher doesn't the rate ...
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3answers
328 views

Why does the coupon effect mean that higher yields do not necessarily mean that a bond is more attractive?

In Tuckman, it says "The fact that fairly priced bonds of the same maturity but different coupons have different yields-to-maturity is called the coupon effect. The implication of this effect is ...
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56 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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2answers
719 views

Modelling callable bonds in a risk model (historical simulation)

What is a best-practice example on how to model callable bonds in a risk model - I focus on historical simulation (HS). For plain-vanilla bonds the input factors for historical simulation could be ...
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1answer
74 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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60 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
38 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
33 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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1answer
63 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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123 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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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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2answers
214 views

Treasury zero coupon curve for discounting two bonds but OAS different on Bloomberg

Using zero coupon Treasury curve, I discounted a 10% coupon bond. Using the same curve, I discounted a 5% coupon bond. Both these bonds have the same maturity. Since I discount both these bonds using ...
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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
83 views

Problem with bond.bondYield Quantlib

I'm having issues with a simple FixedRateBond bond yield calculation using QuantLib: ...
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1answer
824 views

How to price Swaptions with short rate models?

I have specified a (Lognormal) short-rate model (non-affine) under the Risk-Neutral measure $Q$ as a shifted exponential vasicek: $ r(t) = e^{y(t)} + \phi(t)\\ \text{with} \quad dy(t) = \kappa(\...
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44 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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1answer
181 views

What discount rates should I use to price a municipal bond with unknown market price?

I have a payoff structure but I do not know the price of the bond. The bond is municipal. What discount rates should I take for each period in order to calculate its fair price?
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101 views

Implied repo rate from carry component

Carry is coupon income + pull-to-par - financing cost. Pull to par is derived as ytm-coupon. So carry can be rewritten as ytm - financing costs. Carry cash value is the current dirty price minus the ...
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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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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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1answer
2k views

Forward Contract Price on Zero Coupon Bond

I'm trying to calculate the forward contract on a zero coupon bond where the forward contract matures at t=4. The zero coupon bond matures at t=10 and has a face value of 100. The price of that bond ...
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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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1answer
139 views

impact of bond futures conversion factor on calendar spread trading

i have a quick question about conversion factor and his implication in calendar bonds roll trading. I go short on a calendar roll (short front+long back) which has the same cheapest to deliver. The ...
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1answer
176 views

OIS Fixed Rate - how to calculate on trade booking?

I am trying to understand how the Fix rate on a OIS trade is calculated at trade initiation. I understand this process for a Fixed V LIBOR trade non collateralized ( discount and projection curve are ...
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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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3answers
219 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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1answer
421 views

Volatility considerations with interest rate derivatives

I am a bit confused about the practical use of vol surfaces used for derivative pricing. We know that the two main products that best represent market volatility are caps and swaptions, from which ...
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1answer
95 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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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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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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3answers
2k views

Calculating the Discount Margin for a FRN

I am working with a programming case where there are two methods of calculating YTM / discount margin for bonds and FRNs. Both methods use an iterative approach to find a rate / spread that ...
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1answer
143 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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1answer
503 views

question about the market quote from bloomberg

I am a little bit new in finance. Perhaps it is not suitable to ask here, but still, I would like someone can help me. What I have now in hand are normal volatilities taken from Bloomberg for a ...
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98 views

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
2k views

Calculating YTM for a floating rate bond

I am trying to understand how YTM's are calculated for floating rate notes. I have had a go at calculating it and I am always a few bps off for every FRN I try to calculate. Does anyone have any ideas ...
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1answer
61 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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1answer
198 views

Show that a zero-coupon bond discounted by a bond with mautrity $T$ is a martingale under the $T$-Forward measure

Here's the exact question: Show that for any $s>0$, $\frac{P(t,s)}{P(t,T)}$ is a $Q^T$-martingale. Here's my attempt: Let $t^\prime < t$. First consider the case $s>T$. \begin{aligned} \...
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5answers
275 views

What assets other than bonds are risk free?

I saw a question the other day that said Assume you have only two assets to build a portfolio. Name and explain three scenarios under which a completely risk-free portfolio can be formed? I ...

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