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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Book recommendation for economic data realeases and their Impact on markets? [closed]
I was wondering if there is a practitioners book for reading markets signals and what key indicators move the markets (especially FX and Rates (Swap/Bond market) and how to interpret the signals?
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Yield Curve Flattening Trade
Relatively simple question, but came upon it in class and have not been able to come up with an answer:
The two-year bond yield is equal to 4% while the 10-year one is equal to 10%. You want to put ...
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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 bond yields 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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Why do we have CDS + Bond = Treasury?
In section 25.1, sub-section "Credit Default Swaps and Bond Yields", of "OPTIONS, FUTURES, AND OTHER DERIVATIVES", John Hull defines "CDS–bond basis = CDS spread - Bond yield ...
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Strange Market Data YTM for a Zero Coupon Bond
I am trying to compute the YTM of the following Zero-Coupon Bond:
The issue date was 13-01-2022 and the maturity date was 14-01-2023.
For me, it seems strange that the price remains "almost ...
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Popular treasury futures bond options volatility surface model/s
I am looking for volatility surface parametrisation model used for treasury futures bond options. I know that most popular for options on equities its SVI, on FX its Vanna-Volga, on rates its SABR. ...
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How do I calculate yield and trading margin of an Australian Dollar floating rate note?
I am trying to calculate the yield and trading margin on an AUD FRN in a robust manner. I am hoping someone can help with a few details.
I am forecasting cash flows and solving for the discount rate ...
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How to construct a forward exposure portfolio with bonds?
I was asked in an interview to get an exposure to 5Y5Y forward rate using bonds alone. Essentially it is short 5Y bond and long 10Y bond, and I needed to compute the relative weights. Regarding risk:
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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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How to calculate returns for interest rate futures
Say we have the active German government bond future, RXH3 and we wanted to calculate a series of returns for the active contract.
Would we calculate returns on the daily price difference? And if so, ...
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Python Quant Lib - Bond Pricing ex coupon period [closed]
were wondering If anyone knows how to use rate bonds on Python Quantlib, that have
an ex-coupon period.
For example the link below shows the construction of such a bond in the c++ quantlib
using
...
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Modified duration in multi-currency portfolio
I was thinking about how to figure aut duration for portfolio of bonds denominated in different currencies… I would like to compare sensitivity of portfolio to shift of yield with competitive ...
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Can one compute the total return of a fixed-rate bond without having the coupon? [duplicate]
Say that I have a historical series of yields and no coupon data because these yields come from a generic government bond, hence an constant maturity interpolation.
How would I go about computing the ...
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Why is Bloomberg showing difference yields than US Dept of Treasury
I am using historical 30yr US treasury rates for a project. When I downloaded the rates from Bloomberg by queuing the history of the USGG30YR index, I found the numbers different from what US ...
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What is the PDE for this interest rate derivative?
We have the following model for the short rate $r_t$under $\mathbb{Q}$:
$$dr_t=(2\%-r_t)dt+\sqrt{r_t+\sigma_t}dW^1_t\\d\sigma_t=(5\%-\sigma_t)dt+\sqrt{\sigma_t}dW^2_t$$
What is the PDE of which the ...
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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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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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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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Accrued interest on RFR Floating Rate Note
On fixed rate bonds and IBOR based floating rate notes the next cashflow is known definitively in advance, therefore the accrued interest for a given settlement date is a trivial calculation typically ...
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treasury bond futures rolldown
Treasury futures contract has no carry, but what is its rolldown (if it exists)?
In the above answer to carry, @Helin mentioned "...bonds have expected rolldown returns that will flow through to ...
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Bond Bid ask spread relative valuation
How can I use bloomberg and BVAL valuation quotes (AllQ),to determine whether BO spreads for a certain bond are too tight/or too wide,more than expected, shall I utilise comparable bonds,in which way? ...
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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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Defaulted bonds valuation [closed]
How can I value corporate bonds in default?
I have access to both reuters and bloomberg terminals.
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Bond Benchmarks Not relying on Bloomberg
I have previously hit this forum for some guidance on getting benchmark curve members (link below). I have managed to get this working with Bloomberg, but I was wondering, is there any way to reliably ...
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Can I use spot rates bootstrapped from a swap curve to price a bond?
Say that some corporation has a long position in a fixed rate bond. To turn this into a float-rate asset, they take a fixed paying position in a fixed/float swap. If we are given the par swap curve, ...
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Quantlib t bills price using DepositRateHelper or FixedRateBondHelper
EDIT:
I edit my question, as I didn't get any answers,
my previous question was why in the python quantlib cookbook we see 2 different approaches for t bills 1. example using DepositRateHelper and 2. ...
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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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what is the rationale behind CTD (Cheapest to Deliver) mechanism in bond futures
why doesn't futures contract just stipulate a specific contract to be delivered. Is it because the futures seller cannot readily buy specific bond contracts?
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Discount factors curve shapes
I have 2 discount factor curves;
DF 1
I expected every DF curve to have the shape of the 2nd one (almost a straight line), what does it mean economically when a DF curve has the shape of the 1st one? ...
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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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Are there names from the third term onwards in the Taylor approximation for bond pricing?
The first terms are duration and convexity, but are there common names for the terms beyond this?
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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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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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difference of carry for zero coupon bonds in Pedersen and Ilmanen
I know that carry was discussed broadly on this forum but I can't get my head around the following difference.
If we talk about carry / rolldown I have trouble to see the connection / differences ...
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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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Bloomberg FWCM vs FWCV
I'm helping my team to project 90-day T-bill forward rates. I have two options: using FWCM or FWCV in Bloomberg. My team has used FWCM. Today I opened FWCV and found that the rates for the same curve (...
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Quantlib Build a yield curve with 2 day conventions
I am following the example below;
build a yield curve using tbills(deposit rates) and bonds,
in the final step yield curve is built using deposit and bond helpers,
but in the case where I have ...
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Help with Quantlib DepositRateHelper (unexpected maturity dates)
I've been working with the Quantlib DepositRateHelper and get some unexpected maturity dates and date pillars from the helpers when I have constructed them.
In the example below, I have set a range of ...
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YTM calculation of a portfolio
Should I take in count future which are used to lower the duration to calculate the portfolio's YTM ?
(Bloomberg calculate portfolio's YTM without Future)
Im currently doing the weighted average. I ...
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Python Quanlib : yearFraction returns same number when I change the valuation date
I am completely new to python/coding so apologies in advance if the question is too basic but I could not find the answer elsewhere.
I am trying to calculate the daycount fraction from the settlement ...
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the difference between CS01 and RS 1%
Please tell me the difference between CS01 and RST 1% (Relative spreads tightening by 1%) and how these two are used to monitor the credit flow traded product's exposures. Why would you use the spread ...
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Mispricing models for non-equity asset classes
Despite risk-factor models like Fama/French
(1993) or q-theory based models like Hou et al. (2015), others have proposed factor-models to capture mispricing in equities, e.g. Stambaugh/Yuan (2017) and ...
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Intuitive way to think about Bond Futures in a long only cash portfolio
I think this is the intuitive way to think about specialness in bond futures, at least to my mind; therefore, I am wondering if my logic is correct:
Cash Bonds have a forward price that is totally ...
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Construct yield curve using bonds and bills or bonds only? [closed]
I have:
3M,6M,1Y,2Y,3Y....bonds
1W,2W,1M,2M,3M.... bills
To build the yield curve what is better:
build a single curve using bonds+bills
build 2 separate yield curves, 1 to price bonds made out of ...
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Tax obligation in collaterised loan
Typically physical assets e.g. gold are held as collateral for corporate loan. In case of default, the holder of the corporate loan (i.e. bank) can liquidate the collateral asset held to recover the ...
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Cost of Carry of a Steepener using Treasury futures
I want to get a sense of the cost of carry (pure carry in this sense - no rolldown) embedded in a dv01 2s5s steepener in treasury futures. The horizon is 3 months, or 0.25 years.
The implied-repo rate ...
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How to value a bond with a credit spread
Suppose I have a bond, with a face value of 95, a coupon of 2%, and a maturity of 50 years. Suppose the discount curve is flat at 2%, and there is no credit spread.
I am trying to calculate what ...
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Calculate Carry from Z-spread to Forward Spot Curve
I am considering a 5-year bond. I can buy this 5-year bond today, or I can buy it 3 months from now.
My question pertains to carry on the forward position. If I buy the bond forward and use the ...
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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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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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