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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How can you convert the CUSIP of a bond issue to the CUSIP of the company's stock/
As part of a research project I ran a query on the Mergent FISD database using the WRDS website. The output included the CUSIPs of numerous bond issues (>10000). I am using this data to run event ...
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1answer
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What is lagged interest rate?
I am trying to reproduce a plot in "Statistics and Data engineering for Financial Engineering" by D. Ruppert. The author uses the risk free returns data available in the Ecdat package in R. ...
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Matlab; How to specify Coupon frequency for Interest Rate Swap
I'm trying to price an interest rate swap and would like to change the default coupon payment frequency from 1 a year to 2 or 4 a year. I'm using
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RQuantLib, Hoadley and Bloomberg YAS: fixed rate bond pricing differences?
I'm trying to price a fixed rate bond one year from now on.
The bond is the PEUGOT 7 ⅜ 03/06/18, whose ISIN code is FR0011439975. I'm using such a specific example because in this way everyone can ...
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RQuantLib: any difference between FixedRateBond() and FixedRateBondPriceByYield() with flat term structure?
Please, consider the following functions from RQuantLib package:
FixedRateBond()
...
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1answer
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Yield on Fixed income futures
I am trying to get a simplified model of the DV01 for the US 10YR Note futures but I cant figure out what the current yield is. When I back out the implied interest rate on the current TYM3 futures ...
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1answer
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Annual Percentage Rate and Yield
I found references relative to US where the Nominal Annual Percentage Rate or simply APR is defined as the simple interest rate (i.e. proportional to time and without compounding).
Instead the ...
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Is there a comprehensive reference book on US fixed income conventions?
In Canadian fixed income markets there is a nice handbook called Canadian Conventions in Fixed Income Markets (PDF). It contains detailed market standard pricing formulas for calculating prices, ...
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How to hedge the fixed leg of a swap contract?
I happened to get this question for Fixed Income Swap contract. (let's assume it's it's not cross currency).
If the fixed leg is paying 10% interest rate in this contract, but in the market the ...
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1answer
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is there a mapping from Altman Z-score for private companies to bond ratings or probability of default?
On wikipedia, there is a formula to calculate the Altman Z-score for private companies:
Z-score estimated for private firms:
T1 = (Current Assets − Current Liabilities) / Total Assets
T2 = Retained ...
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4answers
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What's the algorithm behind Excel's ACCRINT?
This question was originally posted on Stackoverflow:
As part of the Formula.js project, I'm trying to re-implement Excel's ACCRINT function (in JavaScript, but the language should not matter). I've ...
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2answers
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CTD and bond futures
I am reading a chapter on bond futures in Fabozzi's book. It states that without CF (conversion factor) the CTD (cheapest to deliver) would be the bond with the longest maturity and highest coupon. ...
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What is the clean price and dirty price of a risky bond?
Following up on this question: Yield of a risky bond, what is the definition of clean and dirty prices for a risky (defaultable, catastrophe, etc.) bond?
I would think the dirty price should ...
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Yield Curve Volatility
Let you have several issuers, and let each issuer have its yield curve built up with liquid plain vanilla fixed rate bonds.
Each yield curve has its slope and its curvature, and they obviously change ...
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1answer
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Why might a manager consider using an interest-rate in which the notional principal amount declines over time?
Say swap would be used to convert the payments of its portfolio of fixed-rate residential mortgage loans into a floating payment. Why might a manager consider using an interest-rate in which the ...
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How does a covered bond characteristics compare to a mortgage security for credit enhancement?
I need help with understanding how does a covered bond characteristics compare to a mortgage security for credit enhancement?
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1answer
320 views
Price difference between bond cash and futures
I used to trade German and US govt. bond futures and I am now having trouble understanding the price difference of these markets against the cash market.
For example, the 10 year german government ...
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3answers
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Interpretation of Macaulay Duration
I am having a difficulty conceptualizing the meaning of "Macaulay duration" - I want to note I completely understand the math, this isn't the issue. Modified duration & Efficitive Duration make ...
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1answer
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Reasonable Hull & White parameters
I am using a Hull & White model to simulate forward rates on US swap curve from the 1.10.2012. This is a part of a bigger picture, and I am interested in some reasonable values for the parameters ...
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1answer
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Calculating pre-tax cost of debt
This is a simple problem but I'm not sure about one aspect of it.
A company has 15 year bonds outstanding, with a 5% annual coupon, a face value of \$1000, and a current market value of \$1100. ...
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1answer
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desk's performance
I need your point of view in evaluating the monthly performance of a desk.
I have the daily
credit risk capital requirement (A);
the net banking income or GNP (B).
What is the best measure of the ...
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3answers
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Treasury Bond Yield Curves in R
Does anyone know if I can access interest rates series from the treasury using R? I tried yahoo! Finance and it doesn't seem to have this kind of information.
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2answers
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How to calculate discounted inflation and growth?
Given the nominal bond yield and the inflation index bond yield (earning yield), how would one calculate the discounted inflation rate (discounted earning growth rates)?
These two factor seems to ...
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2answers
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Where can I find corporate bond spreads?
I am trying to price a 30 yr bond maturing in December 15, 2035. The bond is rated A- (S&P). Where can I find the spreads for corporate bonds rated A- maturing in 23 years (December 2035)? I ...
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1answer
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About Option Adjusted Spread, rate curves and bonds comparison
I have few questions about using OAS as a measure of risk:
does OAS allow for comparison between bonds with and without embedded options (e.g. a callable bond against a plain vanilla one against a ...
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2answers
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VaR for corporate bonds
I am trying to create a simple risk calculation for the portfolio (ignoring correlations for the moment). I have some corporate bonds with limited daily price changes. Any one have ideas how I can get ...
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1answer
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T-note returns from T-note yields … derivation of Damodaran's formula
Damodaran's historical data on 10-year T-note returns (found here) uses the following formula to calculate the 1-period total return on a T-note ($R_1$) given the 10-year constant maturity yield-to-...
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Looking for FpML best practices
We want start using FpML within our organisation; where message will be sent using FpML.
What are best practices to do this ?
If anyone who have used Tools as well as; i want to use FpML for ...
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1answer
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Implied forward rates puzzle
Here's an interesting cocktail puzzle related to the term structure of interest rates.
One of the primary competing theories for explaining the term structure of rates is the Rational Exepctations ...
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3answers
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How to properly interpret accrued interest of bonds
Ever since I work in finance I was wondering what accrued interest (AI) are good for (see the wikipedia article for a short introduction). I think I have a clear picture in mind now and the usual ...
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2answers
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Do Bond Put Dates always fall on Coupon Dates (for non-zero coupon bonds). Calculation rules for Coupon Dates
This may not be the most appropriate SE site to ask this question, but I can't seem to find a better place to ask, so here goes:
Do Puttable Bonds' put dates always fall on Coupon Dates? When they do,...
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2answers
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Is it true that pricing an IR swap doesn't require any stochastic model but calculation of the PFE of an IR swap would?
Pricing an IR swap doesn't require any stochastic model but calculation of the PFE for an IR swap would require the Hull White Model or any other stochastic short rate or forward rate model.
Is this ...
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1answer
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Risk Decomposition of Index linked Bonds
Do you know how to decompose the risk of index linked bonds?
To value a inflation linked bond, one plugs the real zero curve into the bond PV calculation, the real interest rate is as the fisher ...
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1answer
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How do I backfill the price of bonds for backtesting?
I need to backfill the price of bonds for testing a startegy.
The method employed is:
Regressing the YTM of the bond against a benchmark.
Using the regression estimates to calculate the YTM for the ...
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3answers
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What is a real world example of negative forward interest rate?
As the title says, I am looking for a real world example where a forward interest rate is negative.
Theoretically this is not a problem at all, if I look for a 3M forward interest rate that starts ...
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1answer
351 views
Where to find introductory material on leveraged loans?
What are some good, preferably free, introductions to leveraged loans, also known as syndicated loans or bank loans? The introduction should describe the basic mechanics and very importantly provide ...
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1answer
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What is an appropriate hedge ratio for hedging a credit instrument with equity of the same issuer?
Given a bond and a stock issued by the same issuer, what is the appropriate ratio of bond-to-stock one should hold in order to minimize the specific risk to that issuer? Equivalently, what is the ...
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What is the difference between Option Adjusted Spread (OAS) and Z-spread?
I am preparing for the CFA level 2 exam, I got confused by the concept Z-spread and OAS.
When a call option is added to a bond, since it is not favorable to the bond buyer, they would require more ...
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1answer
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Discrete time Ho lee model
This is my first question in this forum. I am stuck with my current testing the Ho Lee model. I am having difficulty computing the perturbation factor $\Delta$.
The ho lee model should be completely ...
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1answer
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Pricing a bond future with a basket of deposit futures
I have a future on a two-year UK government bond that I wish to price. The bond future expires in 3 months. I was thinking of building a portfolio of 3-month deposit futures (1 x 3 month deposit ...
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1answer
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Should we apply practical constraints on the distribution of monte carlo paths?
to limit interest rate paths to a 'reasonable' range (if we could define reasonable). Now we calibrate log-normal skew and mean reversion monthly to robust basket of atm swaptions and in and out caps....
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1answer
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Can duration gap analysis be applied to mortgages?
Can a mortgage loan be treated like a bond and its duration calculated using the bond duration formula? More precisely, can I calculate the loan portfolio duration for duration gap analysis, with ...
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What are the limits of bond portfolio immunization against interest rate changes?
I'm currently reading through an article on bond portfolio immunization against changes in the interest rate.
I learned that the immunization can be done against instant changes in interest rate etc.,...
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1answer
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Which approach is better for modeling option exercise strategies, rational or behavioral?
This question is most relevant to the evaluation of embedded options, such as the refinancing option granted to borrowers in the mortgage and bank loan markets, or the call option present in some ...
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1answer
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How would I value a perpetual bond with an embedded option?
I am trying to work out how to value the following transactions. It should be straight forward, since it breaks down into a series of well known instruments, yet I am not sure how to evaluate it:
...
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1answer
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What is the replicating portfolio of swaptions for a constant maturity swap (CMS)?
How do you replicate the payoff of a constant maturity swap rate?
That is, if the payoff of a contract pays the 5-year swap rate every year for 10 years, how would you replicate this payoff using ...
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Why is there a price difference between 30 year principal and interest STRIPS?
Sorry if this is obvious, I am not a professional. I like to trade 30 year treasury zero's.
I have noticed that the price for a 30 year principal payment is never the same as a 30 year interest ...
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1answer
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Correct way to calculate bond's Yield-to-Horizon
I'm creating some .Net libraries for bond pricing and verifying its correctness with a bond pricing excel spreadsheet (Bond Pricing and Yield from Chrisholm Roth) but I believe it calculates the Yield ...
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1answer
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How to value a floor when a loan is callable?
Certain bank loans pay a spread above a floating-rate interest rate (typically LIBOR) subject to a floor. I would like to find the value of this floor to the investor. Assume for this example that ...
