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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36 views

I am looking to bootstrap a USD and GBP yield curve: what are some of the futures and swaps I can use that are findable on Bloomberg?

Getting overnight-to-12 month LIBOR on Bloomberg is easy. Had difficulty finding GBP futures (range of maturities) on Bloomberg. Any tips (both USD and GBP)? Swaps (maturities all the way to 30 years) ...
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64 views

How to calculate the new price of a bond using duration rule and duration with convexity rule?

A bond with a 30 year maturity, par value of $1000 and is 8% p.a. coupon is selling at an yield to maturity of 8% p.a. The modified duration of the the bond at its yield is 11.26%, and its convexity ...
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65 views

How to determine the cash flows of a Mortgage backed security?

Suppose there is a $400 million mortgage pass-through security with a 7.5% pass-through rate, a weighted average coupon of 8.125% and a weighted average maturity of 357 months, how to compute the cash ...
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How to calculate the monthly cash flows of Mortgage Pass through Security?

Suppose there is a $400 million mortgage pass-through security with a 7.5% pass-through rate, a weighted average coupon of 8.125% and a weighted average maturity of 357 months, how to compute the cash ...
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234 views

Yield of a Bond

If we have a coupon bearing Bond and want to calculate it's Yield then what is the standard practice to determine the ...
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64 views

Is there some sort of index of products, their description, and pricing?

I'm imagining some sort of site where you can look up all sorts of products that are traded (swaps, bonds, options, and all the variations that they exist in), and then the site gives an extremely ...
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34 views

How do I hedge two/three zero coupon bonds with different maturity under Vasicek short rate model?

I am working on the case that I need to hedge two bonds with different maturites under Vasicek model, which is \begin{equation} dr_t=a(b-r_t)dt+\sigma dW^Q_t \end{equation} and I know how to price the ...
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34 views

Concavity of Cumulative Accuracy Profile curve

I am writing my thesis for the default probability estimation in low default portfolios. One way to estimate the probability of default is from the Cumulative Accuracy Profile (CAP) curve (Marco Van ...
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95 views

Convention for computing returns on bond futures

From the CME website, we know that the contract unit for bond futures is "face value at maturity of $100,000". Which of the following is more appropriate the convention to compute "...
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293 views

How to compute par yield from zero rate curve?

How does one calculate the below two-year par yield given the zero rate curve: Assume the following two-year zero rate curve, with continuous compounding: ...
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72 views

Proper way to calculate spread between bonds and Swap

In the place I work they are calculating the spread between bonds and swaps as follow... Bonds vs Swap spread = (Swap bid-ask spread) / (Bonds bid-ask spread) Is this the "right" way to ...
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147 views

How to price this Bond

I have below Bond - Issue date : 1/1/2020 Principal 1,000 Coupon : 8% pa Frequency : Semi-annual Tenor: 2 years This Bond has 2 specific characteristics - At the ...
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61 views

How to price an Annuity

When we price a fixed rate bond using Quantlib, we generally take below approach - ...
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39 views

Ultrashort ETFs and YTM

Currently I hold the ETF JPST with steadily declining yield. For example, the last published YTM was .81 on 6/30/20, and the most recent SEC daily yield was .57 on 8/7/20. My question, with JPST as ...
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87 views

Interest rate swap performance attribution

I have learned some attribution models such as Campisi. It decomposes the return of bond into treasury return, spread return, and coupon return. It works like: $$r = y\times dt - D \times dy_\text{...
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56 views

How to optimise Fixed Income portfolio (Yieldbook) based on YTM, duration, rating and exchange rate

I have a fixed income portfolio built up in the Yieldbook and BBG Port. However due to some bad performance of my portfolio compared to the benchmark I would like to build up an optimisation which ...
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112 views

Does bond market trading price has recovery assumption in mind?

We all know fixed income seucirties have default risk which can be generated from CDS market. However, I am curious if the market trading price of a bond (say, $105) imposing any recovery assumption? ...
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How does rate expectations, rate volatility,firm value, and maturity effect credit risk?

I'm trying to understand several credit risk graphs seen in the FRM curriculum. The way the book goes it's hard to see how it ties together, so I'd like to try and do that now. The pictures are taken ...
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36 views

Quantifying Mortgage Refinance Incentive: Why define the Refi Incentive as the log of Mortgage Rate/Market Rate

I'm reading this research article, where they are using survival analysis to study mortgage prepayments. In this article they define the mortgage holder's incentive to refinance as: $Refi = log(Mr_t$ $...
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87 views

Which curve is better to approximate bond yields (python)

I would like to approximate bond yields in python. But the question arose which curve describes this better? ...
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150 views

Clean vs dirty price for bonds

Why the clean price is mostly quoted in the US bond markets and the dirty price is mostly quoted in the European bond markets?
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60 views

Step-up bonds should be more, not less sensitive to market interest rates, shouldn't they?

I keep reading that "a step-up bond provides more protection to an investor in the face of market interest rate fluctuations", that "a step-up bond typically performs better than any ...
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32 views

Bootstrapping zero curve for obligor creates jumps spikes

I am constructing a zero curve for a super national obligor for the period 2007 to 2015. I am using the universe of bonds available on Bloomberg to construct the zero curve from maturities 3m to 50 ...
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Harvesting Bond Term Premium and Roll Yield using curve plays with Oanda Continuous Contracts

Oanda has their own product pricing and method of rollover that stitches the futures contract prices. I was trying to implement a strategy that accesses the bond term premium and roll over yield for ...
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87 views

What is the most convincing method/formula for carry and rolldown (in nominal terms) of inflation protected bonds

It is interesting that there is no thorough discussion and clear derivation on this per my search. I know TIPS are complex (compared to nominal bonds). The naive use of simple spot/forward yield ...
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40 views

Use of Macaulay Duration to calculate the Funds Transfer Pricing Cost of an Amortizing Mortgage

I am asked to comment on the Funds Transfer Pricing methodology used by our Treasury to assign a Cost of Funds to a Loan. This is the current methodology: Let us say there is a 2 year loan with an ...
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225 views

Eurodollar future vs Eurodollar forward contracts

You are considering two contracts: a Eurodollar futures contract with six months to maturity, selling at 5%, settled on three-month LIBOR, marked to market every day; and a Eurodollar forward contract ...
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1answer
79 views

What is the state of the art govie bond term structure recently

Specifically, the US govt bond market is segmented and the shape is difficult to model in a structural model, because recently there is a maturity gap from 12 to 20 year, and the front and back ends ...
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1answer
78 views

How can I simulate the Yield Curve?

I would like to simulate the Yield Curve and Yield Curve changes and then use this data to evaluate bond hedging strategies. I certainly need a model like Nelson-Siegel, but how can I simulate changes ...
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205 views

VBA Black Scholes Implied Volatility

I keep getting a Implied Vol. = to my initial guess, My code is as bellow ...
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Valuating risky annuities. (Default & Recovery)

As the topic says, I want to price a risky annuity. There are 2 things that I'm uncertain of. Whether the probability of default is correctly defined. Value of payments in the event of default. In ...
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1answer
55 views

Two year spot rate meaning

I am trying to understand the concept of spot rates better. Does a 2-year spot rate indicate the rate you get for a two year bond or the rate you should discount the second year cash flow for an ...
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1answer
68 views

What's the best way to create a Bond Portfolio for Duration and Convexity hedging?

I need to create a bond portfolio, hedge it with duration / convexity and simulate yield shocks to . How would you proceed when creating the bond portfolio? Government or Corporate Bonds (or mixed?) ...
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44 views

Bond Change in Absolute or Relatively Percentage

Since most of the bonds prices are quoted in price, for example, bond price of 103 means 103% of the principal or face value (ex. $1000). Suppose a bond has modified duration of 4.62 years. If yield ...
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67 views

How to handle ON, TN, and S/N in quantlib

I'm wondering how to precisely handle the quote convention of ON, TN, and S/N of FX quote. How to handle these convention in quantlib. Here is my code, is that correct? ...
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74 views

how can i see the cashflows of a specific bond created in quantlib in Python? this is the code i have, how should i change it

This is the code i have, what would be the way to see the cashflows of this specific bond i created
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49 views

Hedging Bond portfolio with Futures

I am working on a risk department. Our portfolio contains mostly some long German bond 15y and we tend to hedge it through BUXL and BOBL via PCA but our 15y key rate duration is not properly covered. ...
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121 views

How to replicate the future instantaneous short rate?

Suppose we have an interest rate model $R(t)=\alpha(t)d(t)+\sigma d\tilde{W}(t)$, where the brownian motion is under the risk neutral measure. Suppose $S(t)$ is the price at time $t$ for a contract ...
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83 views

Valuing a floating-rate bond [duplicate]

Suppose we have a floating-rate bond with arbitrary face value. I am given to understand that the value of such a bond is the face value, at the time it is issued and also after each coupon payment. ...
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34 views

Fair value calendar roll

I am trying to replicate a sell side report that calculates the fair value of the calendar roll. I assume the proper way to do this is to get the forward prices for the cheapest to deliver securities ...
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31 views

Bond future pricing and credit spreads

I am trying to understand where the credit spread of the Cheapest to Deliver (CTD) bond should appear in the bond future pricing formula. I am following the pricing formula described here. I ...
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1answer
78 views

yield curve basics

Suppose we observe the following term structure (of annualised spot rates): 0-3 Months $\rightarrow$ 4.0%. 0-6 Months $\rightarrow$ 4.2%. 0-9 Months $\rightarrow$ 4.4%. Question1) How can we ...
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Is the value of an Asset-Swap (Underlying + Swap) the same value as a floating-rate bond with the same issuer, maturity, etc.?

I am trying to evaluate the impact of switching an Asset-Swap Package (fixed bond + Swap) into a floating rate bond of the same issuer with the same notional and maturity. My intuition would tell me ...
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relation between duration and credit risk

I am curious if there is a relation between duration and Credit risk measure for callable bonds. I recall seeing it somewhere but can't find the details. Credit risk measure would be sensitivity of 1 ...
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52 views

Why Bond pricing formula is changed? [closed]

When I first learn about finance, a bond with continuous yield was priced via $$Z = e^{-rT},$$ where $r$ is the yield, $T$ the time to maturity. But, when I learned about stochastic interest rate ...
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87 views

Valuation of a REPO

I thought I had a pretty good grasp on how to calculate this but I'm getting questioned on it and just want to be sure I'm not getting it mixed up. In my notation you enter into the repo contract at $...
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2answers
159 views

How do you calculate value at risk on a portfolio of fixed income instruments

I'm curious about this question both for a parametric "Delta" style approach and a Monte Carlo full revaluation approach and I will lead one question into the next. Taking the "Delta" approach first. ...
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1answer
36 views

What estimation method is best to conduct event study on unconventional monetary policy

I have collected bond yield data from 01/01/2008:31/12/2019 for several euro-zone countries. I would like to conduct an event study analysis of the main Non standard measures announced by central ...
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Libor transition to SOFR - swaps after 2021

Assuming that Libor will fully transition to SOFR by the end of 2021. How are swap rates after 2021 currently priced to reflect this? For example, if I am looking at 5 year US swap rate, doesn't this ...

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