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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140 views
Cox-Ingersoll-Ross Zero Bond Put Option
according to Brigo & Mercurio (2006):
But how is the Zero bond Put of the CIR model? I couldn't find any information about that.
Thanks in advance.
Regards
Chris
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1answer
446 views
Hedging a trade for PCA component neutrality
Suppose I am given a set of financial instruments, e.g. {1Y, 2Y, ..., 30Y} interest rate swaps or {Barclays, Lloyds, .. } FTSE100 companies. It doesn't matter which so let's go with IRS.
I have ...
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354 views
Is my thinking on futures implied repo correct?
I am building analytics for futures and have a theoretical understanding. If implied repo > actual repo then I can short futures and go long the security and finance it in repo.
ON my Bloomberg ...
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1answer
78 views
Floating Loan Valuation and Par Value
Why is it true that the value of a floating rate loan is equal to its par value at payment dates?
How can one show this mathematically? I want to understand this both conceptually and mathematically.
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1answer
84 views
Treasury auction trading strategy (tails vs stop throughs)
All Treasury auctions stopped through this week across the 2, 5, and 7 year auctions. People are saying that dealers lost because dealers typically short then when-issued bond and cover at the ...
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2answers
1k views
Best topics to begin Quantitative Finance Research/Programming
I have a background in mathematics (Functional Analysis and Probability Theory) and am looking to acquaint myself with research in quantitative finance, particularly with a programming component.
...
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65 views
Question regarding loan tape data when thinking about providing credit facility to bank
I have few questions regarding loan tape data such as this one: Data
Say that I as a fund want to provide a credit facility to this bank and am given this loan tape data.
(1) What observations / ...
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0answers
39 views
Hedged portfolio dynamics under T-forward measure
I'm looking to find the hedging PDE for a multi-currency derivative $u(F_d, F_f, X,t, T)$ under the T-forward measure, using the delta-hedging argument (F - forward rate, X - forward FX rate).
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1answer
147 views
Fixed rate bond pricing issue in Quantlib
I cannot retrieve the same price for a fixed bond using quantlib.
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59 views
Dealing with day counts that span a weekend
Consider the following security:
CUSIP: 3130A3GE8
Federal Home Loan Bank
Maturity: 2024-12-13
Coupon: 2.75 % (CPN)
Previous Coupon Date: 2019-06-13
Today is ...
3
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0answers
234 views
Estimating Market Price of Risk
I need help with estimating market price of risk. Assume money market account and two risky assets which exposed to same two sources of risks follow process:
$dM(t)=rM(t)dt$
$dS_1(t)=S_1(t)(\mu_1dt+\...
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0answers
301 views
Using Python Quantlib's FittedBondDiscountCurve as Evaluator of Parametric Curve - Errors
I am using Quantlib's FittedBondDiscountCurve in Python 3.7 and setting MaxIterations to 0, and giving a guess_solution, which then turns the routine into an evaluator for the parametric form I choose,...
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0answers
46 views
Quesion about the VBA function of continuous cap look up [closed]
Here is the VBA function to calculate the cap price
Can anyone tell me what is N and t0? From the textbook, N = the number of reset (or payment) dates and t0 = time until the first reset date. But ...
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2answers
1k views
Calculating the Macaulay duration of a floating-rate bond
I am new to the pricing of bonds:
Suppose that I would like to price a floating-rate bond with par value \$100, with maturity at $T$ years from now, paying coupons semi-annually.
Suppose that $r_{n-0....
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133 views
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2answers
552 views
Misunderstanding of 'day counts' and accrued interest
I'm totally new to the fixed income world.
My goal with this question is to gain an understanding how interest is accrued day-by-day for a particular instrument. This will obviously be done by an app ...
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2answers
75 views
Is there any difference between “shorting a bond” and “selling a bond” concepts? [closed]
Shorting a bond means borrow it form other and sell. It seems to me that this operation is the same as just simply issue a bond. Am I right? If yes, then why do we use "shorting" terminology for bonds?...
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0answers
38 views
To price Municipal Bonds and risks I want to know the percent of unfunded pension liabilities ($3.8T) to total state and local gov liabilities
Unfunded pension liabilities keep growing and this seems alarming to both pension holders but also Municipal Bond holders.
I would like to know how large this problem is to better price Munis and ...
2
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0answers
220 views
Extract list of tickers bloomberg api [closed]
Does anyone know what is the python equivalent to the BQL.Query/BSRCH functions from the Excel API?
I am essentially trying to get a list of tickers for all government bonds from a certain country ...
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3answers
98 views
Why do some mutual funds or indexes have an average effective maturity that is way larger (2-4 times larger) than the average effective duration?
I would like to know if this difference occurs when the coupon payments are very large and/or if there are other reasons.
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1answer
94 views
Nelson & Siegel model (Fixed Income Securities)
I am well aware of the basic model formula and for what it is used, theoretically speaking, however I cannot find any concrete, problem solving exercises.
Soon, I will have to deal with this problem ...
2
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1answer
176 views
Stochastic Processes (Applying Ito's Lemma on Ho-Lee Model )
I seek a basic form (SDE) to understand the Ho-Lee model.
I already understand the models from Vasicek, Merton and Cox-Ingereoll-Ross, etc.. For example,
\begin{align*}
dX_t &= -1/2 \alpha X_t ...
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0answers
70 views
Markovian short rate in HJM framework
In Bjork it is proven in proposition 20.5 that a forward rate dynamics:
\begin{equation}
f(t,T) = f(0,T) + \int_0^t\alpha(s,T)ds + \int_0^t\sigma(s,T)dW(s)
\end{equation}
imply a dynamics for the ...
2
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2answers
235 views
Carry vs Roll-Down on a zero-coupon IRS
I am trying to understand the differences between carry vs roll-down on a zero-coupon interest rate swap.
Lets say we have a 10 day ZC IRS, meaning we will only swap once on maturity. We are a payer ...
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0answers
18 views
What is the most recent measure of the US Municipal Bond Market Size (Capitalization)?
$3.853 trillion in second quarter of 2018 according to Fed. Today?
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0answers
20 views
Are Muni REVENUE bonds secured or can the local gov. use the revenues for other purposes not paying the bond holders if its going bankrupt? [closed]
Municipal bonds are of two kinds: GO (General Obligation) Bonds or Revenue Bonds. My question on Revenue Bonds is: are the revenues from the specific project secured or can the local government use ...
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2answers
89 views
How do the following aspects lead to U.S. Repo shortfalls
A major theme in the markets this past week has been the repo rate hikes and the sudden disappearance of liquidity. Although most are confused as to the main reason, there seems to be a consensus on ...
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0answers
129 views
Difference between spread duration & IR duration for a fixed rate bond
I am struggling to comprehend the difference in impact between spread duration & IR for a fixed rate bond when yields move.
I know that both measures would be the same for a fixed rate bond but ...
2
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2answers
174 views
Origin of the $-\frac{1}{P}$ in Macaulay Duration?
Changes in the yield curve affect the total return of a coupon bond instrument, hence I want to compare different bond instruments in how sensitive they are to $y$.
Well, I just take the derivative, ...
2
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1answer
231 views
If 10s20s steepener have equal DV01 weighting on each swap then why does convexity play a role in MtM
Receiver Swap 10yrs
Notional: 1,000,000
DV01: +1,300
Tenor: 10yrs
Rate: 4%
Payer Swap 20yrs
Notional: 500,000
DV01: -1,300
Tenor: 20yrs
Rate: 5%
Looking at this fictitious example, I want to ...
2
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3answers
251 views
Systematic credit “liquidity provider” strategy
I was reading a piece published by Bloomberg today, where it says the following:
“A systematic process lends itself to providing liquidity rather than
taking it because our models have views on ...
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1answer
287 views
How would this 10s/20s steepener work
Say I'm interested in a trade that wants to execute a 10s/20s steepener
This is done via a receiver leg on the 10s and a payer leg on 20s
Look at the following example (the figures are all ...
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2answers
114 views
Fastest way to calculate YTM from bond price
I would like to calculate YTM for every top of the book update on the 10-year note traded on Brokertec. There is no closed form solution so have to use a root finding method like Newton-Rhapson. It ...
3
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3answers
124 views
Bond strategy in rising rate environment
During a period of rising interest rates, it makes sense for investors to either swap out their longer term bonds for shorter ones, or simply invest in shorter maturity bonds in order to reduce ...
3
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1answer
97 views
Investor rationale behind inverted yield curve
I just had a question regarding investors/markets rationale behind the cause of the yield curve. Assuming that investors believe that rates will be lower in the future and are pessimistic about the ...
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0answers
60 views
Autocorrelation in daily bond returns
I've been examining the returns of a few government bond series around the world. I found out that some have a positive daily autocorrelation. It's not big, but still seems at odds with efficiency. ...
2
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2answers
323 views
Carry & roll - question regarding the repo transaction
Could someone please explain the carry and roll trade that a lot of traders are doing with negative euro debt?
I read an example that they borrow in the repo market then buy a longer dated bond to ...
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2answers
255 views
Stress testing fixed income Yield curve with Nelson Siegel
I am attempting to stress test the Zero coupon Yield curve using The Nelson Siegel model as described in the following papers :
Generating Yield Curve Stress-Scenarios
Representative Yield Curve ...
2
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1answer
113 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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2answers
327 views
Libor Forwards from Swaps
I am trying to understand how to interpret a few forward curves that I grabbed from Bloomberg. In Bloomberg, you use ICSV command and choose the USD to Libor swap curve. I did this and grabbed the 1mo,...
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2answers
1k views
How exactly are corporate bonds priced at issue
I am interested in Debt Capital Markets but I am struggling to understand how bonds, particularly corporate bonds, are priced initially. I know that a company will tap an investment bank as book ...
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1answer
80 views
Negative 2y swap spreads
2y swap spreads have dipped below zero for the first time. Can this stay negative and invert more? If my math is correct, the negative swap spread for the 2y leg suggest that the expected path of 3-...
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1answer
574 views
How to understand interest rate bid/ask and apply client mark-up in Tom/Next Rollover Swap Point Calculation
When I am reading materials in swap point calculation for FX Tom/Next Rollover, I am confused with the market interest rate bid/ask.
Using an example:
I traded on ...
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1answer
72 views
Interest rate equation from bond price?
If a zero coupon bond price at time $t$, with maturity $T$ ($t<T$), is denoted by
$B(t;T) = B(T;T) e^{(-\int_{t}^{T} r(s) ds)}$
where $r(t)$ is a known interest rate.
How does this transform ...
2
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3answers
123 views
How do I derive a blend of a 3Y future and 10Y future risk?
So I have a portfolio of Govt. bonds that I'm trying to hedge with futures. Let's take one of the bonds out of the portfolio as an example.
In bloomberg, every bond and its future counterparts has a ...
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1answer
117 views
Calculating theoretical spot rates of treasury bonds beginning with treasury bills
In Introduction to Fixed Income Analytics by Frank Fabozzi, p. 41, there is an example how to calculate the theoretical spot rate of a 1.5 year treasury bond with a 3.5% annual interest and semiannual ...
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1answer
79 views
Daily accruals - when does it accrue?
Is there a convention on when interest should be accruing? That is, does interest on a bond accrue during the business day, or does it accrue overnight? Are you able to point me in the direction of a ...
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1answer
79 views
Measuring liquiduity of a portoflio of bonds
I'm currently looking into applying bond liquidity out of curiousity.
The Method i'm currently using is the Barclays LCS score (live.barcap.com/publiccp/RSR/nyfipubs/barcap-email-mkting/qps/LCS_In-...
2
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1answer
134 views
What are the best relative value frameworks for Corporate Credit?
Fixed Income (Credit) fair value models in the literature tend to be variations on cross-sectional regressions. For a recent example in a factor-model setting, see here.
My understanding is that this ...
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2answers
87 views
Which curve does the interest rate risk fall in?
For example, Australian government issues a bond denominated in USD currency? Which curve does the interest rate risk fall in? Australian Gov Curve or USD Gov Curve?
