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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1answer
181 views

How to calculate scheduled mortgage payment of a mortgage pass-through security?

I am trying to estimate the cash flows of Mortgage Backed Security. The example is present in the Fixed Income textbook written by Fabozzi. The problem and the solution is as follows:- Suppose there ...
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41 views

Hedge Active Duration by Issue Currency or Country of Risk

For example, lets say I own a bond issued by a company in Mexico that's denominated in USD and I want to hedge my duration exposure. I obviously need to hedge duration to the US yield curve. Do I ...
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626 views

Duration of a floating rate bond with spread

I need to calculate the duration of a floating rate bond with spread. With zero spread the price of the bond is given by: $$p_\tau=(1+c_1)e^{-r(\tau_1) \cdot \tau_1}$$ so the duration is: $$-\frac{\...
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48 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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186 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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72 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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44 views

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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310 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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66 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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124 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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1answer
1k 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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287 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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155 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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1answer
87 views

How to price an Annuity

When we price a fixed rate bond using Quantlib, we generally take below approach - ...
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1answer
168 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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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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1answer
153 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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47 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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1answer
100 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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434 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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65 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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220 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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47 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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3answers
342 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
94 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
88 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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1answer
426 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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1answer
430 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
117 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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64 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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1answer
167 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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301 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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142 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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120 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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84 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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65 views

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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1answer
74 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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1answer
321 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
414 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
46 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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151 views

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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2answers
360 views

How could Renaissance Technologies have near real-time prices on corporate bonds and other debt? [closed]

Julie Segal, What Renaissance Technologies has that you don't..., Institutional Investor, October 17, 2017. Does this just mean they are aggregating data from vendors like MarketAxess? Or is ...
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43 views

Stale prices: Greek government bond yields

I am analysing the effects of some Central Bank's policies on asset prices. Among others, daily 5y and 10y Greek government bond yields are part of my dataset. Data are fromm Datastream. I know that ...
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1answer
1k views

Bond quotes to EDSF

I am having a hard time understanding what "EDSF" (Eurodollar Synthetic Forward Curve) represents as a bond pricing benchmark. I have seen bonds quoted as spreads to EDSF with maturities < 2 years ...
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2answers
234 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
397 views

Bond Hedging: PCA and regression based hedge ratios

This is my first question and I would very much appreciate any help. For a project I am trying to compare different hedging techniques for hedging a long portfolio of bonds. I have a history of ...
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2answers
153 views

Bond interest rate, the relationship between a bond's interest rate and its present value, and discount rate [closed]

Consider this equation for calculating the Present Value of Bond that pays a coupon and its face value at maturity: C is the coupon, r is the interest rate on the bond, m is the number of times it ...
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397 views

Quantlib ZeroCurve interpolation

I'd like to check how QuantLib does interpolation on rates if I use ZeroCurve constructor. As it was mentioned here, by using curve.nodes() you can get a list of ...
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17 views

Historical data on european corporate bonds [duplicate]

I am trying to run a factor analysis on European corporate bonds and I need historical data since mid - late 90s on : 1.bonds listed 2.spread 3.firm´s total debt at the time 4.Sector of firm 5....

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