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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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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1answer
131 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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158 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
112 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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196 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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0answers
40 views
$E_p(e^{-\int_j^k r(t)dt})=B(0,j)$
Consider $r(t)$ the spot rate of default-free interest where $B(t,T)$ represents the $T$-maturity zero-coupon bond price at time $t$. Also assume, we are taking the expectation under the risk-netural ...
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1answer
178 views
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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1answer
78 views
Normalizing with Sum of Zero-Coupon Bond Prices
Suppose you are receiving a payment $K$ at time $t_m$.
Let $p(0,t_i)$ be the maturity-$t_i$ zero-coupon bond price at $t=0$.
If we consider a discrete time $\{0,...,t_m\}$, what would it mean to ...
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1answer
252 views
Zero Curve from a par curve curve QuantLib
I'm trying to understand why pricing a par bond with zero curve, contracted from par bonds themselves doesn't give me par.
(Based on examples here)
...
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1answer
201 views
Interpolation for discount curve building QuantLib for bonds
I'm trying to figure out how to build a discount curve to price bonds from spot rates using some advance interpolation methods like PiecewiseLogCubicDiscount. I know I can build this curve with ...
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1answer
148 views
OIS Fixed Rate - how to calculate on trade booking?
I am trying to understand how the Fix rate on a OIS trade is calculated at trade initiation. I understand this process for a Fixed V LIBOR trade non collateralized ( discount and projection curve are ...
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0answers
29 views
How to model the different returns of agents with different information information
For a seminar, I would like to graphically represent the returns made by agents of different information standpoints. In other words, say I have a market tuple $(\Omega, \mathbb{F}, P,S)$ where $S$ is ...
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1answer
169 views
Difference between Price and Value in Forward and Futures
Consider forward and futures contract on a zero-coupon bond.
Denote the time $t$ forward (contract) price on a $T_2$-maturity zero-coupon bond with delivery date $T_1$ as $F(t,T_1:T_2).$
Similarly, ...
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0answers
436 views
Duration of forward starting swap
For a spot starting interest rate swap, the duration is calculated as the duration of the fixed rate leg less the duration of the floating leg. Each of these calculations is akin to calculating the ...
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1answer
1k views
Calculating YTM for a floating rate bond
I am trying to understand how YTM's are calculated for floating rate notes. I have had a go at calculating it and I am always a few bps off for every FRN I try to calculate. Does anyone have any ideas ...
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1answer
127 views
Rebalancing Bond Indexes
I am trying to make an index for the bond market in my country, which will be modified daily. For simplicity, suppose that I only have three bonds.
Additionally, suppose that I am interested in ...
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1answer
136 views
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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2answers
227 views
Discounting for XVA
I was thinking that since XVA is on uncollaterized exposure, we should be using LIBOR discounting environment. Why don't we do that?
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1answer
138 views
Does it make sense to adjust a bond spread for price/coupon effects?
I have come across the practice, in the wild, of bond OAS being adjusted for the price of a bond. The idea expressed to me was something like the following. A $\$90$ corporate bond with a 10 yr ...
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0answers
83 views
Quant valuation of a credit card debt (or flexible loan)
What would you say is the generally accepted quantitative method of valuing an individual credit card, or flexible loan? Is the method very changeable if that were a pool of such loans?
Suppose the ...
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1answer
132 views
Implied/Realised Vol ratio for negative rates?
I'm trying to calculate the implied vs realised vol ratio for different swaptions across major currencies. This works fine for the likes of USD and GBP as rates are positive. However I'm struggling ...
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1answer
108 views
Basic arbitrage exercise
In the exercise we are given, possible contracts to buy/sell and possibility to take credits / make deposits money with current market rates. We are asked if its possible to make profit at time T=0 ...
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1answer
2k views
Forward Contract Price on Zero Coupon Bond
I'm trying to calculate the forward contract on a zero coupon bond where the forward contract matures at t=4.
The zero coupon bond matures at t=10 and has a face value of 100. The price of that bond ...
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1answer
85 views
How are the notionals on proceeds-weighted bond butterflies calculated?
Most LDI (Liability-Driven Investment) accounts construct bond butterfly (fly) trades by weighting them according to proceeds. This creates two constraints:
The fly is duration-neutral (the usual ...
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1answer
155 views
The similarity between a bond's quoted bid price and its clean price?
Is the Best Quoted Bid Price the same as the Clean Price for bonds? I understand that the Clean Price is the Dirty Price less Accrued Interests, however, I am a bit confused of why the Bid Price = ...
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1answer
113 views
Bonds are traded and settled at clean price or Dirty price? [closed]
Are Bonds are traded and settled at clean price or Dirty price ?
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1answer
1k views
Libor to SOFR transition Yield Curve Construction
With the imminent transition from LIBOR to SOFR next year, what are the data points practitioners are using to the yield curve? Also, since LIBOR implicitly took into account credit risk of the ...
3
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1answer
114 views
Repo risk - how the desk operate
I am trying to understand how repo traders are being measured(pnl/risk).
I understand the amount of repo that can be done is limited by regulation but want to dig deeper on how the performance is ...
0
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3answers
289 views
Treasury Futures Wild Card
I am looking at some empirical methods to model the Treasury Futures wild card. I was looking through some sell side reports and found this statement.
"Wildcard fair BNOC is the net basis under ...
0
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1answer
91 views
Is this regression suitable for fixed income products (negative interest rates)?
I am currently looking at a regression which tries to model EWMA volatility in the presence of negative interest rates. The regression is as follows and uses absolute return instead of relative in ...
0
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1answer
54 views
Compute value of $\mathbb{E}(B_3)$
I wonder would anybody tell me how to calculate $\mathbb{E}(B_3)$
Assuming that $\int_0^{t}r_s\,ds\sim N(0.03t,0.25t)$, then is
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I have similar problem solved:
Assuming that $\int_0^t r_s ds \...
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3answers
2k views
Calculating the Discount Margin for a FRN
I am working with a programming case where there are two methods of calculating YTM / discount margin for bonds and FRNs.
Both methods use an iterative approach to find a rate / spread that ...
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0answers
152 views
Calculating bond prices from constant maturity yield
Goal: turn a constant maturity yield time series into bond prices.
The federal reserve has great data series including this one. This is a time series of historical treasury bond yields and I need to ...
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0answers
64 views
Fed repo operations - Balance sheet constraints
There's been a lot of discussions regarding end-of-year balance sheet constraints as dealers wind down their repo activity. However, the Fed is engaged in open market repo operations in overnight and ...
2
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1answer
209 views
zero-coupon bond and forward rate
My understanding, in a discrete-time setting, the relationship between a zero-coupon bond price and forward rates is:
$$p(t,T)=\frac{1}{\Pi_{j=1}^{T-1}f(t,j)}.$$
where $p(t,T)$ represents the price ...
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1answer
91 views
Bond whose amortization scheme initiates at a later time in its life?
Is there any type of bond whose amortization initiates at a later time in its life? For example the first year we observe interest-only payments and after year 1 there initiates an amortization ...
0
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1answer
150 views
Payoff of Forward Contract
Consider the following notation:
$P(T_j,T_2)$ is the price of a zero-coupon bond at $T_j$ with maturity $T_2$.
$F(t,T_h,T_2)$ is the price of a forward contract at time $t$ on the above $T_2$-...
0
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1answer
73 views
Futures vs Forward (Last Delivery or Last Trading Day)
For all contracts except the 2-year and 5-year, the last trading day is 7 business days before the end of the contract month.
If we assume there is no optionality, isn't there a mismatch in carry. ...
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2answers
153 views
What is the price of a bond that settles on its coupon date?
Let's say I have a bond that pays on coupon on 10/03.
I buy this bond on 10/01 with settlement on 10/03.
Who gets the coupon ? Does it depend if it's paid in the morning, in the afternoon, before/...
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0answers
498 views
Hedging the duration and convexity of a bond portfolio
I'm trying to work through this homework question, but not sure how to approach it.
You recently took over as the manager of a bond portfolio. Your total assets under management – all consisting of ...
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1answer
155 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
583 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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2answers
425 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
82 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
119 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
2k 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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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
166 views
Fixed rate bond pricing issue in Quantlib
I cannot retrieve the same price for a fixed bond using quantlib.
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