# Questions tagged [interest-rates]

An interest rate is the rate at which interest is paid by a borrower (debtor) for the use of money that they borrow from a lender (creditor).

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### No arbitrage conditions for normal implied volatility

usually the term implied volatility refers to Black-Scholes implied volatility (also Log-Normal volatility): it is defined as a quantity which when plugged in the Black-Scholes formula returns the ...
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### Why are Interest Rate Swaps not valued using Monte Carlo Simulations?

the current valuation methods seem to rely on treating the floating payment as deterministic based on the current yield curve and derived forward rates. But wouldnt it make more sense to use monte ...
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### Practical purpose of overnight repos

I know this might not be a very quantitative question, but I figure this is the most relevant place to ask this. Over that last few days, there has been a lot of news from the repo market, for ...
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### Calibration of G2++ two factor interest rate model using Kalman filtering

I'm trying to use the Kalman filter to calibrate a G2++ interest rate model in R. I'm reading "Implementing interest rate models: A practical guide" by Park F.C. (2004) where he provides details on ...
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### Zero Coupon Bond prices in One Factor Hull White model

I implemented the one factor Hull White model for educational purposes and I calibrated the model from a given (made up!) yield curve: The Zero Coupon Bond Prices from this yield curve are: Taking ...
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### How would you use FRAs to find out how much Central Banks would cut/hike by?

Let's say you have The FRAs 1x4F, 2x5F, 3x6F, 4x7F, 5x8F... (meaning 3 months rate today, 3 months rate in 1 month, etc..) at 5.5, 5.5, 5.6, 5.55, 5.55. Assume today's date is 20/09/2019. You also ...
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### Overnight Index Swaps (OIS) vs. Fed Funds Futures

When calculating the probability of a certain target rate specified by the Fed at an FOMC release, I’ve generally read that it is typical to use Fed Funds Futures as proxies. I can find data on this ...
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### Estimating Product Rate Sensitivity to Market Rate Changes: First Difference With Interactive Variable

I am currently trying to understand and estimate the sensitivity of deposit rate sensitivity to market rate changes. My current model: $\Delta$$R_t = \alpha + \beta_1$$*$$\Delta$$FFR_{t-1}$$+$...
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### 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 ...