Questions tagged [rates]

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How do traders determine when points in a yield curve are at 'fair value'?

While on my last day on an internship last summer, I heard on the morning call a UK rates trader say something along the lines of: "Most of the curve is at fair value at the moment, so nothing ...
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1 vote
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45 views

Time step in Hull white mean reverting model

Specially for mean reverting processes for interest rate simulation. Is it acceptable to directly simulate the paths at say 1 month horizon without stepping through time? Please advice.
1 vote
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417 views

Constructing USD 1M Libor Forward Curve

Hope you are doing fine. I am pricing a 1month IRS. For that purpose in order tu build the forward curve i have to use the following. Since USD 1m instruments do not exist, one has to use basis ...
1 vote
0 answers
2k views

Why is the annuity factor proportional to the CV01?

For an asset with par amount of one unit (with a semiannual payment regime) we have $$\frac{C(T)}{2}\sum_{t=1}^{2T}d\Big(\frac{t}{2}\Big) + d(T) = 1$$ $$\implies\frac{C(T)}{2}A(T) + d(T) = 1,$$ ...
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329 views

How to compute SABR's probability density function

I am trying to compute the probability density function of the forward rate implied by the SABR formula approximation in order to see how the density implied by the approximation has negative ...
  • 463
1 vote
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45 views

Model for target zone exchange rates

I just found a stochastic model for target zone exchange rates $x_{t+1}=x_t+k+r(x_t-y)+ \tilde{\epsilon}$ where k is a drift term so equal $r-r_f$ r is lean againt the wind coefficient that ...
1 vote
0 answers
69 views

Is there a reliable International Currency Exchange rates provider in JSON format

I am looking for a currency exchange rate provider (preferrably) JSON format , that is free/open and also reliable. Anybody here have any experiences working with some solutions like this? Cheers!!
1 vote
0 answers
154 views

Moody's seasoned corporate bond yields

The Fed publishes Moody's seasoned corporate bond yields here. These yields are not broken out by maturity. According to this website, the yields represent "long-term" bonds, with minimum and ...
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1 vote
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64 views

Should portfolio be optimized by marking to the future than marking to market (excluding currencies)?

Observing the negative interest bonds in Switzerland, Denmark, GErmany the value of higher presently (credit-free) outgoing cash flows seems less important than the value of lower future (credit-free) ...
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0 answers
58 views

How do you identify nondeliverable swap

what is unique about NDS transactions, how can I identify them using certain parameters or attributes specific to NDS?
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0 answers
60 views

How to calculate spot rate for maturity which does not have a zero-coupon bond?

How do I calculate zero-coupon yields for a maturity which does not have an equivalent zero-coupon bond? For instance, let's say we have this spot rate curve: t0.5=1% t1=2% And a bond which has a ...
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Rates arbitrage - practical trade example, is it actually risk free or can it burn?

The trade: Imagine a bank balance sheet as follows: One liability: GBP 100m deposit fixed term 6 month One asset: JPY 153m government bond maturing in 1 year (£100m equivalent, spot rate 153) ...
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93 views

Hedging Curve Risk with Futures

Please help confirm/correct my understanding of hedging curve risk using futures. For example, if I purchased a 9y bond and hedged the duration risk (parallel shift) by shorting 10y treasury futures ...
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0 answers
62 views

Market pricing of forward US Treasury rates

What instrument(s) are used for forward pricing of US Treasuries? I know that Eurodollar futures are used for the market pricing of Libor in the future, but treasury futures only have contracts 3 ...
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38 views

Determining rate of interest

If I have trade prices of 10Y futures contract (ZNH6) is it possible to derive the interest rate from it? Or is there a better way to obtain historical 10 year rates?