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Is it appropriate to use Term-SOFR curve as spot rate curve in bond pricing for simplicity?

everyone, I am coding for a task of some derivatives pricing, and I am a newbie to the quant. Since the term SOFR data is already available in my company's database, I am wondering if it's appropriate ...
Slowman Karllenschütz's user avatar
2 votes
1 answer
71 views

Parallel shift in spot yield curve moves the IRR of a bond portfolio in the same direction: Analytical Proof

I am trying to prove that a parallel shift in the spot yield curve will as its effect have the IRR of a bond portfolio move in the same direction and by the same amount. I have tested this on few ...
Milan's user avatar
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2 answers
115 views

Shape of Yield curve of ZCB under no-arbitrage

Sorry if the question is somewhat elementary, but I have thought about it for a while and I cannot figure out where my mistake is. Suppose we are in are in an arbitrage-free market in which risk-free ...
Cirdan's user avatar
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1 answer
113 views

Spot and Forward rates - arbitrage?

Working on a problem to devise an arbitrage strategy. 1 year sport rate is 5% and 3 year spot rate is 5.5%, 1x3 Forward rate is 5.6%. I calculated the 2 year spot rate as 5.75% ...
Yoshiro's user avatar
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56 views

Relationship Between the Equity Funding Curve and Equity Forward Curve

am trying to understand the core concepts of Equity Forwards Curve, Funding Curve and yield Curves (most sources online seem to focus on Interest rate related examples, so any sources for equity ...
ESN's user avatar
  • 1
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1 answer
286 views

Relationship of par-curve and zero-curve/spot-curve

I've been trying to bootstrap the zero-curve from a swap curve composed of ESTR OIS swaps. Theory says when the par-curve is upward sloping, the zero-curve will be above the par-curve and vice-versa. ...
Energy Media's user avatar
0 votes
2 answers
460 views

Bootstrapping the zero-curve/spot-curve from incomplete swap curve par-rates

TL;DR: I have an incomplete set of swap rates and want to bootstrap the zero-rate curve, what can I do? I'm trying to construct a spot-rate/zero-rate curve from a swap curve (i.e. par-rate quotes) ...
Energy Media's user avatar
3 votes
0 answers
227 views

How to calculate spot rates using market data of bonds?

Given 3 Bonds $A$, $B$ and $C$ with \begin{matrix} & \text{Bond } A& \text{Bond } B& \text{Bond } C& \\ \text{Price:}& 101,12\%& 99,03\%& 102,95\%\\ \text{Mat. in years:}&...
julian2000P's user avatar
1 vote
1 answer
321 views

Eikon Government Benchmark Yield Curve

I want to price gov bonds using Bid Yields (column 5) from the screen below, and quantlib. I am not sure what those Bid Yield rates represent. Do those Bid yields represent spot rates, or what?
Skittles's user avatar
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1 answer
122 views

PIP Value conversion - How can I convert my Pips? general formula [closed]

So I was wondering, how I can convert for example a 20 pips charge is(Spot: 1.0250 with pips 1.0270) on EURUSD into EURCNH Pips with (Spot EURCNH at 7.3005). Is there a general formula and short-cut? ...
Mostdoisneverdone's user avatar
2 votes
1 answer
318 views

Relationship between simple Libor spot and forward rates

How is the simple forward rate L(0,T,T+1) calculated given the spot rate L(0,T)?
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0 votes
1 answer
260 views

What is the consensus interpretation of index future dealer gamma?

I'm trying to confirm that I'm understanding this concept correctly: dealer gamma exposure. I can make sense of dealers / gamma in isolation: Dealers: make markets for certain securities, notching ...
Arash Howaida's user avatar
2 votes
2 answers
979 views

Determine forward rates for EUR/USD

I can't wrap my head around how to determine the interest rates to calculate the forward rates of any currency. At this point, I don't even know if this data is actually available to do the ...
JerBouma's user avatar
0 votes
0 answers
90 views

Good performance of naive forecasting in efficient markets

I am doing spot price forecasting for a market, and so far, the naive forecasting model, which forecasts with the last observed prices, is the best forecasting model. I know that it might be because ...
BSel's user avatar
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1 vote
1 answer
433 views

Can I use spot rates bootstrapped from a swap curve to price a bond?

Say that some corporation has a long position in a fixed rate bond. To turn this into a float-rate asset, they take a fixed paying position in a fixed/float swap. If we are given the par swap curve, ...
whaddaplaya's user avatar
0 votes
1 answer
48 views

Are the buy/sell demand, the underlying spot price and the time value, the only factors in futures contract price?

Are the buy/sell demand on the future contract, the underlying spot price and the time value (days to expiration and the accelerating decay in backwardation or rising in contango, coefficent ) are the ...
huab's user avatar
  • 101
-1 votes
1 answer
419 views

How to value a long term interest rate swap if the floating leg is USD-LIBOR

To value an IRS, you require a spot/zero curve. If I am correct this zero curve will be the USD-LIBOR curve. However, if you have e.g. a 10-year swap that you are trying to value 2 months into the ...
Student's user avatar
  • 39
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0 answers
377 views

Deriving instantaneous forward rate from spot rates/ zero rates

i have the following problem. I have a set of spot rates /zero rates $\{(t,r_t)\}_{t=1}^n$ where $t$ is the time and $r_t$ is the zero rate. How can i calculate with this data the instantaneous ...
Bot_Swag's user avatar
0 votes
0 answers
53 views

Is there a name for the common class of instrument which Spots and Forwards belong to?

I'm doing some database design where I'm modelling Forwards and Spots. They share the same schema, the only difference is that Spots have a settlement date of the time they were created at, while ...
Rol's user avatar
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1 vote
1 answer
109 views

Implication of Humped Spot Curve on future spot curve(s)

I'm currently implementing a G++ model (Two Factor Hull & White model with constant parameters) on zero curve bootstrapped from USD IRS. Currently, USD IRS is humped at 30 years; swap rate goes up ...
HumpedCurve's user avatar
-1 votes
1 answer
70 views

Total return of a bond using spot rates

Suppose that the current spot rate curve (annually compounded) is s1=0.2%, s2=0.8%, s3=1.2%. Assume that one year from now, the spot rate curve will be s'1=0.8%, s'2=1.4%, s'3=1.8%. Consider a 3-year ...
Wizfin's user avatar
  • 3
0 votes
1 answer
99 views

FX spot distribution with student-t returns

If I am modelling my returns as $\sim N(0, \sigma^2)$, then I can evolve my spot distribution as: $$S_{t} = S_{0}e^{(\mu - \frac{1}{2}\sigma^{2})t + \sigma dW_{t}}$$ where $S_{0}$ is the spot, $\mu$ ...
sumit_uk1's user avatar
  • 141
4 votes
1 answer
3k views

Bootstrapping OIS curve

I am trying to get a zero curve from a series of EONIA-based OIS rates with Quantlib. When comparing my output with Bloomberg, I find some differences (see at the end of the question), and and I don't ...
Tomás Carrera de Souza's user avatar
2 votes
2 answers
85 views

Reliable weekend forex source that can act as credible data for Monday APAC morning forex trade

In general most of the forex market closes by 10:00 pm london time on Friday and opens back on Monday morning APAC time , somewhere around Sunday evening London time. I am interested in knowing if ...
Invictus's user avatar
  • 121
1 vote
2 answers
110 views

Spot rate investment horizon

I'm learning about spot rates from Financial Mathematics for Actuaries and something about the definition is confusing me. Spot rates are used (in the textbook) to specify the interest rate on a ...
Harry's user avatar
  • 11
0 votes
1 answer
3k views

Pricing IRS: bootstrapping zero rate (spot rate) from the swap curve

I would like to ask about swap zero curve calculation algorithm used by Bloomberg. Below is a plain vanilla EUR IRS. I want to calculate >= 2 year spot rates from the market rates. I don't know how to ...
Bart's user avatar
  • 3
-2 votes
1 answer
326 views

Link between spot and forward rates in no-arbitrage world

With reference to the forward exchange rate definition, let be: $S$: the spot rate $F$: the forward rate $r_d$ and $r_f$: respectively the domestic and foreign interest rates $DF_d$ and $DF_f$: ...
Pietro Scaglione's user avatar
2 votes
0 answers
1k views

Bloomberg SWPM Zero Rate Curve Conventions

Referencing : Bloomberg SWPM: Day count to calculate discount factor for US0003M Hi, I have a hard time reproducing the conversions between Discount factors and zero rates for an XCCY Swap I have ...
gosymmetry.de's user avatar
1 vote
1 answer
68 views

Spot Rates on Treasuries

I am trying to find the spot rates for 1mo, 3mo, and 6mo tbills. This would just be their yields as listed on the treasury website, correct or am I missing something?
1c23's user avatar
  • 11
2 votes
1 answer
193 views

For which would you expect the liquidity on instrument X to be the greatest: its spot, future, option or swap?

Would like $X$ to remain general, but if needed, let's say GBPUSD Exchange Rate. By liquidity I mean overal market volume across exchanges / ease of opening and closing positions / total notional ...
A.L. Verminburger's user avatar
4 votes
2 answers
2k views

Half of the bid-ask spread as transaction cost

I am currently reading "Deviations from Covered Interest Rate Parity" by Du et al. When establishing deviations from CIRP they consider transaction costs as follows. "We assume that the transaction ...
fabla's user avatar
  • 165
1 vote
1 answer
289 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 ...
Amaterasu's user avatar
  • 151
2 votes
1 answer
196 views

Units of measurement for Minimum Variance Hedge Ratio

The minimum variance hedge ratio is given by $h=p*\frac{\sigma_S}{\sigma_F}$. I was wondering if you wanted to calculate the S.D yourself and the spot prices were in Dollars per barrel while futures ...
ConnieTraveller's user avatar
1 vote
0 answers
69 views

Retrieve SYC from Par yields

Currently studying about fixed income and the construction of the Spot yield curve, but I do not know whether my intuition is right. Suppose we have a firm that has traded Bond for different ...
alexbougias's user avatar
  • 1,426
1 vote
2 answers
3k views

Calculating spot rates from forward rates

I am working on a problem where I am trying to calculate the forward rates from two different spot rates. I have the following: ...
QFII's user avatar
  • 55
1 vote
1 answer
154 views

Generalization of Macaulay/modified duration under non-parallel shift of spot curve

The generaliztaion of Macaulay duration (which is defined in terms of yield to maturity) is known as Fisher-Weil duration. How is Fisher-Weil duration or modified duration defined under non-parallel ...
sane's user avatar
  • 159
1 vote
1 answer
994 views

How can we value NPV for a standard FX Swap?

hope you are all well! Was just wondering how we can value the NPV on the value date for a FX swap - i'm sure it's by evaluating the interest rate payable/receivable from the trade date until the ...
Bola's user avatar
  • 11
1 vote
0 answers
62 views

Valueing a Short future contract with dividens [closed]

A forward of an underlying paying a yield $q$ can be priced with the equation: Price $= S_0 e^{(r-q)*t}$ or Price $= (S_0-I)e^{rt}$ Where $S_0$ = Spot price, r = interest, q = dividend yield, I = ...
sdgthsfh's user avatar
2 votes
1 answer
4k views

Pricing Uneven FX Swaps

I'm trying to figure out how to price uneven FX swaps. I just started on a FX trading desk and have been told that the all-in rate for a 2-legged FX swap is equal to: 1) Quote for market side of net ...
GuestFX123's user avatar
-2 votes
1 answer
1k views

How do I calculate the spot rate?

How can I calculate the rates to construct the curve? I was thinking to use the formula converting par yield to spot rate, but I am not confident about it. Please give some hints or working on how to ...
Hooimin Ooi's user avatar
1 vote
1 answer
2k views

Implied AUD Interest Rate from USDAUD FX Swap and USD Interest Rate

Can someone help me understand how to derive the implied interest rate or spot rate in BBG FXFA? I actually get why the Forward rate, F_Ask and F_Bid are derived using the formula in the picture. ...
pqsn's user avatar
  • 49
3 votes
2 answers
2k views

Why do par-yield shifts grow faster across the curve than spot-rate shifts when looking at key-rates?

Consider the following 10y key-rate shifts of bond par yields and its implied shift of bond spot rates: Assume we have the key-rates for 2y, 5y, 10y and 30y. The y-axis is in basis points, and the x-...
quanty's user avatar
  • 439
1 vote
0 answers
122 views

Physical trading spot transaction analysis-Quantified

ref to my previous question here: Physical commodity trading quantitative risk return model I am currently new to commodities and physical trading. I have currently narrowed down my area of analysis ...
El_1988's user avatar
  • 193
1 vote
0 answers
967 views

Bloomberg zero rate calculation using shift

I used Bloomberg to calculate a zero rate under a parallel shift of 100 basis points, however I can not understand the results neather duplicate them. I included the +100 basis points by using the ...
Immer's user avatar
  • 11
1 vote
1 answer
391 views

Spot-Forward Relationship - Proof

Does anyone know of a decent proof for the spot-forward relationship of a currency? I've been looking on Google for hours and I'm not getting anywhere. My lecture notes are useless in that they don't ...
Joe Bloggs's user avatar
2 votes
3 answers
798 views

Structured product sellers and div swaps

From a Barclays primer on dividend swaps: We note that for shorter periods of time, implied dividends can be more volatile than spot as dividends often trade away from ...
Trajan's user avatar
  • 2,542
0 votes
2 answers
999 views

CIR discretization Milstein scheme

The CIR model for spot rate $r_t$ is: $$dr_t=(\eta-\gamma r_t)dt+\sqrt{\alpha r_t} dW_t$$ where $\eta, \gamma, \alpha$ are constants. How to express this SDE in discrete form using Milstein scheme? ...
lrh09's user avatar
  • 155
1 vote
1 answer
1k views

Is LIBOR a spot rate?

Can we use USD LIBOR as spot rates for discounting? If we have overnight LIBOR and say 1 month LIBOR how to compute 16 day LIBOR? Can we do interpolation?
onkar's user avatar
  • 51
2 votes
1 answer
520 views

Riccati Equation in spot rate model

Given that $dr=(\eta-\gamma r)dt+\sqrt{\alpha r+\beta}dW$ Let $Z(r,t)=e^{A(t;T)-rB(t;T)}$, \begin{matrix} \frac{dA}{dt}=\eta B-\frac{1}{2}\beta {{B}^{2}} \\ \frac{dB}{dt}=\frac{1}{2}\alpha {{...
lrh09's user avatar
  • 155
2 votes
0 answers
141 views

Are forward rates starting at observation date spot rates?

In part 3.2 of Lu and Neftci (2003) "Convexity Adjustments and Forward Libor Model: Case of Constant Maturity Swaps", the authors propose a new way of pricing CMS swaps, with Monte Carlo simulations. ...
Sithered's user avatar
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