Questions tagged [spot-rate]

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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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Short term implied fx rate

For context, I'm working towards constructing a FX implied rate curve based on the fwd points market. As you know, most of the spot rates usually settle in t+2. We can group fwd points in two types, ...
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100 views

Understanding FX forward points and market usage [closed]

I've been trying to make sense of how the FX forward market works. Let's say today is June 13, 2022. And we have the next market info as seen in Bloomberg for the FX cross between USDMXN, assuming mid ...
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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 ...
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2 votes
2 answers
175 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 ...
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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 ...
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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, ...
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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 ...
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-1 votes
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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 ...
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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 ...
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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 ...
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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 ...
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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 ...
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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, $\mu$ ...
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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 ...
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2 answers
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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 ...
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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 ...
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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 ...
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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 $DF_f$: ...
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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 ...
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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?
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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 ...
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3 votes
2 answers
1k 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 ...
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1 vote
1 answer
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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 ...
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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 ...
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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 ...
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2 answers
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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: ...
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1 answer
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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 ...
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1 answer
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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 ...
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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 = ...
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1 answer
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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 ...
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-2 votes
1 answer
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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 ...
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1 vote
1 answer
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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. ...
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3 votes
2 answers
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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-...
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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 ...
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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 ...
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1 answer
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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 ...
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2 votes
3 answers
612 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 ...
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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? ...
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1 answer
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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?
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2 votes
1 answer
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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 {{...
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2 votes
0 answers
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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. ...
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5 votes
2 answers
633 views

Predicting the Future FX Spot Rates

Say I need to predict what the spot rate between USD and CAD will be in 3 months. What will be the most accurate measure or model that I could possibly use? Does the 3 month forward rate necessarily ...
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1 vote
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Is there a limit to the number of Spot rates than can be calculated from Par Yields

I am just trying to calculate Spot Rates from Par yields. I find that the code below gives very similar spot rates for the data here, yet if I increase the size of the ...
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Settlement/Spot/(bid ask spread) ratio

Are there any studies on the average difference or ratio between Settlement (execution price) and the Spot price dependant on lot size. I'm looking for a function such as ...
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3 votes
3 answers
929 views

Two different ways of pricing that leads to two answers

This question might appear trivial to many (considering the questions on this site), but I think it reflects something fundamental that I am missing. To keep things simple, assume everyone is risk-...
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How should I use central banks rates in order to compute 2-day forward exchange rate on EURUSD

Good morning, I would like to compute a 2-day forward exchange rate on EURUSD. For that, I have historical data on EURUSD spot price, and I know that theoretically, when maturity is T we have : $F_0$...
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-4 votes
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Zero coupon bonds [closed]

Assume the zero-coupon bonds from 1 year to 4 years are all available, and the current 1-year, 2-year, 3-year and 4-year spot rates are 4%, 5%, 6% and 7% accordingly. Interest rates are annually ...
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1 vote
2 answers
76 views

Incorrect characterization of spot rate?

Is the t in the red boxed $R(t,T)$ supposed to be the same as the S in the green boxed $R(S,T)$?
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2 votes
2 answers
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Build spot rate curve with multiple treasuries for each maturity

I have the following treasuries: T 0 1/4 01/31/15 at 100.1236 T 2 1/4 01/31/15 at 101.1257 T 0 1/4 02/15/15 at 100.1251 T 4 02/15/15 at 101.9994 T 11 1/4 02/15/15 at 105.6269 T 0 1/4 02/28/15 at 100....
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