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Questions tagged [spread]

A spread is a difference between two prices or yields. Bid-ask spreads reflect that the most competitive buyers and sellers want to trade an asset at different prices. Yield spreads reflect a difference in bond tenors, credits, liquidity, optionality, or other features. Option spreads reflect views on prices beyond just positive or negative. Commodity spreads reflect time evolution of supply or demand or the gross producer margin for creating a product.

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Futures Spread Contract - How to Structure Risk to Reward

Futures Spread - Contract There is a Futures Spread, Where the Margin reflects a Leverage of 3 to 1 , The Margin for the contract is just $ 210. I ‘am Buying “ 1 Futures Contract September, Selling 1 ...
Calculate's user avatar
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Is my spread calculation correct?

I have automated Pair trading strategies running on both CME Futures and cryptocurrency perpetual pairs. I can chose between different spread calculation type and I noticed that the one I thought was ...
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1 answer
184 views

Calculating spread on a par rate curve given bond’s coupon and yield

In Tuckman and Serrat’s Fixed Income Securities, they give an example of a bond and state its coupon and yield. They also provide an HQM par rate curve and quote the bond’s spread to this curve. How ...
akrylic's user avatar
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Price display of weighted spreads via PCA and value changed

Using PCA I have the below PC1, first component weights, for 4 quarterly expiries of short term interest rate future. These are hypothetical values used to help my question. March: 0.005542604, June: ...
ChairmanMeow's user avatar
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0 answers
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Market make when the orderbook has very few orders/volume in it? (price is stable at $10) [closed]

Imagine a stock that's very unpopular, to the point where there'll only be on average 4 units of the stock at any given moment in the orderbook. This stock is also stable at a price of \$10 (meaning ...
Minko_Minkov's user avatar
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2 answers
181 views

How to conclude which option is overpriced (by using implied volatility)

I have a small question regarding how to conclude which option is more overpriced? See the following table Option Theoretical Value Option Price Option Implied Volatility 7.00 8.00 26% 6.00 6.75 28%...
bigstreet's user avatar
1 vote
1 answer
154 views

The bid-ask spread before transactions

They are a lot of ways to compute an "estimated bid-ask spread". The most straightforward one is to sample the bid-ask on a regular time grid (for instance every second), but that for you ...
XY0's user avatar
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Is z spread always ‘better’ than nominal spread?

If nominal spread is the addition to the treasury yield at the WAL of the risky bond cashflows (to worst) necessary to make the npv of the cashflows equal to a given price, and z spread is the ...
slothish1's user avatar
2 votes
1 answer
68 views

Bond indices : where to find yields and asset swap spreads by rating and average duration?

I am looking for alternatives or relatively similar information about historical data for yields and/or asset swap spreads for bond indices in major currency. I would like to gather the info by rating ...
Jean Dessain's user avatar
0 votes
1 answer
95 views

Compare Spread On A Fixed Bond Vs A Loan/FRN?

I was discussing with a colleague, but in short, how do you compare a fixed bond vs a loan/frn when it comes to spread? Theoretically, you should get paid more for holding fixed bonds, as you have ...
Yuppity's user avatar
1 vote
2 answers
204 views

Estimate of realized spread

Given a dataset with second level information about open, high, low, close, volume and vwap of a stock - how can one estimate the realized spread - a simple estimate could be (high - low)- but can one ...
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How to Bloomberg compute the implied Yield ? What is FX swap basis spread?

Question 1: You can see Bloomberg EUR/USD FXFA<go> page attached below EUR 3 months yield=3.9412 US 3 months yield= 5.6683 Spot Rate: 1.0580 How does it find FX swap rate as 1.062732? Question ...
Engin YILMAZ's user avatar
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0 answers
82 views

Combination of bid ask of two instruments

You have 2 instruments: X in which you are quoting 35 @ 40 and product Y in which you are quoting 15 @ 30. We want to make a market on the product X+Y. What is the bid-ask spread you will quote? Got ...
Kai's user avatar
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2 votes
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26 views

Interpretation of data for Market Premium

I am given some preliminary data with a goal to estimate the probability of default. This data consists of Market premium for different tenors. One such example ...
Daniel Lobo's user avatar
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Determine Dependent Variable Product

Let's say I have three products that are correlated (e.g. AAPL, MSFT, and AMZN). I would like to construct a spread between these products and trade the mean-reverting spread. Specifically, sell the ...
Vanillihoot's user avatar
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0 answers
76 views

CDS Basket Kth to Default and Recovery rates

I am trying to determine the effect of recovery rate on the Kth-to-default CDS Basket made up of 5 names (all major investment bank names). I repeatedly change the recovery rate assumption from 0 to 1....
Yoshiro's user avatar
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1 answer
433 views

Incorporating the I-Spread and Parallel Shift for Accurate Bond Pricing

I am currently working on pricing bonds and intend to utilize the S490 curve sourced from Bloomberg. This curve is constructed exclusively using swap rates. However, I have encountered challenges when ...
TourEiffel's user avatar
2 votes
1 answer
430 views

FRTB Delta CSR vs Delta GIRR

In Basel III, FRTB SA includes different market risk capital requirements for interest rate (GIRR §21.19) and credit spread risk (CSR §21.20) exposures. These are different risks, as credit spreads ...
SuavestArt's user avatar
2 votes
1 answer
390 views

How fast is the forex market regenerated?

I'm doing some statistics in order to evaluate the Forex market profitability. I first define what I call "regeneration of the market". For example, the following fictive order-book of ...
Bertrand125's user avatar
2 votes
2 answers
538 views

Intuition behind calendar spread max loss

With a calendar spread (buying back, selling front), max loss is defined as some variant of "maximum potential loss is the cost of opening the trade (Premium Paid − Premium Received = Total Debit)...
quantumtightening's user avatar
0 votes
1 answer
91 views

Relationship between order size and spread for direct market order

Suppose that I am placing a market order directly in the order book of an exchange. For market orders, it seems quite clear that larger orders obtain larger spreads due to the fact that - without loss ...
David's user avatar
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1 vote
1 answer
740 views

US Treasury vs OIS rate

Is there any specific name for the spread between US Treasury vs OIS rate? I observed that for a specific tenor (e.g. 10 years) US Treasury is higher than the OIS curve. Any reason for this? OIS is ...
Bogaso's user avatar
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1 answer
395 views

In which units the conventional CDS spreads in Markit's data are measured?

I am trying to understand if the conventional spread column in Markit's CDS database simply represents the CDS spread, measured in bps, or should I make some adjustments (in case I would like to make ...
Guy Kern's user avatar
0 votes
1 answer
203 views

How does one put on a 2s10s trade using 2 and 10 year treasury futures contracts when the CTDs are not 2 and 10 year bonds?

The CME describes how to put on a 2s10s trade in this screenshot: https://i.sstatic.net/2yPzW.jpg Looking at current 2 and 10 year futures the CTD is roughly a 2 year and 7 year respectively. Am I ...
filifunk's user avatar
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2 votes
2 answers
543 views

Do MarketOnClose orders cross a bid-ask spread?

If I'm entering into a Market order to buy (e.g., for a share of SPY), it's easy to see the spread that I am crossing: I can compare the "mid" average of the NBBO to the ask, and that's the ...
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Liquidity Rebate

I have one question regarding the liquidity rebate that liquidity providers receive. I've read on investopedia that it refers to the traders/investors who place limit orders since they then "...
itachi23's user avatar
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1 answer
1k views

Calculate Bond Price knowing Z-Spread

From my point of view, to calculate the price of a bond, we just need to add the discounted cash flows. The discount factor calculation is as follows: In my theory knowing the z-spread of a bond I ...
TourEiffel's user avatar
0 votes
1 answer
690 views

Is it possible to have negative Z-spread for a corporate bond?

I have a 2 year maturity AA rated US corporate bonds, and I found that it has negative Z-spread, -0.00053. Does it make sense or it's wrong?
Alessandro Campagna's user avatar
0 votes
1 answer
859 views

How to calculate corporate bonds Z spreads having yield to maturities and knowing that they pay annual fixed coupons?

I have three corporate bonds with maturities 2,3 and 5 years. They pay annual fixed coupons. I know their yield to maturities. How to compute their z spreads?
Alessandro Campagna's user avatar
8 votes
1 answer
220 views

If the spread between two assets is an OU process, what processes do the two assets follow?

Let $(\Omega,\mathcal{F}, \mathbb{P}, (\mathcal{F}_{t})_{t\geq0})$ be a filtered probability space. Furthemore, let $(S_{t}^{1},S_{t}^{2})_{t\geq0}$ be two assets (adapted to filtration, etc). Define $...
Vasily Melnikov's user avatar
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2 answers
65 views

How should the spread be determined after calculation of expected value?

Suppose I am willing to buy a contract which I believe has a 15% chance to settle to $100 and 0 otherwise. The EV of this contract is therefore 15. How much should I buy this for? I would answer at ...
Featherball's user avatar
0 votes
1 answer
149 views

Comparison between Effective Bid-Ask spreads

I understood that given two listed assets, the one with the lower effective spread is more liquid, and if one has effective spread lower than the quoted one, it means there has been a price ...
mountshoutcap's user avatar
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0 answers
50 views

Shock to a system of CDS spread values

Assume we have a system that is built on the CDS spread values. If we want to shock the system, how can we define the shock? For instance, we can define it as the increase in the spread. Of course a ...
statwoman's user avatar
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1 vote
1 answer
872 views

Relationship between risk free rate and credit spread in the Merton model

Based on Merton model of credit risk, I understand that investing in a risky debt is the same as buying a treasury bond and writing a put option on the firm's assets with a strike price equal to the ...
Teemo's user avatar
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0 votes
1 answer
98 views

Pricing for basic option strategies [closed]

If I am trying to price a strategy, say for example a call spread where we are long a call, strike L and short a call strike M, would the pricing formula simply be the Black-Sholes price for the Call ...
DoonieCaan's user avatar
2 votes
1 answer
142 views

Modelling the instantaneous funding spread as a log-normal process

Let us consider a stochastic market model with a fixed short (risk-free) rate $r\in\mathbb{R}$. A trader can obtain unsecured funding at a rate $f_t:=r+s_t$ where $s_t$ is its stochastic funding ...
Daneel Olivaw's user avatar
1 vote
0 answers
105 views

How To Construct A Volatility Spread Position?

Is there a simple way to spread the volatility of one product against another? By simple I mean one trade executed on each leg rather than constant delta hedging. I can see a lot of opportunity for ...
Tom's user avatar
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0 votes
1 answer
800 views

"spread-to-maturity" as defined by Bloomberg

Bloomberg has a number "spread to maturity" they display in some screens for fixed coupon bonds. Does anybody know the exact definition of this spread? I am not sure which screen it is but ...
Magnyz's user avatar
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0 votes
1 answer
209 views

What is the definition of horizon current coupon spread duration

Trying to understand the meaning of current coupon spread duration? Is this same as empirical mortgage spread duration?
nsivakr's user avatar
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-1 votes
1 answer
273 views

How would I price out and set up a steepening yield curve strategy in which Im long 5yr UST and short 30yr UST futures [closed]

Curious if someone could help me out with pricing this trade idea, or just give me some general tips on a direction I need to head to go about this. I attached a photo if to see how I set up the idea ...
JunkbondKing's user avatar
1 vote
0 answers
137 views

Graph of price of CDS against par spread

I'm new to credit and I'm trying to wrap my head around the following idea. I understand that the par spread $s$ is the value of the fixed coupon payment at which the fixed and floating legs are equal ...
Ice Tea's user avatar
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1 vote
2 answers
158 views

Is there a mathematical relationship between the spread on a collection of individual assets and the spread of a portfolio?

If the spread on each individual asset in a portfolio is known (and the duration and market value of these assets is also known), is there a relationship that can be used to deduce the spread on the ...
J. Chapman's user avatar
0 votes
1 answer
347 views

Credit spreads adjusted for rating migration and default

Given the below 1-year rating transition matrix and cumulative default rates, I am interested in calculating credit spread adjusted for defaults so I can compare this with the outright credit spread. ...
Jeweller89's user avatar
0 votes
1 answer
157 views

Spread duration curve by issuer or by sector

I was surprised to see that spread duration was not offered as a curve in Bloomberg. As a result, I'm trying to find a curve (in Bloomberg) or build a curve (maybe using the Excel API) which ...
mogwai's user avatar
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0 votes
0 answers
126 views

Is there an equation that gives you the optimal spread width or strike prices when opening a vertical options spread?

On a specific leg, when going to open a spread is there an equation that can tell me at what strike price I should sell at and what strike price I should buy at? I look at this options calculator ...
Ant's user avatar
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1 vote
0 answers
472 views

Option Adjusted Spread - Monte Carlo

It's my understanding that in order to calculate the option adjusted spread on a mortgage backed-security, the following steps are required: Run a Monte Carlo simulation of interest rates Project ...
VVKK77's user avatar
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1 vote
0 answers
152 views

Spread betting risk management in backtesting in Python

My background is in Spread Betting. I know how to calculate my position size based on how far away my stop is from my entry, I calculate the amount per pip so that I only ever risk a fixed percentage ...
Oliver P's user avatar
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1 vote
0 answers
59 views

tick data: does this data look wrong? what am I missing?

I can't seem to understand how tick data works. Below is some tick data for a certain security (I got this data from a platform called MetaTrader). At 09:56:28 someone offered to sell at \$9.9. But ...
Parzival's user avatar
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-1 votes
1 answer
1k views

Survival probabilities starting from CDS spreads

How is that possible to get survival probabilities starting from CDS spread? Could you please provide me with a demonstration? What is more, is that true that CDS Zero type is necessary so as to get ...
Strictly_increasing's user avatar
0 votes
2 answers
231 views

What prevents market-makers to do speculative trades with much better conditions than other traders?

Market-makers gain profit from the bid-ask spread. This means that they could place speculative positions without any cost (they pay the spread to themselves = zero cost). I assume there are laws ...
Maci0503's user avatar