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90 questions
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When I read up on swap spreads, the definition always goes something like this: The swap spread is the difference between the fixed leg of swap and a Treasury bond with the same maturity. So if the ...
154 views

Pricing a callable bond

I have read the Lehman Brother's paper on OAS which I mostly understand, they outline how to find the OAS for a callable bond of which the formula is effectively (ignoring refinancing costs): Market ...
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How to convert a vector of bonds ZC Spreads into default spreads

If we consider a set of bonds issued by a given entity that are quoted on the market, one can get for each of those bonds a ZC spread on top of reference swap curve (say the bonds are in USD and so we ...
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I found a paper which uses inflation as an independant variable for credit spread. Unfortunately, the relationship is not explained in this paper. Further research got my to the paper of Kang/Pflueger ...
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This is a beginner level question. I have a $spread = aluminium - 0.7*lead$ $s = a - 0.7*l$ I have two methods to calculate return on this spread: $return = (s_t - s_{t-1})/(a_t + 0.7*l_t)$ ...
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Spread Duration weighted OAS vs. Mkt Cap Weighted?

I am curious what the differences might be in rolling up OAS spreads across a portfolio by duration weighting vs. mkt cap weighting. @Alex yes I meant S.D. weighted not Duration weighted
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Interpreting the bid-ask spread calculated by the Corwin and Schultz (2012) method

On the homepage of Corwin (https://www3.nd.edu/~scorwin/) there is an excel spreadsheet which showcases the calculation for the bid-ask spread, which is expressed as a percentage. What is this a ...
202 views

One property of High-Frequency data is it's subject to bid-ask bounce. Description : Unlike traditional data based on just closing prices, tick data carry additional supply-and-demand information in ...
105 views

How does an exchange guarantee both legs of a calendar spread are executed atomically to give a specific spread?

In commodities/oil you have monthly contracts for a given Future, e.g. on CME the Crude Oil Futures (CL) monthly contracts can be trades, and have Globex codes such as CLZ8(Crude Oil Dec18 Future), ...
419 views

What causes the spread between WTI and Brent

Could anyone explain what leads to the spread between WTI and BRENT oil price, and what will be the upper limit of the spread to cause export of oil from US to other country.
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Duration split: treasury curve vs spread duration

I am looking at corporate bond (FR0013367620) in Bloomberg for which I have these values: DUR_ADJ_MID (modified duration performed using the yield to worst): 6.649 DUR_ADJ_OAS_MID (security's price/...
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Any Suggestion for Credit Risk Measure for Banking Industry in Turkey?

I need a measure that will proxy for overall credit risk in the banking industry of Turkey. The literature offers LIBOR-OIS spread and Moody's Baa-Aaa spread as strong candidates. However, these ...
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different Z-spreads for a same company

A same company has two different bonds. I expected the Z-spread to be close for both bonds (since my representation of the Z-spread is the spread due to credit-risk proper to the company). Here is an ...
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I would like to understand what is credit spread basis currency ajustment. credit spread implied by a usd bond won't be the same as one implied by a chf bond, isn't it ? Do you have any elements (...
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Why the spread is calculated on raw prices instead on the price changes?

I'm reading Quantitative Trading With R written by Harry Georgakopoulos. In chapter 6 he exposes a basic quantitative strategy based on setting up a stock spread and buy when it is below a lower ...
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Libor Swap Rates

In a 5 year Libor Swap, say fixed vs. 3 months Libor, what is the credit risk reflected by the fixed leg ? (I'm ignoring counterparty credit risk). Would the fixed leg reflect 3 month Libor quoting ...
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FOREX: why does SPREAD peak at 22:00 gmt

I noticed that spread on currency pairs shoots up to 5x larger around 22:00 GMT. Then it slowly goes down back to normal levels around 23:00 GMT. Does anyone know why? thanks!
622 views

Total Return Swaps and Borrow Cost Relationship

If an investor is long a Total Return Swap (TRS), they get the total return (ie, including dividend) performance and usually pay LIBOR minus a spread. This spread should trade ...
1k views

Intuition behind the tenor basis spread in basis swaps

Reading myself into basis swaps, I was wondering a couple of things. Say, one enters into a 1y - basis swap where party A agrees to pay 1M-LIBOR each month and party B agrees to pay 3M-LIBOR every ...
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I hope you can help me. I want to use the bid-ask spread of prices for 10yr treasury notes as a proxy for bond market liquidity. I got monthly aggregated bond price data (for yrs 1999-2013) from ...
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Negative correlation between interest rates and credit spreads - Why?

In fixed income markets a stylized fact seems to be that there is a negative correlation between interest rates and credit spreads: Spreads tend to widen as rates fall. Why is that?
2k views

How to calculate credit spread from rating

I've been trying to calculate the credit spread of a financial institution with a Fitch rate of A. By using the transition matrix (https://www.fitchratings.com/web_content/nrsro/nav/NRSRO_Exhibit-1....
1k views

I'm a programmer and recent trading enthusiast. To learn more about options I'm building a market maker trading bot. So far it gets market prices and volatility and calculates the Black&Scholes. I ...
1k views

Interpretation of OAS on MBS

I'm struggling a little with the interpretation of option adjusted spread on mortgage backed securities. I can see how, for a corporate bond without optionality, the z-spread is sort of like a ...
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I am checking a few bonds on the YAS page on Bloomberg and I can see that G is higher than Z spread (this applies to bonds with optionality and bullet, too). As Z is stripped from reinvestment risk, ...
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Spurious regression between two futures with the same underlying highly correlated (cor=0.9)

analyzing the correlation between soybean and soybean meal futures in ECBOT, and making a linear regression in R between them I check with an ADF Test that the residuals are not stationary, so ...
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If I know all the economics of a CDS trade included the Upfront Settlement Fee from the ISDA CDS Model, how can I convert that amount back to Traded Spead? Can some help explain the process?
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Is it possible to hedge Spread Risk on a Forward Swap?

You can enter a forward swap to eliminate interest rate risk, but the spread risk still exists when the swap actually goes into effect. My goal is to convert a floating rate credit facility that will ...
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I have a hard time getting my head around this. Let's say you have a strategy that consists in buying one future spread, for instance CL Z7-Z8 (crude oil dec17 minus dec18). It's easy to calculate the ...
208 views

How to calculate the volatility of a equity option spread

I would like to calculate the volatility of an equity option spread with all legs having the same expiration. Reading Option Volatility and Pricing 2nd Edition by Natenberg, Chapter 20, section ...
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weird stationary pattern in LDO.MI's stock price

how to describe this pattern in Leonardo Finmeccanica's share price (observed here)? It is a fairly liquid stock, but the price seems to alternate between ca. 8 and ca 13!! Does anyone know what ...
628 views

Replacement for Moodys BAA and AAA series

Along with many other people, I have been using Moody's seasoned BAA and AAA corporate bond yield series for my research for some time. I use them primarily to compute and analyze the quality spread. ...
838 views

Free Data Source for Credit Spreads?

Credit spreads are a key economic indicator. They are the difference between yields on corporate and government debt. They are a measure of confidence in the private sector, they provide insight into ...
3k views

is there anyone who can explain the concept of spread duration, both from a mathematical point of view and an intuitive one? Providing a practical example would be highly appreciated. Thanks in ...
1k views

This has always been difficult to understand for me. How is the second futures contract valued in relation to the front month contract? My understanding is there are carry considerations (3 more ...
258 views

I am new to the quant finance community... I have a series of bond cash flows, its market prices and also the spot rates for the timing of those cash flows. How to find the Z-Spread that matches its ...
111 views

Right expression for the semi-annually compounded credit spreads?

I'm familiar with the expression for a (continuously compounded) credit spread of the form $$c(t,T) = -\frac{1}{T-t} \ln \frac{v(t,T)}{p(t,T)},$$ where $p(t,T)$ denotes the time $t$ price of a $T$-...
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Lets say I have two stocks x and y and their corresponding stock price p(x) and p(y). consider HR as hedge ratio. Then we can calculate the spread using this equation. $spread=p(x)-HR*p(y)$ from ...
238 views

Bootstrapping bond spreads as in the standard CDS model

Suppose that we have a spread curve $\boldsymbol{s}:=(s_1, ..., s_n)$, where $s_i$ are CDS par spreads. Moreover, assume the standard ISDA model framework, i.e. piecewise constant forward / hazard ...
816 views

Risky duration formula for what kind of bond?

In a documentation, there is the following formula for "zero interest rate risky duration" of a bond: $\frac{1-exp(-s \cdot T)}{s}$, where $s$ is spread, $T$ time until maturity. What type of bond (...
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calculate 6 month change in TED spread

I have a basic question if someone could help me out how would I calculate the 6 month change in TED spread. I have a monthly time series of TED spreads.
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First and foremost thank you for reading my question, I hope all if you have a Happy Holiday this weekend. On to my question: I am completing an assignment on global sovereign bonds, I've been ...