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98 views

I am wading into pair trading concepts. Here is one article I've read. I understand for these strategies our intention is to go long on one asset and short another, however I do not understand what ...
154 views

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 ...
174 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 ...
193 views

### Crossing the spread as a ML signal

In the optic of high-frequency trading, most of the standard trading algorithms work on the principle of mid-price prediction or mid-price movement prediction. However a big drawback of this technique ...
38 views

### 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 ...
85 views

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 ...
3k views

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, ...
56 views

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: $return = (s_t - s_{t-1})/(a_t + 0.7*l_t)$ ...
95 views

### 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
266 views

Currently studying on techniques to estimate the bid-ask spread. Perhaps the most widely known model is the Roll model (1984). Let $P_t$ indicate log prices $\begin{cases} Bid_t=P_t-c, \\ ... 1answer 98 views ### Good References for Treasury Futures Spreads I’m reading the excellent Treasury Bond Basis by Burghardt. I was wondering if there’s a similar quality book/paper about Yield curve spreads using treasury futures (i.e. NOL, NOB, FYT). 1answer 118 views ### How can I approximate the hedge ratio for Inter Commodity Treasury Spreads? Looking at the excellent CME Treasury Analytics tool, I can see that the hedge ratio for spreads betweend diff treasury futures is derived from the DV01 of each leg. I can get treasury futures data ... 2answers 134 views ### Seagull Spread payoffs I'm looking at different option strategies and the ways that their payoffs differ (and therefore how they can differently be used). I'm looking at the long seagull (buy a call spread and sell a put), ... 1answer 72 views ### Why the spread is calculated on raw prices instead on the price changes? I'm reading Quantitative Trading With R written by Harry Georgakopoulos. In chapter 6 he exposes a basic quantitative strategy based on setting up a stock spread and buy when it is below a lower ... 2answers 68 views ### Synthetic equity index futures calendar spread using options I understand it is possible to synthetic a future using long call and short put ATM options which has the same expiry as the futures. Can we do the following to synthetic a future calendar spread?$...
7k views

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?
80 views

### credit spread ajustment considering currency

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 (...
119 views

### 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 ...
245 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 ...
250 views

### 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/...
130 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), ...
515 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.
607 views

### Whites Reality Check for Pair Trading

I want to use the Monte Carlo Method described in Aronsons book Evidence based Technical Analysis to test if a given pairs trading strategy is useless. First step there is to randomize the returns of ...
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 ...
31 views

### 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 ...
27k views

### What's the intuition behind DTS(duration times spread) in fixed income?

I am having some difficulty grasping the concept of using DTS to measure credit risk. In the equity world, one typical measure of risk is beta, which is quite well-defined as the exposure to a common ...
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 ...
572 views

### 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!
74 views

### 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 ...
727 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 ...
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....
505 views

### Yield for valuation of illiquid corporate bond

I am trying to value a illiquid corporate bond issued at a discount to face value by a privately held company in India. The corporate bond is a sinkable bond (amortizing principle) with coupon rate of ...
101 views

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 ...
237 views

### 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?
1k views

### How to compute interest rate futures spread ratio?

I am confused on how to compute the spread ratio. For example, this is example I came across with my broker - Consider 2 contracts Bobl and Euribor. The DV01 of Bobl i 44.8 and Euribor is 25. To ...
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 ...
223 views

### 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 ...
2k views

### Where can I find corporate bond spreads?

I am trying to price a 30 yr bond maturing in December 15, 2035. The bond is rated A- (S&P). Where can I find the spreads for corporate bonds rated A- maturing in 23 years (December 2035)? I ...
59 views

### 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 ...
3k views

### How to hedge a bull call spread

I am trying to make a theoretical hedge to a bull call spread. (buy out the money call, sell further out the money call) What I have now is almost effective but there is one possible 80% loss (...
812 views

### Spread over LIBOR on a Equity Swap

Does anyone how banks determine the spread over LIBOR on a Equity Swap? Example: Party A pays the return on SPTR to Party B Party B pays 1M LIBOR + 40 bps to Party A Does anyone know how the 40 ...
106 views

### Return on investment in spreads

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 ...
216 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 ...
58 views

### 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 ...
631 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. ...
859 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 ...