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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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 ...
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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 ...
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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 ...
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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 ...
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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....
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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 ...
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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 ...
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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 ...
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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)...
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what is the problem of using asset swap spread to compare bonds
people use asset swap spread to compare bond relative values (rich/cheap).
is there a known issues or anything that needs to be aware of when using swap spread to compare relative value of bonds?
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Beta Neutral Spread in Pairs Trading
I was looking for the methods of calculating spread in pairs trading and I come across this answer from Jacques Joubert in which he said that $\text{Stock Price}_A- \text{Stock Price}_B*\text{Hedge ...
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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 ...
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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 ...
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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 ...
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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.stack.imgur.com/2yPzW.jpg
Looking at current 2 and 10 year futures the CTD is roughly a 2 year and 7 year respectively.
Am I ...
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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 "...
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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 ...
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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?
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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?
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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 $...
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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 ...
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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 ...
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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 ...
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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 ...
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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 ...
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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 ...
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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 ...
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"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 ...
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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?
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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 ...
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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 ...
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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 ...
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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.
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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 ...
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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 ...
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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 ...
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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 ...
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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 ...
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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 ...
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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 ...
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Market maker hedging model
I understand that most market makers maintain non directionality i.e. they always aim to be perfectly hedged. So if they take a long position in X, they will take an offsetting short position in a ...
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comparing volatilities of 2 different commodities when no delta is provided
If I wanted to compare the relative volatilities of options on 2 different commodities, but the deltas are not provided, is it sufficient to compare by the % each commodities strike is in or out of ...
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Spread and volatility
I look for any references where one consider how bid-ask spread depends on volatility (may be it is more correct to say 'volatility measure'). I would be grateful for any references.
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ETF bid/ask spread [duplicate]
I was just wondering if someone could explain to me how an ETF market maker earns profit through the spread they collect while hedging the positions to be non-directional.
For example I read somewhere ...
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Corwin-Schultz estimator of bid-ask spread
I am reading a paper "A Simple Way to Estimate Bid-Ask Spreads from Daily High and Low Prices" cf.A Simple Way to Estimate Bid-Ask Spreads from Daily High and Low Prices
The authors proposed ...
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How to calculate bid/ask spread for an index?
I am trying to calculate implicit transaction costs for a newly launched portfolio, as per the definition from ESMA:
"transaction costs may be calculated either by multiplying an estimate of ...
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Cap/Floor on a SpreadOption grid
I have a spread option data from a broker. The rows are the following :
STK
ATM
-0.5
-0.25
... and the values are forward price ( the strikes used are absolute strike and the value of the raw STK is ...
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Asset Swap Spread
A Bond's Asset Swap Spread is defined as the difference between Bond's Yield and the Risk free rate.
Then I was told that, the Present value of the Bond's Asset ...
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