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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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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How does this formula for the price of a bond in terms of forward rates work?
I am currently reading Chapter 3 of Tuckman's 'Fixed Income Securities' and it states that we can write the price of a bond using its term structure in terms of forward rates but with periods of ...
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Downward Sloping Swap Spread Curve
After observing swap spreads in the market, I have noticed that the swap spread curve is downward sloping. Why is this? I have tried looking around the internet for answers, but have not found ...
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How to correctly build a spread candlestick chart between two assets (avoid inconsistent OHLC)
I just wondering how charting platforms plot spreads between two assets. For example, if we want two create spread chart between APPL / AMZN we can substract or divide each asset:
if we divide two ...
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Why do E-mini S&P 500 futures have small bid-ask spreads?
I noticed that E-mini S&P 500 futures (ES) typically trade with a very narrow bid-ask spread of 1 tick. What contributes to this small bid-ask spread? I can think of two reasons:
Lots of active ...
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Are bid-ask spreads in options related to bid-ask spreads in their underlying?
If an underlying has a large bid-ask spread, does it mean that its options will have large bid-ask spreads too? Is there any relation between the bid-ask spreads of options and the bid-ask spreads of ...
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Why there is no Bid Ask Spread in Futures Markets?
I heard that there is no bid-ask spread in futures markets. Could anyone explain why there would be no difference between the selling and buying price of a futures contract?
Thanks in advance!
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Fitting a Spread into ARIMA AR(1) process
I'm a newbie to econometrics. I've simply ran a regression and have coefficient values of the variables. I'm running a regression for a crypto data, and I've gotten the Spread of the variables. To ...
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Simulating Bid-Ask Spreads
I would like to examine the impact of the volatility on the transaction costs (Bid-ask spread). In my case I would like to examine this for power prices. However, I don't have access to actual order ...
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Feature engineering for mid-price prediction - quickly changing features
I'm training a fully-connected feed-forward neural network on HFT (limit order book) data to predict the midprice at timepoint $t+\Delta t$ (assuming that $t$ is the current moment, and $\Delta t$ is ...
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Can the spread between option premium for bull call spread change over time?
I have created a bull call spread. There was spread of 70 dollars between the option premium of 2 strikes I selected. Now the spread between option premium of 2 strikes is greater than 100 dollars. ...
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Market Impact proportional to the bid-ask spread
Empirical studies have shown that market impact can be linked to the following parameters:
$$ \mathcal{I}(Q) = \kappa \ . \ \sigma \ . \ (\frac{Q}{V})^\gamma + \alpha \ . \ \psi_{BA} ...
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Why is OLS based spread not reflective of actual difference?
I'm trying to define and track the spread between two time series (data available here), for the purpose of learning pair trading basics.
When running a cointegration test the two series seem to be ...
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Trading inside/ outside the spread
Can anyone explain to me what trading inside/ outside the spread mean?
And why are trades that occured outside the spread are to be considered anomalous?
Thanks
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What's the industry standard/typical way to model contango or futures spreads?
If you want to include futures spread either as a response or predictor, I would imagine you also need to include time to expiration somewhere in your model.
What is the industry standard way to ...
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Spread determinants
Knowing that bond A is more liquid that bond B, i.e higher volumes are traded on bond A, does this information have any impact on the spread? Can we say that the large volumes traded on A will ...
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Futures Carry for Index Spread Trade
This question is about a leveraged trade involving index futures.
Let's use an example of buying two contracts YM futures and selling three contracts RTY futures. CME will give the trade a margin ...
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Historical data on european corporate bonds [duplicate]
I am trying to run a factor analysis on European corporate bonds and I need historical data since mid - late 90s on :
1.bonds listed
2.spread
3.firm´s total debt at the time
4.Sector of firm
5....
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Calculation of the Bid-Ask Spread on Bloomberg
I downloaded the bid-ask spread from Bloomberg, but did not check how they calculate them.
Is it only the ask minus bid price or is it weighted in a way?
I appreciate your help!
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What is a call-spread and its formula?
I am attempting Mark Joshi's The Concepts and Practice of Mathematical Finance.
In B.3 Project 1: Vanilla options in a Black-Scholes world, he asked the following question.
We need to be sure that ...
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Pair Trade - Should stock order matter
I am testing a simple pair trading algorithm and I'm having problems if I swap the stocks around. I don't know which stock should be X and which should be Y. When I swap them I get very different ...
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PDs for negative credit spreads
My question is about credit spreads and the corresponding probability of default (PD).
One of the most simple relations between credit spreads and PDs is (see e.g. ch7 in Malz(2011))
$$
PD \approx \...
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The ETF trick - E-mini S&P 500 Futures
In Advances in Financial Machine Learning, Marcos Lopez de Prado talk about what he call the ETF Trick. I understand it is about building a time series from another time serie, with the aim to reflect ...
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Does it make sense to adjust a bond spread for price/coupon effects?
I have come across the practice, in the wild, of bond OAS being adjusted for the price of a bond. The idea expressed to me was something like the following. A $\$90$ corporate bond with a 10 yr ...
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Volatility spread of Strangle
It's written in a book by Giles Hewitt : " The bid-offer spread quoted on a Strangle in volatility terms will usually be wider than the ATM spread to the same maturity because strikes away from the ...
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Turning a spread always-positive for profit calculations?
I have a strange problem. I am running a backtest on a strategy whose signal is based on a spread. Naturally, a spread can go negative or positive. If I try to calculate the log return of a difference ...
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Relation between ATM, RR and BF
In FX derivative market, why does vol spread of ATM > RR > BF? ATM is the most liquid and intuitively it should have the lowest spread. Please help me in understanding the rational behind the above ...
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Understanding Front-End Spreads (terminology, lingo, convention)
Would appreciate a clear explanation as to what the OIS/Tsy spread and the TU OIS spread is. I've seen it being talked about in Wall St research reports but can't seem to find good explanations on ...
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Pair trading - short / long the spread
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 ...
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Basic question about swap/swap spreads
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 ...
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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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Understanding the link between inflation and credit spreads
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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Return On a Spread
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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Bid-Ask spread in Roll's model: Negative autocovariance of returns and informational content
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, \\
...
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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).
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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 ...
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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), ...
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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 ...
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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?
$...
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Getting over bid-ask bounce
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 ...
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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), ...
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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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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 (...
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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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