Questions tagged [yield]

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What is the difference between Discount Yield and Yield on US Treasury Bills

I would like to understand the fundamental difference between yield and discount yield, specifically relating it to zero coupon treasury bills. Please see image below: For those who are terminal ...
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1 vote
3 answers
563 views

Pricing a bond denominated in USD but issued in Europe

I need to price a USD bond using yield-to-maturity from the yield curve (YC). The bond is issued by a German company. My question is what yield curve should I use: the US Treasury YC or the EUR YC of ...
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3 votes
1 answer
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How to interpret YTM of FRN when interest rates change?

Say I have a FRN. If rates go up, then my cashflows are discounted more, but my coupons also go up, so in the end, my bond may be worth the same. However, if rates go up, then since my price is ...
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1 answer
71 views

Estimating Zero Coupon Curve using only Fixed-Coupon bonds available

Today I have been struggling with something that someone here for sure has already encountered. I have a corporate issuer with a set of fixed coupon bonds (maturities between 1.5 to 20+ Years, luckily ...
1 vote
0 answers
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Why do some TIPS bonds have credit spread < 0 [duplicate]

If we look at the yield spreads on Bloomberg of some TIPS bonds, we see they have credit spread < 0 (i.e. their yield is even lower than their benchmark treasury bonds) Why is that the case. ...
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Reverse Repo and Yield to maturity

there is one question I got wrong that I am confused about and that is the following : If you believe that yield will increase in the future which of the following should you choose? the two ...
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1 vote
1 answer
66 views

Is High Treasury yield a bullish signal to stock market?

Conventionally, when 10Y T yield is up, investors run away from growth stock, and vice versa, as it affect the risk free rate, and caused changes to their DCF model. I am here trying to breakdown the ...
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Does tail risk disappear in the long horizon in any rolling over strategy with shorter frequency?

Say I am investing to gain weekly yields ${y_{i}}$ for over a year, gaining the overall yield: $\prod_{n=1}^{52} (1+y_i) -1$ The most dominant term in the above product is the sum of all yields, which ...
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2 answers
202 views

How do you construct a zero coupon curve from the current market yield curve?

If I was to take the current market yield to maturity and tenor for all bonds for a particular issuer how can I convert this curve into a zero-coupon curve? For example if we were to get the yield and ...
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50 views

Day count convention effect on I-spread / Z-spread

I would like to ask if the Ispread / Zspread are computed correctly when day count convention "DCC" of the swap rate is different from the DCC of the bond. My understanding is that DCC plays ...
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1 answer
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Data on historical, cross-country nominal yield curves

Various central banks publish their fitted nominal yield curve estimates: the Fed, BOE, SNB, BOC, ECB (cf: Bundesbank), RBA, Russia, RBI. (I couldn't find for BOJ; Brazil; BOK; or PBOC. Links for ...
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1 answer
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How do I calculate yield and trading margin of an Australian Dollar floating rate note?

I am trying to calculate the yield and trading margin on an AUD FRN in a robust manner. I am hoping someone can help with a few details. I am forecasting cash flows and solving for the discount rate ...
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0 answers
176 views

Definition / convention of statements receive 10s30s and boxes

I have a very practical question regarding the terminology of swap / rates trading. What is the exact definition of statements like receive 10s30s. I know that it is the spread between 30y and 10y ...
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Standardize YTM's of coupon bonds with different coupon frequencies

In Financial Mathematics for Actuaries by Wai-Sum Chan and Yiu-Kuen Tse, the following formula is given for a $n$-year annual coupon bond with transaction price $P$ where the yield to maturity is $i_Y$...
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40 views

Building a yield curve out of YTM's with different coupon periodicities

I want to graph a yield curve using the yield to maturity of my bonds. However, my coupon rates have different periodicities. Financial Mathematics for Actuaries by Wai-Sum Chan Yiu-Kuen Tse give the ...
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1 answer
202 views

YTM calculation of a portfolio

Should I take in count future which are used to lower the duration to calculate the portfolio's YTM ? (Bloomberg calculate portfolio's YTM without Future) Im currently doing the weighted average. I ...
2 votes
0 answers
76 views

Yield to maturity of amortized bond

I have an amortized bond with maturity at 30.04.2023, a semiannual frequency, 10% coupon rate, 30Е/360 day convention, and a clean price of 104.9367. Also, there are two amortization payments: 300 at ...
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1 answer
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Long Breakeven inflation

I want to go long bei by going long individual 10 year tips and short individual 10 year treasuries. How do I calculate and match the duration?
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0 answers
301 views

Schedule, Yield-to-Maturity, and NPV of Fixed Rate Bond from QuantLib Python

I would like to price a fixed rate bond using QuantLib Python. The pricing is fine, however I would like to understand how to extract the Yield-to-Maturity (YTM) of the fixed rate bond, that is, the ...
1 vote
2 answers
154 views

Problem with bond.bondYield Quantlib

I'm having issues with a simple FixedRateBond bond yield calculation using QuantLib: ...
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1 answer
101 views

Bond Future and Bond Yield relation

I recently read, that yield changes during a short time window can be approximated by dividing the returns of futures on the bond by its Duration. Has anybody heard this before and can shed some light ...
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0 answers
114 views

How to bootstrap zero coupon rates and what is the relationship with par yields

I understand the basic logic of bootstrapping zero coupon rates (take a bond, discount each cashflow at the prevailing/previously solved zero rate, and solve for the last rate at the last cashflow). I ...
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2 votes
3 answers
630 views

Carry and Pull to Par of a bond

I am of the understanding the true carry of a bond is yield - repo rate. And not simply coupon + repo cost because this doesn’t ...
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0 answers
49 views

TNote Futures contract YTM vs yield on bought notes? [duplicate]

I understand how to calculate the yield on a 10 yr TNote based on face, price & coupon. I don’t understand why the yield (and price) on a futures contract about to expire is so different than the ...
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1 vote
3 answers
258 views

Interpolating a yield from two yields (giving more weight to one of the two)

I would like some guidance with the following please. Suppose I have two yields: ...
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2 answers
130 views

Hull's book par yield example [closed]

In Hull's book (9th edition), on page 83, there is a simple example of par yield: I am a bit confused when it says "this has semiannual compounding because payments are assumed to be made every ...
1 vote
4 answers
75 views

corporate bonds - general questions [closed]

Newbie here and not trading IRL but for a school assignment. I want to buy corporate bonds because they are a safe bet from what I read. I have a few questions though, I hope I will find an answer ...
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1 answer
176 views

Calculating the cumulative probability of default from recovery rate, yield and coupon rate

I have the following details: A 10-year U.S.Treasury strip has a yield of 6% and a 10-year zero issued by XYZ Inc, rated A by S&P and Moody's, has 7% (semi-annual compounding). Assuming a recovery ...
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1 vote
1 answer
787 views

ICVS 133 Bloomberg Curve

This could be a very dumb question but as I'm making my debuts as a Quant and some things have to be clarified as I'm mostly on my own and no way of asking questions to more experienced quants. I'm ...
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1 answer
98 views

Which relation stands between IRR and the cumulative profits?

In the graph below you can see an irregular Cash Flow. The graph is cumulative, on the y axes there are moneys, on the x the dates. In the second graph the IRR (...
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2 votes
1 answer
1k views

How to compute par yield from zero rate curve?

How does one calculate the below two-year par yield given the zero rate curve: Assume the following two-year zero rate curve, with continuous compounding: ...
3 votes
2 answers
127 views

FED rate cuts don't exist

I would just like to confirm my understanding of how the FED controls interest rates. In my view there's no such thing as changing an interest rate. Because rate/yield is just an effect of price ...
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1 answer
70 views

Agency Fixed Rate RMBS Yield Decomposition

I'm trying to find the best way to decompose the yield on an index of fixed residential MBS securities and want to open up the question to the community. The goal is to look at this from a ...
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1 vote
1 answer
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reason behind bond yield diverge for bonds with the same maturity during 2008 crisis

I was told that the following two US treasury bonds diverged in yields during 2008 crisis up to 80 bps. what was the reason for it ? They are both matured in 15th Aug 2015 but has different coupon ...
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1 answer
55 views

Calculating coupon yield and continous compounding

I need to calculate the yield of a 2 year Coupon Bond. Price = 98, Coupon = 3.5, N = 100. Now when I try to solve this, I arrive at the equation: $$ 98 = 3,5*e^{-y}+103,5*e^{-2*y} $$ But I can't ...
2 votes
1 answer
410 views

How to get the price of a bond if the yield is given or viceversa in QuantLib

For example Can u provide with a detailed example please if i have ( maturity, issue date, coupon, frequency, days_countbase, (price or yield) what is the (yield or price given this information. ...
1 vote
0 answers
35 views

Time and asset weighted rate of return of a portfolio

If I have a portfolio with 3 initial assets on day 1 (say, stock 1 with beginning market value of \$100, stock 2 \$150 and stock 3 \$175) and after 10 days the stock 2 is sold for \$200, how can I ...
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1 vote
0 answers
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Should the NPV be equal to zero in liquid markets? [closed]

My question is actually very simple. I would like to motivate it by bringing the following example: suppose we have a (conventional) bond which generates $CF_1;CF_2;...;CF_n$ cash flow (for ...
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2 votes
1 answer
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Computing T-Bill Yield across leap year boundary

Consider this T-Bill (912796TE9) that was purchased on 2019-10-30 and matures on 2020-02-06: I'm trying to work through some of the basics of the yield calculation. The days until maturity is 99. (<...
1 vote
0 answers
396 views

Relationship between ROE and IRR

In the textbook I read the following: We can increase the present value of a share of common stock with a new investment only if $ROE > r$ , where $r$ is a discount rate (capitalization rate). ...
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410 views

Expected Yield to Maturity & Default Risk Premium

For a corporate bond, which natuarally has a default risk, the expected yield to maturity (EYTM) is defined as the probability-weighted average of all possible yields. Hence, for a 10-year zero-...
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4 votes
1 answer
387 views

Hedging EURUSD with negative rates

I was reading an article and i saw this : Fund managers based outside the eurozone can profit from buying Europe’s negative-yielding government debt thanks to an uplift from hedging the currency. ...
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1 answer
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Clarification on certain finance terms surrounding bonds

Whilst revising for my upcoming financial mathematics exam I've been struggling to get to grips with certain terms/ phrases used when studying Bonds. I am very new to Finance and get confused very ...
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5 votes
4 answers
2k views

Why does the ultra long-end of a yield curve invert?

The shape of the yield curve (at least in the GBP Rates market) is upward sloping from the front end up to the long end (i.e. 30y), but then begins to become downward sloping as we go beyond 30y and ...
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0 answers
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How to modify EMSR when capacity for each fare class is different

In the normal EMSRa and EMSRb algorithms (EMSR= expected marginal seat revenue), each fare class is utilizes exactly 1 unit of capacity (for eg. one seat on a plane). But I have a similar problem for ...
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2 votes
1 answer
133 views

Why did high yield corporate bond ETFs tank during the great recession

My apologies if this is not mathematical enough for this outlet. My understanding of the pricing of a bond ETF is that lowering interest rates drive the price up and increased risk of default drives ...
3 votes
4 answers
12k views

Par Yield, Bond Yield and Zero Rate

In the Hull's book, chapter 4.4, it says : The par yield for a certain bond maturity is the coupon rate that causes the bond price to equal it's par value. Then for this question (4.18) : “...
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1 answer
564 views

Yield Curve Flattening Trade

Relatively simple question, but came upon it in class and have not been able to come up with an answer: The two-year bond yield is equal to 4% while the 10-year one is equal to 10%. You want to put ...
1 vote
1 answer
239 views

Proving that YTM > Current Yield on Discount Bond

I’m currently stuck in proving that for a discount bond: YTM > current yield, with: $$\text{current yield} = c \frac{100}{P}$$ with $P=100-d$ the price of the discounted bond and $c$ the coupon rate....
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Calculating historical volatility and returns from bond yield

I am interested to calculate the historical volatility and returns from a time series of US 3m T-bill yield (see screenshot below), for portfolio optimization. I am not too sure how to bridge the idea ...
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