Questions tagged [yield]

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73 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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1answer
124 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: ...
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2answers
124 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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1answer
31 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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1answer
64 views

FX implied yield

Emerging market currencies like IDR, INR, its fx implied yield generally rise in a stressed environment. While for KRW, fx implied yield usually drops in a stress environment. I would assume KRW ...
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1answer
56 views

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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1answer
40 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 ...
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1answer
153 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. ...
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31 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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53 views

Find yield (bid and ask spread)

On March 2, a Treasury bill expiring on April 20 had a bid discount of 5.86, and an ask discount of 5.80. Calculate the best estimate of the risk-free rate to be used in valuing options with the Black ...
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34 views

US Treasury: given YTM, calculate price

According to https://www.marketwatch.com/investing/bond/tmubmusd10y At the end of 3/13/2020, the 10 Year Note (maturing 2/15/2030, coupon rate 1.5%) has: yield = 0.981% price = 104 9/32 Assuming a ...
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16 views

Future wealth calculation with investment

Task: The student is 25 years old now. He say, that next year his salary will be 15000€ per year. His salary will grow +5% each year until his pension (when he will be 65 years old). Calculate how ...
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60 views

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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27 views

Transform Bond Yields into Forward-Rates?

There are many bond yield datasets available online; however not so many of them provide forward-rates. How can one convert yield curves into forward-rates? (I'm a bit cloudy on the definition of a ...
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1answer
103 views

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. (<...
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218 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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187 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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1answer
265 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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1answer
65 views

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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4answers
1k 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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29 views

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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1answer
111 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 ...
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4answers
4k 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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1answer
204 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 ...
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1answer
138 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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168 views

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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80 views

Duration and yield

I have some basic questions about mainly duration and yield. 1) Almost no-one defines what yield they are talking about when talking about duration and discount rate, I've seen some talk about ...
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1answer
43 views

Why currencies and futures contracts can be considered as assets with known yields?

I understand why stock index can be considered as assets with known yields due to the dividends. But why currencies and futures contracts can also be considered as assets with known yields? In the ...
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43 views

Is it possible to estimate the average convenience yield on brent crude oil for 2018?

If it is possible to estimate it, how does one do this, and what is it?
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3answers
161 views

What's the logic behind 3-10 UST yield inversion predicting recession?

Is there causality, behavioral or logical explanation behind this indicator or is it just purely an observation based on correlation? My guess is that there are existing derivatives with clauses that ...
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2answers
646 views

Why does the YTM equal the coupon rate at par?

I know the YTM of a coupon bond is the interest rate $i$ which verifies $ P =\frac{C}{(1+i)} + \frac{C}{(1+i)^2} + ...+ \frac{C}{(1+i)^n} + \frac{F}{(1+i)^n} $ where $P$ is price, $C$ is the coupon ...
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1answer
604 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/...
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1answer
141 views

Implied credit spread convertible bonds with negative yield

I’m trying to understand what happens to the credit spread of a convertible bond when yields of the convertible are negative. I’ve heard there is an implied credit spread as spreads can’t really be ...
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1answer
140 views

Difference between Excel's Rate Function and Paul Wilmott's Goal Seek Method for finding YTM

I'm watching some FRM videos teaching how to find YTM via excel's =rate() function and tried getting the YTM using Paul Wilmott's spreadsheet that uses goal seek. I'm getting different results. ...
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2answers
557 views

Why do par-yield shifts grow faster across the curve than spot-rate shifts when looking at key-rates?

Consider the following 10y key-rate shifts of bond par yields and its implied shift of bond spot rates: Assume we have the key-rates for 2y, 5y, 10y and 30y. The y-axis is in basis points, and the x-...
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4answers
257 views

Intuitively, why does liquidity premium contribute to bond yield?

According to the Wikipedia, "The upwards-curving component of the interest yield can be explained by the liquidity premium... Liquidity risk premiums are recommended to be used with longer term ...
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3answers
246 views

Yield To Maturity calculations for risk-free vs risky bonds

For a risk-free bond such as a US treasury bond, the YTM would be solving for $r$ in the denominator of each ($\frac{coupon payment}{(1+r)^n})$ such that the total equals the given price. And such a ...
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1answer
198 views

Is it possible to use the YIELD() function in Excel to compute the yield of an Italian government bond?

I'm interested in using the YIELD() function in Excel to compute the yield of an Italian government bond. The bond in question is: 0.750% 15-January-2018 Italian government bonds have special ...
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1answer
412 views

Dividend Yields of the S&P500

Straightforward question; Is it possible to find dividend yields of the S&P 500 on a daily basis (or at least the dividends of the S&P 500)? I have been looking everywhere and can't find ...
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1answer
87 views

Bond ETF Dividends

Bond ETFs usually make monthly dividend payments. The ETF manager receives quarterly or semiannual coupons on the underlying bonds in the ETF. What is the time delay between the coupons received and ...
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2answers
343 views

Floating rate note value approximation

I was hoping somebody can assist me with a query. Would it be a valid approach to revalue a frn with a discount margin from a comparable bond as par minus the difference between the quoted margin and ...
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1answer
1k views

Yield curve: Turn of year effect jump calculation

I'm trying to get the values for the turn of year jumps that can be found at section 4.8 of Everything You Always Wanted to Know About Multiple Interest Rate Curve Bootstrapping But Were Afraid To ...
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1answer
537 views

How to calculate the yield of a forward bond price from the zero curve

We want to use the Duration to convert forward price volatility to yield volatility with ...
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1answer
51 views

YTM of a Fixed-Income Loan?

I'm quite confused regarding the computation of a YTM. I got a Portfolio of Single Loans 30Y(like a MBS) which are not traded and hence do not have a market price. Now I want to compute the YTM in ...
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2answers
201 views

What yield on T-bills is presented in obtained data from quantmod?

When I try to find, for example 3 months T-bill rate, how that rate is calculated? getSymbols(Symbols = "DGS3MO", src = "FRED", auto.assign = FALSE) -> t3 tail(t3) ...
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2answers
584 views

Cochrane on Return Predictability

Being a lover of Sir Arthur Conan Doyle's work, I picked up a copy of Cochrane’s 2008 paper, The Dog That Did Not Bark: A Defense of Return Predictability and read: If returns are not predictable, ...
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1answer
87 views

Why should central bank intervention cause inverted yield curve to be less effective as a recession signal?

Pimco's new CIO Dan Ivascyn believes that the inverted yield curve has become less effective as a signal of impending recession. https://www.bloomberg.com/news/articles/2017-06-22/pimco-s-ivascyn-...
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163 views

Curve to curve hedging for treasury

Please correct my conceptual understanding if needed, but I'm trying to calculate the mod duration of treasury curve pieces when the curves are DV01 hedged. For example: DV01 of 10 Year Note is 896....
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1answer
55 views

Discretizing the conditional variance in the Arbitrage Free Dynamic Nelson Siegel model

for my thesis I am trying to fit the correlated factor arbitrage free dynamic Nelson Siegel model to yield data. I use the Kalman filter to model this but since the model is in continuous time, I need ...
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2answers
5k views

Do all bonds of the same maturity have the same yield to maturity?

We've been using this formula to price Bonds. c/y + (100-(c/y))/(1+y)^m where c=coupon y=yield to maturity m=time to maturity Let's take a 10 year U.S treasury for example. Price of existing bonds ...