Questions tagged [yield-curve]

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46 views

How to optimise Fixed Income portfolio (Yieldbook) based on YTM, duration, rating and exchange rate

I have a fixed income portfolio built up in the Yieldbook and BBG Port. However due to some bad performance of my portfolio compared to the benchmark I would like to build up an optimisation which ...
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1answer
73 views

Which curve is better to approximate bond yields (python)

I would like to approximate bond yields in python. But the question arose which curve describes this better? ...
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1answer
49 views

Choosing which interest rate model to go with?

I've been assigned with the task of modelling zero rate curve. I did it with two models: Vasicek and CIR. Looking at the two curves produced, I can see that one is closer to the observed curve than ...
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2answers
217 views

Swap curve construction

I am new to this area so my question might be basic to many but please answer. For valuing interest rate swaps how will we define which curve to take, like sometimes we use usd 3m curve, or usd 3mv 6m ...
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1answer
130 views

Bootstrap with QuantLib: Fair Swap or zero NPV

In all brevity What is the termination condition used in QuantLib's curve bootstrapping? Can I modify this setup to my needs, e.g. can I tune this to a higher accuracy? Background When bootstrapping ...
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1answer
82 views

How to find OIS discounting factors from OIS swap rates. Please explain with example

Suppose I have the following OIS Swap rates: 1 year OIS Swap: 0.36% 2 year OIS Swap: 0.37% 3 year OIS Swap: 0.38% 4 year OIS Swap: 0.40% From these, how do I get the OIS Discounting factors for ...
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1answer
78 views

How to do simultaneous dual curve bootstrapping?

I wish to understand how dual curve bootstrapping is done? Lets say we want to bootstrap FF OIS curve and Libor 3 month fwd curve simultaneously. Lets also assume we don't LIBOR-OIS basis swap rates ...
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1answer
192 views

What is Dual Curve Bootstrapping? And how to do it, with an example?

I am starting to explore this area. My ultimate aim is to build a 3 month LIBOR forward curve. 1) I wish to know what exactly 'Dual Curve Bootstrapping' is (If someone could explain it in clear ...
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52 views

Value of a 30 year bond using the Yield curve

If I buy a $1 30 year bond with 4% coupon payment, would my cash flow be: $$ V^{30}(t) = \frac{$1 \times0.04}{1 + R(t, 1)} + \frac{$1 \times0.04}{1 + R(t, 2)} + \cdots + \frac{$1 + $1 \times0.04}{1 + ...
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91 views

How to build the 3 month LIBOR Forward curve through Swaps?

In my research, I found that you can build 3 month LIBOR Forward curve using Eurodollar futures and Interest rate swaps. I want to understand how they can be built from Swaps. How can I find the ...
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32 views

How to build the Fed Funds Rate which is a discounting curve? Need this information for modelling the SOFR curve

I want to understand how one could construct the Fed Funds rate. I read somewhere that this could be done using fed funds futures but I wasn't able to understand how Can someone elaborately explain in ...
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1answer
71 views

yield curve basics

Suppose we observe the following term structure (of annualised spot rates): 0-3 Months $\rightarrow$ 4.0%. 0-6 Months $\rightarrow$ 4.2%. 0-9 Months $\rightarrow$ 4.4%. Question1) How can we ...
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50 views

Risk-Neutral covariance matrix of arbitrage-free Nelson Siegel

For my thesis on a Bayesian sampling routine for a modification on arbitrage-free Nelson-Siegel I came across an equation that involves a matrix exponential within an integral, i.e. $\int_{0}^{\Delta ...
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27 views

USD MultiCurve Calibration - IOER vs. OIS/Fed Funds

I'm building out a calibrated USD MultiCurve set, focusing on Fed Funds & 3M LIBOR for the purpose of trading in Fed Funds Futures and Eurodollar Futures (for now ...). I had always assumed that ...
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In the curve building process, why do we need funding curve and projected curve and what are they exactly in current industry? [duplicate]

I am a newbie to fixed income quant side and I am trying to understand in the curve building process, why do we need funding curve and projected curve and what are they exactly in current industry? ...
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66 views

Calibrating Vasicek model for historical data

I need to to estimate the parameters of vasicek model to predict the zero curve. My database has 4k daily observations of zero rate for 37 maturities. My question is do I have to estimate the model ...
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29 views

Curve LIBOR - LIBOR 1M

I want to price a Floating Rate Loan and also want to calculate the amortization schedule for the loan. The base rate is Libor and the reset frequency is every 1 months. I'm currently using the USD ...
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0answers
37 views

Par rates, zero rates and forward rates curves in swaps

I'm new to the concept of swaps, I'm having hard time understanding what each curve relationship with a swap derivative traded in the market. Can someone please explain this? Thank you.
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54 views

Dual curve construction

I'm new to curve construction for swaps pricing concept and I am having hard time to understand dual curve construction and what difference it from single curve ? how do we construct it ? can someone ...
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44 views

SOFR Term Structure and Discounting

Recently I have been going through a lot of documents for SOFR (Secured Overnight Financing Rate). For Debt Markets (loans, etc.) - I understand that SOFR Forward looking term terms rates are ...
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1answer
87 views

Interpolation for discount curve building QuantLib for bonds

I'm trying to figure out how to build a discount curve to price bonds from spot rates using some advance interpolation methods like PiecewiseLogCubicDiscount. I know I can build this curve with ...
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22 views

What is the continuous time approx formula for the par yield curve?

I understand that the par rate is the single discount rate that you would use to discount all of the bond’s cash flows to get today’s market price. I also see that assuming a spot rate function $R(t)...
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1answer
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project curve spot risk (PV01) into forward risk (PV01)

is there a (simplistic?) formula to convert spot risk PV01 into the forward risk PV01? For example, if I have a a) PV01 spot risk : 1yr = 100k/bp, 2yr = 50k/bp, 3yr = 25k/bp b) how can I project ...
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2answers
294 views

Extrapolation between today and the spot date curve building

I'm trying to build my libor curve using (Deposit, FRAs and Swap) instruments with the goal that my curve match the murex curve, my parameters are : My today date is : 23/10/2019 Start of my deposit ...
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46 views

How key rate durations are calculated

I just had a question regarding how key rate durations are calculated in practise. I Know it involves changing the key rates and calculating new bond prices. But how are these new bond prices ...
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1answer
157 views

3M curve vs 6M Curve, which one to use for valuation of IR Derivatrives

Sorry, this might be basic for some of you but I'm very confused when it comes to know which curve (6m or 3m) we can use for valuations of swaps and swaptions. Could someone please explain when to use ...
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1answer
171 views

Quantlib Yield Curve

Is it possible to create yield curve object in Quantlib given some function of time? For example, given Nelson-Siegel parameters, create yield curve which can compute zero yield for any date >= ...
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0answers
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
137 views

Curve building for a swap

I'm a student learning how to build a swap curve, I've deposit 6m rate = 5%, fra 6-12m rate = 5.8% and 12m-18m rate= 6% and swap 2y =7% and 3y swap rate = 7.5%. I get the correct discount factors for ...
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0answers
227 views

Using Python Quantlib's FittedBondDiscountCurve as Evaluator of Parametric Curve - Errors

I am using Quantlib's FittedBondDiscountCurve in Python 3.7 and setting MaxIterations to 0, and giving a guess_solution, which then turns the routine into an evaluator for the parametric form I choose,...
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1answer
253 views

Find Interest Rate Swap BUMPs from Bloomberg in Excel

I have a bunch of plain vanilla interest rate swap contracts with all the relevant details regarding payment structure such as notional, fixed rate, index, payment frequency, reset convention, etc.. ...
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112 views

pca for yield curve

I used Principe component analysis on yield curve data this was the result ...
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1answer
90 views

Required adjustments for stressed yield curves

I was looking at Basel proposed interest rate shocks. Using the standard US Treasury Yield Curve for the period starting from September 2017 to August 2019, I was able to construct Steep and Flat ...
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1answer
165 views

If 10s20s steepener have equal DV01 weighting on each swap then why does convexity play a role in MtM

Receiver Swap 10yrs Notional: 1,000,000 DV01: +1,300 Tenor: 10yrs Rate: 4% Payer Swap 20yrs Notional: 500,000 DV01: -1,300 Tenor: 20yrs Rate: 5% Looking at this fictitious example, I want to ...
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1answer
237 views

What does 5 year OIS actually mean?

I am aware that OIS is the new reference/risk-free rate for collateralized cashflows. OIS is by definition an overnight rate (annualized, I assume). So once I have constructed my OIS yield curve, what ...
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3answers
122 views

Bond strategy in rising rate environment

During a period of rising interest rates, it makes sense for investors to either swap out their longer term bonds for shorter ones, or simply invest in shorter maturity bonds in order to reduce ...
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1answer
92 views

Investor rationale behind inverted yield curve

I just had a question regarding investors/markets rationale behind the cause of the yield curve. Assuming that investors believe that rates will be lower in the future and are pessimistic about the ...
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2answers
186 views

Stress testing fixed income Yield curve with Nelson Siegel

I am attempting to stress test the Zero coupon Yield curve using The Nelson Siegel model as described in the following papers : Generating Yield Curve Stress-Scenarios Representative Yield Curve ...
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1answer
158 views

Recommended Instruments (and sources) for Constructing Money Market Yield Curves

What instruments are the current industry recommendations for constructing money-market yield curves in some major currencies? The switch after the crisis to multi-curve methods is well documented on ...
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2answers
82 views

Which curve does the interest rate risk fall in?

For example, Australian government issues a bond denominated in USD currency? Which curve does the interest rate risk fall in? Australian Gov Curve or USD Gov Curve?
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29 views

is there a specific design pattern in C# to model a yield curve into the NS model?

I successfully managed to have a nice NS model to a yield curve I am studying using R, while I am still beginner in C# I wonder if there is a specific design pattern I should follow in order to put ...
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1answer
660 views

Mark-to-market cross-currency basis swap valuation

I'm looking to replicate the EUR vs USD cross-currency basis curve that Bloomberg outputs (EUR.OIS collateralized in USD). I understand that Bloomberg is currently using the mark-to-market ...
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0answers
156 views

Matching the yield on a bond with the zeroRate on a curve in Quantlib

I am using QuantLib to generate a US Treasury curve from 1y, 3y, 5y, and 10y yield quotes. However, after building the curve and running zeroRate on it, it ...
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4answers
3k 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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42 views

Deriving the series for federal funds rate expectations using federal funds futures

I am trying to derive the monthly series from 2000-2019 of the expectations of federal funds rate based on federal funds futures. How should I proceed? Where to look? Is it possible?
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1answer
157 views

daycount of the yield curve

Complete characterization of an interest rate requires a few elements: day count compounding frequency the rate itself start date and end date That said, I notice that day counts are never displayed ...
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1answer
192 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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2answers
165 views

Estimating a Yield Curve in a country without Bond Stripping

I am currently working under estimating a Yield Curve. From my understanding common procedures to construct a yield Curve like Nelson Siegel have the input of a series of different zero rates and ...
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1answer
176 views

Convexity in interest rate curve bootstrapping

Whether the bootstrapping is a multicurve one or not, one can use futures quotes. One link these quotes to corresponding (synthetic) forwards (that can be expressed as known functions of zero-coupons) ...

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