# Questions tagged [yield-curve]

A yield curve is a plot of yields for various bonds (often government bonds) versus the bonds' maturities. We also often plot swap and other LIBOR rates to get the (related) swap curve.

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### Inverted Yield Curve [closed]

In an article of FT today, Matthew Klein writes, "The yield curve represents the cost of borrowing over different amounts of time. Lenders generally prefer getting their money back sooner rather than ...
1 vote
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### Yield curve estimaton using linear regression

Assuming that there are not any zero coupon bonds in the market, then someone has to use the prices of regular bonds with same maturity and characteristics (risk,issue etc.) to obtain the yield curve. ...
1 vote
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### High convexity vs low convexity bond definition

Isn't high convexity always better than low convexity bond from the formula that $$\frac {ΔB} B=-D \frac {Δy} {1+y} + \frac 1 2 CΔy^2$$ Since $\frac 1 2 CΔy^2$ is positive no matter what so the price ...
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### How do traders determine when points in a yield curve are at 'fair value'?

While on my last day on an internship last summer, I heard on the morning call a UK rates trader say something along the lines of: "Most of the curve is at fair value at the moment, so nothing ...
1 vote
469 views

### Simulation curves; PRIIPS category 3

Once the yield matrix has been computed, the eigenvectors must be calculated to project the yield matrix on the 3 main dimensions. Tehen is wasted to calculate the yield matrix to be used for the ...
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### Principal Component Analysis of yield curve change

Following pictures are the Principal Component Analysis for the yield curve change from https://www.coursera.org/learn/interest-rate-models/lecture/ZHMM6/principal-...
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### How are short rate models used to construct the whole of the yield curve? [closed]

There are a number of short rate models that give $r(t)$. How can those be used to construct the whole of the yield curve $y(t,T)$ (where $y(t, 0) = r(t)$)?
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### Do we use the Nelson-Siegel model to calculate the yield curve?

Suppose we are to plot a yield curve for a list of bonds. Do we use the Nelson-Siegel fitted yield curve since that's with the case for zero coupon bonds? Or do we in fact use bonds with different ...
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### Yield curve interpolation

I'm trying to build a zero/spot curve and have two pieces of information. 1yr zero coupon swap = 1% 3yr zero coupon swap = 3% My initial guess was to linearly interpolate which produces a linear ...
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### Discount Curve Vs Forward Curve

This could be a trivial question, but would I like to clear the concepts. Our firm started sourcing the Murex Trades which has all the variety of Derivative products. I noticed that the Curve ...
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### Is the "swap curve" synonymous with the "yield curve"?

Looking at the swap curve construction here: http://www.bankofcanada.ca/wp-content/uploads/2010/01/wp00-17.pdf it seems to be constructed in an identical fashion as the yield curve as described here:...
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### Interest rate curve in option pricing

When pricing an equity option we calculate risk-free rate by interpolating one of the curves below for time-to-maturity T. What is the difference between the following curves and in what case each is ...
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### Decreasing Forward FX rate curve

i've constructed a Forward FX curve using the formula: $F= Spot \frac{(1+I_b*n/N)}{(1+I_c*n/N)}$ when i get these Forward rates for 1 month, 3, 6 till 1 year i got a decreasing forward Fx Curve How ...
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### How are LIBOR rates beyond 12M arrived at? [closed]

I understand LIBOR rates quoted on a daily basis upto 12 M tenors. But how are rates beyond 12M tenor estimated. I got this question from an interviewer.
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### Libor futures rolling adjustment & curve building

Can futures rolling affect curve constructing? Let's say that i'm using future 1 and 2 to construct the short end of my curve. As i understand it, rolling will create volatility (as volumes spike), ...
1 vote
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### Interest rate risk using copulas

In order to simulate an interest rate yield curve, can I just estimate a covariance matrix of historical key rate data, simulate with a normal copula, spline my simulated key rates, then price my ...
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### 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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### What curve are you shifting when you calculate DV01 for a swap?

I understand that a general swap has 4 curves attached to it: the flat forecast curve associated with the fixed leg, the forecast curve associated with the floating leg, the fixed leg discount curve ...
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### Is there really a negative roll yield for futures in contango?

I am trying to wrap my head around how ETFs that track futures work (whether its USO tracking WTI futures or VXX tracking VIX futures). I have read online about how for normal contango environments, ...
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### Difference between a 3-months UK nominal spot rate and a 3-months UK treasury bill discount rate?

I am trying to collect data I could use for calibration of a short-rate modeling process, so I need data which represents the historical short-rates. On the Bank of England webpage I came across the ...
1 vote
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### 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-...
1 vote
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### 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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### Equations for multicurve calibration with OIS discounting

I am trying to calibrate my forecast and discount curves using the multi-curve approach with OIS discounting. To do so, I have a implemented multivariate Newton-Raphson root finder. I am finding a bit ...
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For the valuation of a bond, is the bid ask spread somehow reflected in the yield curve? Considering zero coupon bond, one would expect to have an bid price and ask price and therefore if I am ...
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### Does the YTM for a zero coupon treasury equal the treasury yield curve value for it's maturity?

The title is my question. I think the answer is yes, but I am unsure about it.
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### Fitting the Term structure of Discount Bonds with Ho-Lee

I was now reading a book on interest rate modelling, and I am having trouble picturing the practical issues of model calibration with the Ho-Lee model. Apparently, one of the drawbacks of this model ...
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### Pricing zero coupon bonds on a yield curve

I'm getting confused about how I should price the current price of a zero coupon bond when there are several yields to choose from. For instance, lets say that there is an upward sloping yield curve. ...
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### Applications of PCA to yield curve analysis

One of the applications of Principal Component Analysis in Finance is to analyse the shape of the yield curve. But what conclusions can be drawn exactly from performing this exercise? Does it help us ...
1 vote
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### Daily yield to maturity using uniroot in R: error

So, I'm trying to compute the daily yielt to maturity on basis of data retrieved from Datastream. The data comprises EMU Treasury bonds with Prices, Coupon and Maturity date. In R the matrices are ...
1 vote
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### Multi-factor affine yield models reference (a la Duffie and Kan)

http://www.darrellduffie.com/uploads/pubs/DuffieKan1996.pdf I was trying to read above paper on the topic of multi-factor affine models, but I presume the contents have been dealt with more ...
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### Why 10 year treasury yield expectation note priced in bond prices?

A lot of large firms are predicting that the 10 year treasury yield is going to rise. My question is that if such prediction has any substance, shouldn't the current 10 year yield rise accordingly, as ...
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### Shape and geometry of the yield curve

Let the initial yield curve $T\mapsto y(0,T)$ be given for a term structure family of bonds $B(0,T)$ having different maturities. I am trying to figure out the geometric properties of the yield curve. ...
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### Best method for interpolating yield curve? [Multiple questions]

I'm building a spot curve for US Treasuries. My original selection of cash treasury include all the on-the-run bills, notes, bonds from 6 months to 30 years, as well as some selected off-the-run ...
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### Python Quantlib yield curve dates different than input

Thanks very much for your help in advance. I am trying to understand the yield curve construction from Python Quantlib. And it seems I cannot get the curve output the same dates(nodes) as my input ...
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### QuantLib Python Swap Yield Curve Bootstrapping Dates and Maturities

This is somewhat related to the question I asked here but simpler. I am trying to bootstrap a yield curve from swaps, and am having a problem with the dates/maturities that are coming out. The code ...
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### QL-Python Bootstrapping Yield Curve FuturesRateHelper throwing off results

I'm trying to perform a bootstrap of a yield curve from deposit rates, futures, and swaps, and the interpolation is "blowing up" for the futures maturities being off by two orders of magnitude (100x). ...
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### Brazilian break even inflation curves

Brazil has had historically two sets of inflation bonds, the NTN-B and NTN-C series each with a different inflation index. The NTN-C is no longer issued. When creating historical break even ...
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### How to Construct a Corporate Yield Curve

I received this question in a job interview. I don't really have fixed income background and was wondering if anyone can help me understand how to figure out this for myself. Create a 12 month time ...
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### What does equilibrium return on 90-day Treasury Bills mean?

I have been reading NZ Superfund's 2015 Ref Portfolio Review (here) and came across this notion: Our estimate of the equilibrium return on 90-day Treasury Bills is 5%. And this is under the column ...
1 vote
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I am new to the quant finance community... I have a series of bond cash flows, its market prices and also the spot rates for the timing of those cash flows. How to find the Z-Spread that matches its ...
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### Convert USD yield into EUR yields

I want to calculate the EUR equivalent yield from the USD yield curve. For example : how to translate the USD libor curve into an EUR equivalent yield curve ? Do I need to use FX forwards or is the ...
1 vote
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### In what economic scenario do yield curves bull flatten or bear steepen?

Bull steepening and bear flattening have the common belief that in bad news, treasuries catch a bid and short end rallies more because most bad news are short lived. In good news, treasuries sell off ...
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### IR parity theorem

I wonder how post crisis multiple curve approach influences the ir parity theorem: $$(1+i_{\})={\frac {E_{t}S_{t+k}}{S_{t}}}(1+i_{c})$$ Let's say that $i_\$\$ is USD Libor 3m rate ...