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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228 views

Introducing 1bp shocks to yield curve (and interpolation consequences)

Let us assume we have a LIBOR 3M curve and that I would like to introduce a small shock up/down of 1bp at a certain point along the curve. I am trying to find out what the best and most efficient way ...
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576 views

Cubic spline interpolation function within Matlab

I want to use the Cubic spline interpolation technique so I can interpolate yield curve points. Now I wonder if I can use the standard matlab function interpl1 (and then using the 'spline' method) or ...
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2k views

Forecast 3m LIBOR USD. Budget purpose

How can I calculate/budget/find a expectation for the 3 month LIBOR for the next 3monts-4 years? I am calculating a CF scenario on USD 3month Libor + margin. With swaps and fixed rate this is easy, ...
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538 views

Building curves using onshore or offshore JPY overnight rates?

I am trying to build Japanese Yen interest rate curves. When defining the curve instruments for the 'OIS' (discount) curve (aka TONAR), I am uncertain as to which rate to use for the overnight deposit ...
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190 views

Economic indicators leading the yield curve

There is a lot of research on how the government yield curve can be used to predict the economy. The government yield curve is often seen as a leading indicator. But for which variables is the curve a ...
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39 views

Nelson Segel Model calculation of the zero bound price at time zero that expires in 2 years

I am somewhat stuck and not sure how to proceed, so any help would be appreciated. I got the Nelson Siegel model with all parameters for the real data. The curve that is produced is yield vs maturity. ...
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52 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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38 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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276 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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269 views

How to interpret DV01 in terms of PCA equivalent?

I have computed the PCs for daily changes in the UST yield curve over the last 5 years using the covariance matrix and can explain 94% of the variance using the first two components, which is good ...
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113 views

Yield Curve Trading Strategy Explaining Books

Recently I really enjoyed being here while getting great recommendations. Would like to thank you all. Could you please recommend some books/papers on trading strategies, lets say yield curve ...
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49 views

Bond Index Return from Yield Curve Data [duplicate]

I am trying to compare fund returns with benchmark returns. I have some yield curve data (some of them calculated by Bloomberg) but not bond price or return data. Is there any way to get bond returns ...
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Strategy in steepening curve environment, stable spreads - HotS interview problem

The following problem was found in "Heard on the Street": You construct a yield curve for (coupon-bearing) treasuries. A particular five-year corporate zero-coupon bond has a default risk ...
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44 views

Custom Frequency termstrc Package

Termstrc package in R by default uses yearly coupon frequencies. Dataset i am working with is semi-yearly coupon bonds. Here are the variables it takes into the model ...
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77 views

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 ...
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391 views

Discount factor taking into account yield curve shape

I have always been told that the discount factor formula is just: $$ DF(T) = \frac{1}{(1+L_{t_0})^T} $$ where $L_{t_0}$ is the LIBOR rate on one period (the first one I guess) and $T$ the number of ...
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Monetary Policy and the Yield Curve PART ONE

As I understand it, the Fed has 3 tools for moving interest rates to combat inflation/unemployment: the discount rate, Fed Funds rate and open market operations. I'm trying to understand how the ...
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113 views

Turn of the year

I understand the basics of "Turn of the year" effect. But I am wondering why does this effect sometimes cause overnight rates around year end to dip below normal overnight rate levels (i.e. negative ...
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329 views

Data source for a corporate bond yield curve?

Yield curves are a valuable tool for economic analysis. It is particularly interesting to analyse the difference between Government Debt yields and Corporate Debt yields (credit spreads). This gives ...
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215 views

YTM of “very-seasoned” bond issues

There is a liquidity premium between on-the-run treasury issues and off-the-run issues with similar characteristics. This is why when building a yield curve, typically on-the-run issues are used to ...
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2answers
12k views

Par Yield Curves vs Zero Curves

Does it make sense to look at par yield curve for German bonds in the current environment? Because low rates mean that a lot of bonds are trading above much above par (even around 150!). I would ...
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2answers
239 views

Intuitive explanation of geometric mean

Suppose that the 10 Year Treasury Yield Rate varies every trading day during the year X1 (which in practice is accurate) what is the intuitive explanation behind calculating the geometric mean using ...
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1answer
1k views

Quantlib bootstraping fails on 5y swap

I'm trying to build a euro swap curve with real up to date data. I should say that examples provided in github work fine. as soon as I add the 5y swap, I got the following error : ...
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597 views

Who determine Sport rate curve (Yield Curve)

My study was in a Mathematical modelling, we studied much about theory, equations, how to resolve equation, how to implement, but we don't understand well where these equations come from. My ...
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1answer
185 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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114 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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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 ...
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55 views

Negative Carry when Yield Curve is Downward Sloping

I am currently reading "The Treasury Bond Basis", and have a question regarding negative carry. The book states that the carry of a vanilla treasury bond will be negative when the yield ...
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1answer
467 views

ESTER replacement for EONIA/EURIBOR

Does anybody know what impact the replacement of EONIA with ESTER ( Euro Short TErm Rate ) will have on discounting existing or new derivatives once EONIA will be restricted as of Jan 2020? I'm ...
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1k views

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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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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187 views

Is it possible to derive a reasonable USD yield curve using only publicly/freely available data sources?

Background I'm a corporate financial analyst with a small derivatives portfolio (amortizing interest rate swaps and FX forwards) looking to value these derivatives "properly" (which, in my case, ...
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1answer
2k views

Setting input parameters for Nelson Siegel Svensson model

I am trying to determine the parameters for the Nelson Siegel Svensson model and am solving a Non-Linear Optimization problem to do this. I am trying to solve: $$ \min_\theta{\sum{(p_i - \hat p_i)^2}...
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2answers
208 views

Investment: Bond vs Equity

I was talking to a friend recently and he asked me the following question. If I have a device which perfectly (with 100% accuracy) predicts that both a bond (e.g. AAA rated government bond) and the ...
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134 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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1answer
98 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
407 views

Curve steepner and convexity

Can someone please explain why a curve steepener trade has a negative convexity? And are the gains from the steepness of the curve offset by the negative convexity?
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1k views

Details of calibration of Hull-White model

Consider the one-factor Hull-White model $$ \mathrm{d}r(t) = (\theta(t)-\kappa r(t))\mathrm{d}t + \sigma\mathrm{d}W(t) $$ When one calibrates the model to market data one chooses $$ \theta(t) = \...
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580 views

Build a swap curve / Swap Hedging

I’m going through the exercise of building a swap curve. I understand I need libor rates for the short-end, futures for the medium-end, and swap rates for the long-end. Should I be using bid, mid, ...
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2answers
2k views

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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131 views

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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1answer
684 views

QuantLib FittedBondDiscountCurve fitResults [Error]

I try to use FittedBondDiscountCurve with NelsonSiegelFitting, but I faced with error when call fitResults() method: ...
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1answer
1k views

Deriving a 3M libor curve from 6M libor swaps and 3M-6M libor basis swaps

If I had a set of 6M Libor instruments and another set of 3M-6M basis swap instruments, how would I derive the 3M Libor curve? Just bootstrap the 6M curve and the basis curve and add up the zero ...
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541 views

How to get real interest rate from Nominal spot rates?

I have the nominal spot rates. Based on the Fisher equation , how to get the real interest rate ($r$) and the "expected inflation" ($\pi$) ?
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196 views

Yield curve interpolation at (very) short horizons

I'm struggling to find much information about yield curve interpolation for sub-yearly horizons. Say, one-two months. It seems to be the area where the curvature is usually nontrivial, while after ...
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1answer
322 views

“Friendly” papers about maximum smoothness yield curve modelling

I'm currently looking to implement some version of the yield curve modeling techniques in the maximum smoothness framework. The papers I have found so far explains the theory pretty well, but I find ...
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2answers
132 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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92 views
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218 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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1answer
321 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.. ...