# Questions tagged [zero-coupon]

A debt security that doesn't pay interest (a coupon) but is traded at a deep discount, rendering profit at maturity when the bond is redeemed for its full face value.

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### What does instantaneous forward mean?

Could you please help me to understand meaning of instantaneous forward rate? I mean economic interpretation at basic level. What is it used for? How can i derive it from zero rate/price? Thanks
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### yield concept for a short maturity zero coupon bond

I am trying to clarify what is the more relevant and appropriate quantity for a discount security / zero-coupon bond, that is defined by a face value, FV, a present value, PV and a time to maturity, t,...
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### 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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### bootstrapping bloomberg

Does anyone know the zero rate here at -0.23022 is derived? I have tried (1+0.0056*0.503)*(1+-0.00232*0.086)=(1+?^(1/0.589). Solving for ? gives me -0.002344. I have tried simple and compounded ...
157 views

### discount factor, zero rates, zero curve from BBG

How can I calculate the discount factor for row 1? I would do $$\frac{1}{(1+ 2.13763/100)^{(90/360)}} = 0.994726197703956$$ My ultimate goal is to reproduce the Zero Rates. Any hints welcome. ...
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### Why is it desirable to receive fixed on a zero coupon swap, and undesirable to pay fixed on a zero coupon swap?

In most established rates markets, swaps are discounted using risk-free reference rates, such as Sonia in the GBP market and Eonia in the EUR market, as opposed to Libor. Because of the way zero-...
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### Vasicek Model, zero coupon bond question [closed]

I am trying to solve questions in the Vasicek model. Can anyone help me to solve this question... In the Vasicek model with parameters $\theta = 0.08$, $k$ = 2.5, $\sigma = 0.2$, assuming to be ...
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### When estimating P/L through greeks based on zero rate curves, does it contain time (theta) PNL?

Suppose on day 1 we calculate a delta wrt. a point on an interest curve of zero rates, we then let 1 day pass, recalculate the interest curve of zero rates with the same bonds (though now day 20 bond ...
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### Can we derive 5 year zero coupon interest rate by using 1, 2 and 3 year zero coupon interest rate?

Given that the 1 year zero coupon bond interest rate is 5%, 2 year zero coupon bond interest rate is 6% and 3 year zero coupon bond interest rate is 7%. 4 year coupon bond price and interest rate are ...
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### Hedging With Zero Coupon Bonds from The Concepts and Practice of Mathematical Finance by Mark Joshi

In section 2.5 he describes an example of arbitrage-free pricing (attached below). I have a pretty solid understanding of how we arrived at $K' = K\frac{1+d}{1+r}$, but I got a little lost when he ...
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### T-Forward Measure, LMM & the Zero T-bond

the zero-coupon T-bond is widely used in the industry as a tool to derive pricing formulas: for example it is used in the derivation of the Libor Market Model. The way in which it is often used ...
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### Are pure PIK bonds' payoffs known from the start?

I am developer working in the financial field and I would like to understand what I'm doing. My latest work subject involves Payment In Kind bonds with coupons fully reinvested (e.g, no coupons ...
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### a property of zero coupon bond in Brigo/Mercurio's “Interest Rate Models”

Let $P(t,T)$ be the the value of a contract at time $t$. This contract guarantees its holder the payment of $1$ at time $T$. consider $t<T<S$, when the interest rate is non-deterministic, do ...
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### EURIBOR zero rates vs forward rates to project future income on a bank's loans

I work at an international bank within the M&A FIG team, and have seen that my associate uses the future daily EURIBOR 3M,6M,12M to estimate what the future interest income on a banks loans will ...
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### Zero Coupon Curve and Floating Rates Notes pricing

Simple question: Can I use a Zero Coupon Curve (using Treasury or Swap Curve) to price floating rates notes (FRN)? I am building a classic Zero Coupon Curve, however I wonder if I can use it to ...
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### example regarding zero coupon bonds

This example is from Interest Rate Models: an Infinite Dimensional Stochastic Analysis Perspective by Carmona, René, Tehranchi, M R. I am wondering if the calculation is correct?, he says ...
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### Zero rate curve USD Libor

Good day, I gave following inputs of Libor rates : ON 0.3731 1W 0.3939 1M 0.4265 2M 0.5148 3M 0.6176 6M 0.8655 1Y 1.1336 How can I build zero-rate curve ?
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### Constructing NS-Svensson parameters with zero coupon AND coupon bonds

I am in the process of calculating sovereign zero coupon yield curves using the NS-Svensson parameter for a number of countries. Due to data constraints, I would like to use the information from price ...
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### Option pricing PDE Black Scholes one-factor Hull-White (or Vasicek) model

I am trying to find the option pricing PDE of the Black Scholes one-factor Hull-White (or Vasicek) model using a self-financing portfolio strategy. The system is as following \begin{equation*} \begin{...