5

The rolling bond $R(t)$ as defined in your question is a valid numéraire. Indeed, this bond can synthetized with the following iterative trading strategy in basic assets: At any time $T_i\in\{T_0,\dots,T_{m(t)-1}\}$, invest your available wealth into the spot-starting zero-coupon bond expiring at $T_{i+1}$, with price $P(T_i,T_{i+1})$. At $T_{i+1}$, you ...


4

To be honest, this is a complex issue, but there are a few approaches taken in real life trading. The most simplistic approach is to mark the off-the-runs against the liquidly traded points on the curve. We almost always have accurate real-time pricing on benchmark issues and CTDs for bond futures. The off-the-run issues then trade at some spreads to these ...


3

These are "constant maturity" yields that the Fed reports. Not actual bonds that can be traded. The "US 10yr" bond future is usually a ~8y maturity bond and a ~7yr duration. It usually yields significantly less than the actual Treasury with closest to 10 year maturity. So you are looking at three different "10 year yields" at ...


2

The data stored in the object is adjusted such that compounding is Continuous and frequency is NoFrequency. The C++ source code is available here: zerocurve.hpp. I think that the reason for this is that a ZeroCurve object then won't have to store compounding and frequency. We can validate the new rates by using the equation $$e^{r_{cont}t}=(1+r_{comp})^t$$ ...


2

I see that Prof. Petter Kolm's article has been published in the Journal of Financial Data Science https://jfds.pm-research.com/content/early/2021/11/24/jfds.2021.1.079 - there appears to be a paywall there. SSRN https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3899133 says "Not available for download" I suggest that you e-mail the author at ...


1

Calculating the YTM The yield to maturity (YTM) is often used as a yield measure. The YTM of a bond is defined as the solution of the equation: $$ P_d=\sum_{t=1}^T\frac{C_t}{(1+r)^t} $$ Where $P_d$ is the bond's dirty price. When calculating the YTM, you don't have to worry about the reinvestment assumption. For instance, assume that you have a 6 year bond ...


1

The reinvesting-of-interim-cash-flows-at-IRR (RICFI) assumption is neither required for nor has any impact on the calculation of IRR of a project, or a debt instrument's yield-to-maturity (YTM), IRR's application to debt instruments. I think the Investopedia article you have mentioned is a bit misleading in that respect. If mentioned at all, the RICFI ...


1

When you buy or sell a financial instrument on a double auctions (ie involving buyers and sellers, for instance in an orderbook), it is straightforward to understand that when you have more buyers than sellers, the price will, on average, go up (and the reverse). When market makers are in between buyers and sellers, their inventory acts as a "buffer&...


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