3
votes
Accepted
Why pay repo to finance bond position instead of reverse repo?
This idea doesn’t work. If you do a reverse repo (invest cash vs borrowing the bond), you do not have exposure to the bond price. The bond is returned to the counterparty, regardless of what price ...
- 17.5k
2
votes
Accepted
FRN are more complex than we think
You are 90% right.
I will prove some of your statements with a numerical library.
First we need to setup a market. I will construct a SOFR curve and calibrate it to 1y, 2y and 3y SOFR swaps rates.
<...
- 11.2k
2
votes
Carry of a short bond position
An example might help: if you are short a bond with a 4% yield , whose 6m forward yield is 4.1%, then you need the yield of this bond to be at least 4.1% 6 months from now for your trade to make ...
- 17.5k
1
vote
Carry of a 5s/30s steepener relative to that of an outright long
I might not have understood correctly, but this sounds more like the price of the curve trade rather than the carry. On this note, yes, a 5s30s steepener will be cheaper than a 30y payer outright.
&...
- 11
1
vote
Accepted
In rateslib curve construction, how to control the jump size in step daily forward (log_linear), when i have 2 nodes on 1 instrument?
If you have a copy of my book: "Pricing and Trading Interest Rate Derivatives" (2022, 3rd edition) there is a chapter called 12. Advanced Curve Building, and within that a section, 12.6 A ...
- 11.2k
1
vote
Dumb question / thought - bonds and taxes
The business paid 150 for a bond worth 150, so its net PnL is zero and so it should pay zero tax. At least, this would be the case under any reasonable accounting methodology! What the bond actually &...
- 164
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