5
votes
US swap spreads
The basic point you are making is correct. The main reason why swap spreads are negative is the large amount of Treasury issuance versus the limited capacity to own them. The scarcity of bank balance ...
- 16.6k
3
votes
Market Makers how can they sell an asset they don't have
Most market makers keep some inventory. Just like a supermarket has a stock of food ready to sell. I don't think you can call yourself a market maker and have zero inventory at all times. But it may ...
- 10.9k
2
votes
What is "position" when referring to the holders of a bond?
In general, for bonds, loans, and other debt instruments, "position" on reports usually, not always, shows the original face value. For example, the bond issuer promised to pay 10 million, ...
- 12k
2
votes
Ten Year Note Futures Implied Repo Rate calculation from CME Understanding Treasury Futures Document
I get the same as @oronimbus using my own pricing library
github.com/attack68/rateslib, for those without BBG (and BBG formulae are not transparent)
...
- 9,215
2
votes
Accepted
Floor vs Receiver Swaption with Equal Strike
This is a classic question and has been asked/well-addressed several times in this forum in prior answers. Suffice it to say, a $K$-strike receiver swaption $\leq$ a $K$-strike floor and this ...
- 1,231
2
votes
Floor vs Receiver Swaption with Equal Strike
I'd say the floor should definitely always be worth more than the swaption.
The vol on the swaption is an average of the expected vol of forwards (averaged to some extent). Intuitively it makes sense ...
- 361
1
vote
Market Makers how can they sell an asset they don't have
Too long for a comment, just adding a little historical color to the other good answers.
After the 2007-2008 Global Financial Crisis), many U.S. market makers became subjected to the "Volcker ...
- 12k
1
vote
Compare Spread On A Fixed Bond Vs A Loan/FRN?
No. You can hedge the interest rate risk of a fixed-coupon instrument at immaterial cost. Don't discount a fixed-coupon instrument more than a floater because of the presense of additional interest ...
- 12k
1
vote
Any other ways to hedge a bond portfolio against interest rate risk?
If you are long a bond and want to hedge it:
Sell the same bond.
Sell another bond.
Sell a bond future.
Pay a swap.
Buy a payer swaption.
Those are some basic methods. Ofcourse there are many ...
- 361
1
vote
Senior Preferred vs Senior Unsecured Bonds
I am not a lawyer...
The EU amended Bank Recovery and Resolution Directive (BRRD).
Accordingly, Germany amended Section 46f of the German Banking Law effective July 21, 2018 to implement this.
Only ...
- 12k
1
vote
Market Makers how can they sell an asset they don't have
Securities borrowing and lending via the repo market. If the bank doesn't own the bond, it can borrow the bond post sale and deliver it in a certain time frame to the buyer at the agreed price.
...
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