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# Tag Info

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Not only in the U.S., but I'd venture to say in all developed countries, the short end of the curve is controlled not by the market, but by the central bank. Only further out, the curve is controlled by the market, with the forwards being the market's view on what the shorter-term rates will be in the future.

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What you've calculated is essentially ACT/ACT day count basis, since you use the actual number of days between the dates and the actual number of dates in the coupon period. With a 30/360 DCC, you treat each month as if it has 30 days, and that there are 360 days in a year (which means that there are 12 even interest periods). So the calculation is done in ...

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This is due to day count convention, among them 30/360, Actual/360, and Actual/Actual. Convention varies by market and product, so you need to be clear on conventions used for the instrument you're interested in to do the calculation by hand.

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Two important difference are 1) the intention 2) the resulting position Shorting a bond is usually with the intention to buy it back with hopefully a lower price. Your position is sensitive to the bond price changes. Issuing a bond (usually an organization) is usually for raising funds. And you have no risks on bond price fluctuation and it will be ...

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When a bond is issued an entity $A$ creates a debt instrument and makes it available for sale. When a bond is sold, $B$ sells an existing debt instrument to $C$ (who buys it). $A$ doesn't have to be any of the entities $B$ or $C$.

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In some cases, a portion of the principal can be returned before maturity. Mortgage bonds are one example.

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Here is a nice survey of how this model and its alternatives are used by the central banks: https://www.bis.org/publ/bppdf/bispap25a.pdf

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Could you please verify that I edited your question correctly, i.e. that this is indeed your question. In this case, the Ho-Lee (1986) model reads as $dr=\theta_t dt +\sigma dW_t$. Do you can use $f(t,x)=x$ such that $X_t=r_t$. In this Sense, the Ho-Lee model is a Vasicek model with time dependence. This is further generalised in the model from Hull and ...

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Most people would say: carry = the 1day p/l resulting from overnight rate being different from coupon = (3.2- 3.0)* 1day accrual. Roll down = p/l on remaining swap assuming spot rates remain the same = (2.9-3.0) * 9 days accrual.

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(This is my opinion; someone is likely to disagee). I like to think of the carry as the predictable part (e.g. the coupon that accrues daily) and the rolldown as the stochastic part (the curves moved - maybe the forwards realized, maybe not. A good estimate of what it might turn out to be as to reprice for the next day assuming all forwards are realized. I ...

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I'll add a little more color. This week corporations had to pay about \$35 billion in corporate tax. When corporations do this they withdraw those funds from the short-term money markets. Essentially the corporations were using this tax payment money to lend short term. They would lend this money to money market funds - who in turn would lend this money ...

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The corporate tax payments to the Treasury result in less reserves in the banking system. Similarly , when there is Treasury issuance, reserves leave the banking system. Banks need a certain amount of reserves to function normally and to have enough for a rainy day (eg if there were unexpected withdrawals from depositors). Earlier this week , banks found ...

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