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New answers tagged fixed-income

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The yield is the internal rate of return of the coupons and the principal repayment. For a floater, the future unset coupons are not known, and the value of the yield depends a lot on how you project them, making the yield less stable than DM. On Bloomberg terminal, for example, there is a setting for how to project a floater's coupons. The default is to ...

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Suppose that $T<S$. Arcording to Girsanov, we have $$\frac{dQ^T}{dQ^S}|_{F_t'}= \frac{P(T,T)/P(t',S)}{P(T,S)/P(t',S)} =\frac{1}{P(T,S)}\frac{P(t',S)}{P(t',T)}$$ So $$dQ^T|_{F_t'} =\frac{1}{P(T,S)}\frac{P(t',S)}{P(t',T)} dQ^S|_{F_t'}$$ $$E_{Q^T} (\frac{P(t,S)}{P(t,T)}|F_{t'}) =E_{Q^S} (\frac{P(t,S)}{P(t,T)} *\frac{1}{P(T,S)}\frac{P(t',S)}{P(t',T)}|F_{t'}) =... 0 Let:$$c=\frac{K}{\sum\limits_{i=0}^mp(0,t_i)}$$Then:$$K=\sum_{i=1}^mp(0,t_i)c $K$ is the present value of an annuity paying a constant coupon $c$ over the period $\{t_0,\dots,t_m\}$. So it would consist on a transaction in which you pay a flow of coupons $c$ in exchange for a set payment at $t_m$ equal to $K$. This is analogous to some sort of fixed-...

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I believe one the problems is the interpolation, because the way you have it set up, you don't have a curve node for each of the cash flows of the bond you are pricing. The curve you built initially uses LogCubic interpolation on discount factors and the one you are reconstructing uses linear interpolation on spot rates. Notice that... for cf in ...

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If you have the spot rates, you don't need helpers and you can build the curve directly with spot rates and dates. You have several interpolation possibilities that have the same required inputs: dates, yields, dayCounter. There are other optional parameters that have defaults. Here are some example of the classes, where the names are hopefully self ...

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Its a "sure dollar" only when its something like US treasury bond. Otherwise there is a credit spread on top of the "risk-free" rate. Now suppose these are indeed US T-bills, the yield would be a number which can be used only to price another zero-coupon bond of the same maturity. Now, if we build a forward rate term structure, it will be useful in pricing ...

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$\text{(A)}$ Exact, you write your forward contract at $t$ thus afterwards you can think of the delivery (or forward) price $F(t,T_1:T_2)$ as a fixed quantity. The time index $t$ is there to represent the fact that tomorrow, the day after, etc. you will not be able to write a new forward contract with the same delivery price: the forward price evolves in the ...

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