# Tag Info

Accepted

### Bootstrapping OIS curve

I see several problems that might explain those differences: The frequency of the fixed leg on a EONIA swap is Annual and not semi The deposit facility rate is not part of the EONIA curve. Use the ...
• 5,835
Accepted

The idea of assuming that the transaction cost is one half of the bid-offer spread comes from several assumptions: the positions are marked-to-market at mid; you can actually execute at bid or ask (...
• 12.5k
Accepted

### Riccati Equation in spot rate model

As you noted, this is a Riccati type ODE and it can thus be simplified using the standard transformations for this class - see e.g. Wikipedia. We start by defining C(t, T) = \frac{1}{...
• 6,064
Accepted

### For which would you expect the liquidity on instrument X to be the greatest: its spot, future, option or swap?

Completely depends on the asset class. For currencies (including GBP/USD) the spot market is an order of magnitude more liquid than forwards, futures or options. However, some currencies with trading ...
• 5,931
Accepted

• 16k
1 vote

### Units of measurement for Minimum Variance Hedge Ratio

Since SD in this case is usually the 1-day difference of log prices (i.e. 1-day returns) and corr is a dimensionless number, you shouldn't have to keep the units the same. After all that's how you're ...
• 29
1 vote

### Calculating spot rates from forward rates

If you want to calculate the forward rate given semi-annual compounding then the answer should be: F(0,t_a,t_b)=\Bigg(\sqrt[2*(t_b-t_a)]{\frac{(1 + \frac{r_b}{2})^{2*t_b}}{(1 + \...

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