# Tag Info

Accepted

### Shape and geometry of the yield curve

You can't make any concrete statements about the monotonicity, convexity or even sign of the yield curve. Yields are almost always positive, and in the past (2007 and earlier) you could find people ...
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### What does instantaneous forward mean?

1. Observable instruments, spot rates, and forward rates First remember that something observable means that you can observe/find the rate in the market by looking at traded rate instruments or ...
• 1,252
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### What does instantaneous forward mean?

Given a forward rate, for example: $F(t, T, T+\delta)$ The instantaneous forward rate $f(t,T)$ fixed in $t$ is the limit when $\delta \rightarrow 0$ of your forward rate. If the relation between ...
• 146

### Swap curve construction

I think your question can be split into two parts: (i) how to value a swap mathematically and (ii) how swaps actually work as a traded product. Part (i): As noob2 pointed out, "theoretically"...
• 6,223
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### Do we use the Nelson-Siegel model to calculate the yield curve?

In the beginning, we had a plot of yields of individual bonds against time to maturity, the crudest form of "yield curve." Years later, people began hand-drawing a smoothed line through these yields ...
• 11.8k
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### Why Fed Funds Rate's is higher than U.S. treasury yield on the short term (< 2M)

There currently is an excess supply of cash looking for short term investments. Money market funds have been receiving a lot of subscriptions. The Feds reverse repo facility has been reaching new ...
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Please refer to the picture below for what each trade is betting on. As an example, in a bull flattening trade, you're betting that rates will decline AND the yield curve will flatten. The flattening ...
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• 311

### Estimating a Yield Curve in a country without Bond Stripping

You do not need zero rates to estimate a parametric model of the yield curve, such as Nelson-Siegel. Suppose for instance that you have a cross-section of bond prices. Then: For given parameters for ...
• 3,501
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### What does 5 year OIS actually mean?

When people say OIS swap they mean an exchange of some sort of fixed cash flow and in return the receipt of daily OIS based on the "Fed Effective Rate" (FEDL01 Index on Bloomberg). The floating ...
• 2,633
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### Swap curve construction

I think I understand the question, but maybe not. In USD market, the most liquid IR swaps have floating leg reset quarterly from 3Mo LIBOR. (The fixed leg is semi-annual. Ths will change when LIBOR is ...
• 12.6k
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### Choosing which interest rate model to go with?

Calibrate to many observed curves, over all kinds of shapes: flat, normal, inverted, and humped, and measure and compare the model fitting errors. If you can't find all the shapes in history, make ...
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### How to minimize Nelson-Siegel parametric form

When we worked with that model several years go, we used Differential Evolution and it worked very well. See Calibrating the Nelson-Siegel-Svensson Model. At least in the standard version, a best-of-...
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### Advice for automating swap curve construction

I first present the bare basics of single curve bootstrapping in part 1, then I try to come up with some ideas in part 2. (bare) Basics of single curve bootstrapping As I understand it, for a common ...
• 6,967