Questions tagged [fixed-income]
Securities which obligate the borrower/issuer to make payments on a fixed schedule. Fixed income securities include sovereign, corporate and municipal bonds, corporate loans, and securitized lending (e.g., ABS). "Fixed" refers only to the schedule of obligatory payments, not the amount, and may include inflation linked bonds, variable-interest rate notes, and the like.
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Realistic understanding of YTM and reinvestment [duplicate]
Studying for CFA level 1 right now and there are a couple questions I have about YTM and reinvestment rates. It states the following: There are three sources of returns from investing in a fixed-rate ...
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two ways to calculate bond carry
there are two ways to calculate bond carry
forward yield minus spot yield, where forward yield is the bond forward's yield solved on the forward settlement date;
the coupon income minus funding cost
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Clarification on compounding logic in Chapter 23 of Pricing and Trading Interest Rate Derivatives by Darbyshire
I'm working through Chapter 23 (page 396) of Pricing and Trading Interest Rate Derivatives: A Practical Guide to Swaps by J.H.M. Darbyshire, and I’m having trouble understanding a specific statement ...
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Convexity in long end treasury bonds
According to published research, yield curves plotted against duration typically exhibit steepening forces as investors demand higher return for longer yields, but that often in the very long-end, ...
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Bond PV - discount to today or settlement date?
When pricing a bond traded today but settling T+N, should I discount the cash flows to:
today (trade date, T+0), or
the settlement/value date?
Which date is the market standard for producing the ...
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Estimating bond fund returns over a very long horizon (20-30 years plus)
The typical method used to estimate returns over an intermediate time horizon (say 7-8 years or so), for a bond fund that tracks the US Agg, for example, is to calculate the average starting yield and ...
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Decomposing Returns of Coupon Bonds: Yield, Roll-Down, Duration, and Pull-to-Par Effects
I'm currently exploring how to decompose the return of a coupon-bearing bond into meaningful components such as yield return, roll-down return, duration return, and ideally, pull-to-par effect.
For ...
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QuantLib: Correct compounding argument for `ZeroCouponBond` when computing Yield, Duration, zSpread, etc
When computing figures for a ZeroCouponBond in QuantLib, a number of the methods in BondFunctions expect a ...
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rateslib curves: Why does changing day count convention affect discount factors?
I'm using the rateslib Python package to build a yield curve from Brazilian DI1 futures using piecewise/spline interpolation. My expectation was that changing the day count convention of the curve ...
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Do Bond-flies trade?
A simple question: do G10 or at least G5 government bonds trade as flies, or only as individual bonds?
I know for a fact that swaps for G5 currencies are quoted by brokers as various strategies, i.e. ...
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Derivatives pricing in Trading Desks [closed]
Good morning,
Maybe a dumb question but why trading desks do derivatives pricing?
Is this for accounting purposes in order to write the fair value on the balance sheet? Or aimed at discovering ...
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Difference in YTM and calculated risk metrics between QuantLib and Bloomberg for Fixed Coupon Bonds
I'm trying to get the yield for a given bond as well as other metrics to align with the YAS page on Bloomberg, but they are all sufficiently off to be slightly concerning, i.e. somewhere in the 4th ...
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YTM computation for a bond portfolio [duplicate]
Given a list of bond and the relative YTM, i have to compute the YTM of the equally weighted portfolio.
Should i use the market value of each security or the face value is correct enough?
Thank you
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Price and Yield Calculations for Municipal Bonds with QuantLib
I'm currently trying to calculate yield to maturity for a given municipal bond using quantlib for maven, and am comparing the result to the calculated yield listed on EMMA. However, I keep ending up ...
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Handling PV changes on roll days when building return time-series
I'm new to this kind of matters hence probably this is a stupid question. I would like to build a return time series for backtesting purposes and I was wondering how to handle pv changes when ...
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Help Constructing a Yield Curve
I want to construct a BBB spot yield curve and am trying to figure out if I am understanding the process and interpretation. Any guidance would be appreciated here.
I first gather a list of YTM’s of ...
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Why does the sum of key rate durations approximately equal the effective duration?
Let's assume the present value of a bond is a function of all key rates i.e.
$f\big(KR_1,KR_2,KR_3,...\big)$. Then, $KRD_i = \frac{\partial PV}{\partial KR_i}\big(KR_1,KR_2,...\big)$.
The effective ...
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Fixed income spreads and benchmarks practice
Choosing Between Treasury vs Swap Curve as IR Benchmark in Fixed Income Pricing
In practice, how do we decide whether to use the government (treasury) curve or the swap curve as the interest rate ...
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How to show that the present value will be approximately the same for two different cashflows
Assume you have an interest $t$ and a value $V$, define $x_1$ as
$$\sum\limits_{i=1}^N\frac{x_1}{(1+t)^i}=V\rightarrow x_1=\frac{V}{\sum\limits_{i=1}^N\frac{1}{(1+t)^i}}.$$
Assume you have a ...
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Why would anyone want to own a mortgage?
A fixed rate mortgage has negative convexity. If interest rates fall, the borrower will prepay the mortgage and refinance at the lower rate. If interest rates rise, the borrower will keep the loan ...
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Bloomberg terminal fx swap + xccy basis spread
I have an EUR issuer, issued a fixed income security in USD, how in bloomberg i determine the additional yield on top of the EUR yield? Currency driven
As I understood i need fx swap spread and cross ...
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Asset swap on US treasury bond?
I'm thinking through the asset swap spread between a US Treasury bond and a matched maturity swap rate (ATM) and had a question.
I've heard that the asset swap spread is a measure of the bond's ...
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Tracking Error Vanguard BND ETF
I am taking BND ETF total returns and Agg total returns, monthly over 10 years ending 12/31/2024, and calculating the annualized tracking error. What I get blows me away: 57bp of tracking error over ...
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Why Isn’t There a Real Order Book for SOFR Swaps?
For some OTC products like SOFR swaps, there are order books, but these appear to provide only indicative quotes—meaning they cannot be directly executed. I believe ICAP provides such order books for ...
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How is the swaption vol grid clustered/seperated?
I understand that broadly you have gamma/vega and furthermore upper right/left and lower right/left. Can you break it up even more? I've heard "Belly Vega" thrown around.
The vega sectors ...
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