Questions tagged [yield-curve]
A yield curve is a plot of yields for various bonds (often government bonds) versus the bonds' maturities. We also often plot swap and other LIBOR rates to get the (related) swap curve.
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Interest rates swap P&L
I heard about different ways of estimating the PnL of an IRS. Say I receive through a 10y swap where fixed is 5%, I hold the position for 1 year time.
you pay float and receive fixed so estimate PnL =...
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Relative value of bonds
Is it best to measure the relative value of bonds on a z-spread curve or by modified duration?
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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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The most common Greeks for a Bonds and how do they work? [duplicate]
I'm currently working on sensi (Greeks) for Bonds.
I'm trying to understand how the Greeks are working for Bonds because the parameter used is the interest rate.
I have learned that the Delta IR is a ...
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Why not fit a par rate curve directly on par rates?
I often see that, in yield-curve construction, practitioners build a forward/spot/discount curve and then price instruments by interpolating within that curve. My question is: why can’t we just take ...
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PCA on the yield curve and extremely autocorrelated yields
When performing principal component analysis (PCA) on the yield curve, I've seen people online using different methods. Either you use the directly the yield of the OTR bonds or you use the difference ...
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Is there any strong logic behind the formula for the slope and curvature loadings in Nelso Siegel model?
The Nelson Siegel model is given as follow:
$$
y(\tau) = \beta_0 + \beta_1 \cdot \frac{1 - e^{-\lambda \tau}}{\lambda \tau} + \beta_2 \cdot \left( \frac{1 - e^{-\lambda \tau}}{\lambda \tau} - e^{-\...
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Projection Delta of IRS when only Disc Curve bumps (credit spread / curve-cross-gamma?)
This is related to IRS - sensitivity to estimation (projection, coupon) curve and discounting curve.
Assume I have a single ccy receiver IRS, so we pay SOFR flat on the float leg. Assume both fixed ...
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What yield curve to use for FX Options in BSM?
Picking the correct r and q for BSM is somehow critical as O/N rates might differ from Govt Bond rates dramatically. My question is quite straight-forward:
What is the best practice of using interest ...
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Term structure decomposition of a yield curve
The BCBS gives the following definition for Curvature GIRR risk factors (21.8):
Curvature GIRR:
(a) The GIRR curvature risk factors are defined
along only one dimension: the constructed risk-free ...
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Saw-toothed forward rate yield curve structure
I am trying to derive money market yield curve from observable IRS swap rates. IRS float coupon pays average 7D forward rate each quarter in arrears. For the last 2 years i've been using bootstrapping ...
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Mid price for IRS SOFR
I’m trying to understand how market-makers derive the mid price for IRS SOFR swaps, particularly since there are no visible order books for these instruments (as far as I know).
From what I gather, ...
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DepositRateHelper vs SwapRateHelper vs FraRateHelper in QuantLib
I'm new to QuantLib and am trying to build a term structure for a vanilla IRS. I understand that QuantLib provides several helper functions like DepositRateHelper, <...
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Impact of accrual on bond total return
A bond pays 30% annual coupons, the next coupon is in 1 month and the bond will mature in 13 months, reimbursement at maturity is 100.
Assuming the same clean price in both scenarios (90), no FX risk, ...
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Shocking an OTR curve to price an OFF THE RUN
I would like to shock an OTR curve in a certain way and reprice an off-the-run bond after that shock.
I have a yield curve that I want to shock. This yield curve is the YTM of the OTR bonds. The way I ...
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OIS curve, why a multi-curve framework is needed
I don't understand why multi-curve framework is now needed.
Here is my understanding:
The OIS curve is now the curve considered risk-free, and it's used to discount the cashflows for example to value ...
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Correlation between Yield Curve PCA components and Level - Slope - Curvature
I found a piece of the following book:
Yield Curve Modeling and Forecasting
That states that when extracting the PCA components from the yield curve and projecting the data along these axis we find a ...
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Nelson-Siegel-Svensson: question regarding data format for fitting the model
If I want to fit the Nelson-Siegel-Svensson (NSS) model to a set of spot, forward, or discount rates, my intuition says that the data should of course be in percentage form.
For example, I should use $...
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Yield curve steepner or flattener trades
Hi if anyone will kindly help to clear up some confusion that i might have.
Market is currently placing bets on a curve steepener trade due to Trump's potential election success.
Steepener trade is ...
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Bootstrapping SOFR swap curve
I want to know key tenors of SOFR swap for building discounting curve for pricing derivatives.
To build a similar curve to that of Bloomberg ICVS & SWPM, Which instruments should I use?
Which ...
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When using quantlib's swaphelper to build a curve, is the fixing lag considered?
For example, EUR Annual (vs. 3M EURIBOR) swap has 2-Business-Days Fixing Lag.
When interpolating with 1Y swap, the forward 3M Euribor rate starting date is the reset date（2023/6/14）, not the reset ...
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How to calculate zero rate for deposits in an interest rate curve in PiecewiseLinearZero method
I am trying to duplicate zero rates and discount factors from ql.PiecewiseLinearZero method.
To simplify calculation, I only use one deposite rate: 3M Euribor 0.03822.
I set evaluationDate as ql.Date(...
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swap curve calibration with interpolation using newton-like method
suppose 2 swap market quotes for 1Y and 2Y and that swap payments occur semi-annually.
calibrating / obtaining the discount factors means finding 4 unknowns / discount factors that reproduce the ...
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Does PCA for yield curve has any tangible value?
I am aware of an abundant literature on Principal Component Analysis (PCA) application for yield curves. All of these papers to me look merely a statistics-oriented results. Most of the papers argue ...
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Shape of Yield curve of ZCB under no-arbitrage
Sorry if the question is somewhat elementary, but I have thought about it for a while and I cannot figure out where my mistake is.
Suppose we are in are in an arbitrage-free market in which risk-free ...
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