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### Fixed Income - Duration Of Perpetual Bond - Quantitative ...

ModDur assumes continuous compounding, but I think c/r is the bond value in discrete compounding. $endgroup$ - emcor Dec 12 '15 at 16:43 $egingroup$ @emcor you are indeed correct. I had a typo in a last formula - should be MacDur instead of ModDur. $endgroup$ - Nicholas Dec 12 '15 at 19:54

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### Duration And DV01 Vs Coupon Rate - Quantitative Finance ...

Duration and DV01 vs coupon rate. Ask Question Asked 2 ... For a vanilla bond, as coupon goes down ,absolute duration goes up, but absolute dv01(absolute change in price for a 1bp increase in rates ) goes down. ... i.e. they lose present value with higher yield. So the higher coupon bond is riskier, it has the risk of the lower coupon bond plus ...

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### Forecasting - Why Are Multiple Custom Curves (swap) Built ...

So to value a forward-starting IRS, I need both an Overnight curve for discounting, but also a curve of forecasted fixings to estimate the cash flows themselves. When there was 1 curve, it was far simpler. Summary: Once there was 1 fixing, and it was a proxy for the risk free rate, so there was 1 curve of discount factors.

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### Capm - Philosophical Question About Factor Models ...

(Recall that a linear asset pricing function implies the existence of a stochastic discount factor.) You can take an expansive, economics based interpretation of the stochastic discount factor as reflecting the marginal rate of substitution between various states of the world. Hence, in the words of Eugene Fama, factors are "variables of ...

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### How To Compute The Implied Probability Of Default From A ...

How to compute the implied probability of default from a CDS spread? Ask Question Asked 4 years, ... Suppose that a bond yields 200 basis points more than a similar risk-free bond and that the expected recovery rate in the event of a default is 40%. The holder of a corporate bond must be expecting to lose 200 basis points (or 2% per year) from ...

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### Interest Rate Implied Probability Of Default ...

1 Answer. So if you have and you can solve for . Let me give an example. Suppose loan interest rate is 6% and the risk free rate is 1%. In this case . Assume that . In this case . So the annualised implied probability of default is 8.33%. So suppose you had 100 loans similar to this one.

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### Newest 'ois-discounting' Questions - Quantitative Finance ...

In most established rates markets, swaps are discounted using risk-free reference rates, such as Sonia in the GBP market and Eonia in the EUR market, as opposed to Libor. Because of the way zero-... interest-rates swaps interest-rate-swap zero-coupon ois-discounting

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### Fixed Income - How Can We Have Negative Probabilities In ...

The answer is NO, with very few exceptions. A negative coupon would make the bond holder pay, exposing the bond issuer to credit risk. In general terms, this credit risk profile would be very inhomogeneous as the issuer typically has no control over the entity that holds the bond. Almost like a portfolio of bank loans.

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### Options - Can Someone Explain To Me The Intuition Behind ...

Can someone explain to me the intuition behind the discount factor for this simple payoff? [closed] Ask Question Asked 4 months ago. Active 4 months ago. Viewed 50 times 0 $egingroup$ Let''s say you enter into a contract today in which in time t, you receive the difference between the underlying stock price and 100. ... options option-pricing ...

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### Options - Data Selection For Empirical Pricing Kernel ...

Data Selection for Empirical Pricing Kernel Estimation (Stochastic Discount Factor) Ask Question ... The empirical pricing kernel equal is also referred to as the stochastic discount factor. options option-pricing risk-neutral-measure kernel ... Browse other questions tagged options option-pricing risk-neutral-measure kernel stochastic-discount ...

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### CAPM, DCF, And Jensen''s Inequality - Quantitative Finance ...

So we use it to value a single cash flow, we form an ex-ante estimate of beta that relates to that specific cash flow, and that is commensurate with the risk of that particular cash flow. And this beta applies to a particular horison. The resulting discount rate calculated then relates to that particular time horizon.

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### Does The YTM For A Zero Coupon Treasury Equal The Treasury ...

$egingroup$ If I understand what you said correctly, a hypothetical on-the-run zero coupon treasury would have a yield to maturity that matched the yield curve for it''s maturity. But generally, there wouldn''t be a treasury for every maturity on the curve? $endgroup$ - George Wolfe Apr 6 ''17 at 18:02

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### Bootstrapping Bond Spreads As In The Standard CDS Model

Moreover, assume the standard ISDA model framework, i.e. piecewise constant forward / hazard ... Stack Exchange Network Stack Exchange network consists of 175 Q&A communities including Stack Overflow , the largest, most trusted online community for developers to ...

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### 144A Vs Regulation S Vs Registered Bonds - Quantitative ...

144A vs Reg S1 Registered bonds - well, registered with the SEC. 144A and Reg S are exemptions from registration. Read the link for a decent discussion of 144A vs Reg S. In essence though, 144A permits issuers to sell unregistered bonds IN THE US to "qualified institutional buyers" aka "QIBs" (entities that have a high net worth and can demonstrate that they are or should be viewed as ...

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### Fixed Income - Valuation Of A Sinking Bond Fund ...

I assume the sinking fund is optional and non-cumulative.In effect the issuer of the bond holds 10 European call options on 1 million at 4% each. These are valued using a binomial tree and are interest rate ...

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### Swaps - Questions About Markit Rates Curve Bootstrapping ...

I am reading the following two Markit documents concerning the bootstrapping of respectively the USD rates curve and the EUR, GBP, JPY, CHF, CAD, HKD, SGD, AUD and NZD rates curves. (Both versions are the last versions.) These curves are not curves to be used ase discount curves in a "real" pricing process, they have to be seen as "convention" curves used in the ISDA model for quotation purposes.

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### How To Calculate The YTM Of An Inflation Linked Bond

I'm trying to find a formula to calculate the YTM of inflation-linked bonds. I've tried using the conventional YTM formula for bonds and then just adjusting the coupon to the inflation adjusted coupon, but this doesn't seem to be giving an accurate result.

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### FX: PRDC (Power Reverse Dual-Currency Notes): Key Risks ...

One popular product is the 10Y BRL/JPY paying a coupon of 20%*PerfFX-15% with callable opti... Stack Exchange Network. Stack Exchange network consists of 175 Q&A communities including Stack Overflow, ... PRDC (Power Reverse Dual-Currency Notes): key risks and callability. Ask Question Asked 2 years, 9 months ago. Active 2 years, 9 months ago.

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### Collateral - CSA Discounting Vs OIS Discounting ...

Without the CSA agreement, the trade will get priced at the highest level of counterparty risk and the CSA charge will be significant. Often if there is good GC-eligible asset to collateralize the trades (among major firms) then the discounting is off of OIS curve, hence "OIS discounting".

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### Discounting - Cheapest-to-deliver (CTD) Discount Curve ...

Can someone explain, in layman's terms, the mechanics (the algorithm steps) of the construction of the discount curve in the case when the CSA allows the posting party to choose a currency (from a pre-agreed-upon set) in which collateral will be delivered. E.g. Derivative currency is USD. Cash collateral posting in either USD, GBP or JPY. Is the cheapest to deliver currency the cheapest to ...

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### Is Duration Really Inversely Related To The Maturity Time ...

The chart above shows the percentage change in bond price when interest increases by 1%. The bond pays a 6% annual coupon. Each curve represents a bond that is subjected to a different interest rate. For example, the purple curve in the middle represents the relative change in the price of a bond that pays 6% coupon with interest rate being 9%.

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### Fixed Income - Interest Rate PV01 For A Floating Rate Bond ...

To calculate the interest rate PV01 of a floating rate note. A synthetic bond is created that pays the next coupon (which was fixed already during the previous coupon payment date) and the face value (say 100) at the next coupon payment date.

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### How To Calculate The Yield Of A Forward Bond Price From ...

The strike price of the option is 115. The forward yield volatility is 20%. The zero curve is flat at 5% with continuous compounding. Here is some computation. What I don't understand is the yield with semiannual compounding $5.0630\%.$ I know how to calculate the yield of a coupon bond, but here how to obtain the yield of a forward $5.0630\%?$

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### Pricing - How To Compute Dates For Bond - Quantitative ...

First, the cash flows are rarely adjusted for holidays. The actual "payment" dates are usually holiday adjusted ("Following" for US Treasuries, not Mod Following), but for analytical purposes, the "coupon" dates are not holiday adjusted. Second, an important concept in date schedule calculation is "roll day." If the first coupon date is 6/30/2015.

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### Fixed Income - Interpretation Of Macaulay Duration ...

Interpretation of Macaulay Duration. Ask Question Asked 6 years, 10 months ago. Active 3 years, 8 months ago. Viewed 9k times 2. 2 $egingroup$ I am having a difficulty conceptualizing the meaning of "Macaulay duration" - I want to note I completely understand the math, this isn't the issue. ... What would be the maturity of a zero-coupon bond ...

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### Calculating Discount Margin On A Floating Rate Bond Using ...

Going off Luigi's hint on this answer: Setting up Schedule for an amortizing floater in QuantLib I was able to cobble something together but I'm unable to verify if it's correct. TLDR: I was able to generate this cashflow and got a Discount Margin value of 121.42091071060361 for the price input of 90.00. Any insights is appreciated.

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### Arbitrage Question - Quantitative Finance Stack Exchange

The PIK bonds are risk free and trade at par while the yield curve is flat at 9% . risk free 1 year and 2 year zero coupon bonds trade at a yield to maturity of 9% (Effective Annual Yield). Suppose you can buy and short sell (borrow and sell) the PIK and zero coupon bonds without transactions costs.

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### What Is The Swap Curve? - Quantitative Finance Stack Exchange

Since this yield curve represents bonds of identical credit risks (basically risk-free), the zero coupon curve, the discount curve, the forward curve, and the par yield curve are just different representations of the same thing and can be translated very easily from each other. For a€

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### Zero Rate Vs. Yield On Coupon Bearing Bond - Quantitative ...

in Hull's solutions manual of Options, Futures & Derivatives (8th edition), there's question 4.7, in which is asked to put the following in descending order: a) the five-year zero rate, b) the yield on a five-year coupon-bearing bond, c) the forward rate corresponding to a€

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### Hottest 'ois-discounting' Answers - Quantitative Finance ...

"CSA discounting" does not give you a lot of information: it just means the collateralisation of the trade follows the rules agreed upon between both parties in the Credit Support Annex. ... How were OIS discount curves built before long-term OIS were liquid? The ois curves were (and still are) primarily build from adding together (a) interest ...

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### Why Is CSA Currency OIS Rate Used In Discounting Instead ...

Why is CSA currency OIS rate used in discounting instead of local currency OIS? Ask Question Asked 4 years, 4 months ago. ... and then discount with the CSA currency OIS curve: 1/ ... Discounting is driven by how the trade is funded. e.g. if there is a collateral agreement where interest is paid at USD OIS, then USD OIS discounting is used. ...

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### Fixed Income - Carry Vs Roll-Down On A Zero-coupon IRS ...

I am trying to understand the differences between carry vs roll-down on a zero-coupon interest rate swap. Lets say we have a 10 day ZC IRS, meaning we will only swap once on maturity. We are a pay...

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### Fixed Income - Duration Of A Floating Rate Note ...

Duration of a floating rate note. Ask Question Asked 6 years, 4 months ago. ... This means, that the only source of duration is the first bond with known coupon, and its duration is simply its time to maturity. This means that such FRN's duration will be in any case less than three months, which is very different from 2 or 3 years obtained in ...

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### Fixed Income - Duration Of A Floating Rate Bond ...

Yes. the duration of a floating rate bond is the time t until the next coupon payment, as your equation shows. The payments that come after are not known yet and will be determined based on interest rates then prevailing, so they carry no duration risk. In general floating rate bonds are what people buy when they want the smallest duration ...

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### Newest 'mbs' Questions - Quantitative Finance Stack Exchange

Stack Exchange network consists of 175 Q&A communities including Stack Overflow, the largest, most trusted online community for developers to learn, share a€

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### Are There Any Standard MBS Coupon Stack Models ...

I need to model MBS coupon stack prices. It would not be difficult to create something from scratch, but I don't want to re-invent the wheel (and explain why I did) if a somewhat standard model al...

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### Relationship Between Interest Rate And Corporate Bond ...

I have been reading articles on liability driven investing, a technique used to increase the correlation b/w assets and liabilities of a pension plan. It appears that they use AA rated corporate bond yields to discount the liabilities. At the same time, the articles say that interest rate is the dominant influential factor for liabilities.

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### Fixed Income - Bank Discount Yield And Money Market Yield ...

I have a question regarding Bank Discount Yield and Money Market Yield for US TBill.. Some books mentioned that Bank Discount Yield is not a meaningful measure of the return for the TBill because:. The yield is calculated based on face value, not purchase price. a€

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### Credit Derivatives - Fixed Coupon For CDS Index ...

Here is the fixed coupon for CDS index in John Hull's book Options, Futures and Other Derivatives 9th page 580. Actually, I don't much understand the goal of this part, here is some of my

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### Fixed Income - Carry And Rolldown Of A Premium Bond ...

I understand that carry = Coupon income - cost of funds and that the forward price = Spot-carry. If a 5y bond paying a 5% coupon was priced at 110 to yield 3% with a cost of funds of 2.5%, I would say that the carry of the position is 5 - 110*0.025 = 225bp. This tells me that the 1y forward price must be 107.75.

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### Bloomberg Zero Rate Calculation Using Shift - Quantitative ...

I used Bloomberg to calculate a zero rate under a parallel shift of 100 basis points, however I can not understand the results neather duplicate them. I included the +100 basis points by using the shift column.. The 3M is a money market rate, all other rates are swap

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### Fixed Income - Bloomberg Zero Coupon Rates - Quantitative ...

I just want a zero coupon curve (derived from the most liquid instrumnents) not a curve of zero coupon isntruments sorry for any confusion. Problem seems to be that a lot of contributors to bloomberg only give market rates for a small subset of the curve with the remaining rates being interpolated.

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### Market Data - Linear Interpolation Discount Factors ...

I am not sure how to perform a linear interpolation between discount fators for swap quotes. Lets say I have the following market quotes: 12M 0.670% 2Y 0.630% 3Y 4Y 1.030% Here it is ...

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### Calculating Instantaneous Forward Rate From Zero-coupon ...

I have a big dataset containing zero-coupon bond yields with different relative maturities. I fix a time horizon on my dataset and I want to calculate instantaneous forward rate. I'm going to write...

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