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.
Questions tagged [fixed-income]
1105 questions
19
votes
14 answers
What is the difference between Option Adjusted Spread (OAS) and Z-spread?
I am preparing for the CFA level 2 exam, I got confused by the concept Z-spread and OAS.
When a call option is added to a bond, since it is not favorable to the bond buyer, they would require more spread (which is the OAS) for this instrument in…
Dave
- 191
- 1
- 1
- 3
7
votes
2 answers
Question about using binomial interest rate tree to value callable bonds
When we use a binomial interest rate tree to value callable bond, we work backward, right? If any computed bond value is larger than the call price, the bond will be called. The call price will replace the computed bond value and we go on to…
cheezit
- 71
- 2
7
votes
3 answers
Why is there a price difference between 30 year principal and interest STRIPS?
Sorry if this is obvious, I am not a professional. I like to trade 30 year treasury zero's.
I have noticed that the price for a 30 year principal payment is never the same as a 30 year interest payment. The difference is small (~.3%), and I haven't…
Pablitorun
- 173
- 5
6
votes
2 answers
How to adjust butterfly 2s5s10s swaps trade for directionality?
I am looking into a 2s5s10s swaps idea using a 50-50 weighting scheme, where it's 2 times the 5 year minus the 2 year and 10 year. However, there is a correlation between the butterfly spread and the slope of the curve (2s10s) and also with the 5…
VanillaCall
- 953
- 10
- 26
6
votes
4 answers
Term premium 10 year yields
There's a lot of headlines about term premium. If I understand this correctly, term premium compensates investors for holding a longer maturity bond vs rolling over short-term bonds.
So as an example, if a 1 year bond is 2% and let's say it stays at…
VanillaCall
- 953
- 10
- 26
4
votes
4 answers
What's the algorithm behind Excel's ACCRINT?
This question was originally posted on Stackoverflow:
As part of the Formula.js project, I'm trying to re-implement Excel's ACCRINT function (in JavaScript, but the language should not matter). I've been trying to find a proper description for how…
ismael
- 303
- 1
- 10
4
votes
2 answers
What is the price of a bond that settles on its coupon date?
Let's say I have a bond that pays on coupon on 10/03.
I buy this bond on 10/01 with settlement on 10/03.
Who gets the coupon ? Does it depend if it's paid in the morning, in the afternoon, before/after the settlement ?
Or is there a market…
Edouard Cuny
- 143
- 3
4
votes
2 answers
What's a covered bond?
I'm reading both the wikipedia page and investopedia page about covered bonds, and I'm not sure I understand its definition.
From what I could tell a covered bond it's a 'lump' of other loans put together, and sold to someone. Let's say financial…
An old man in the sea.
- 261
- 2
- 10
4
votes
2 answers
How do bond traders get all the different moving parts?
I've been working with this trader and every time he explains something to me, it sound like foreign language. There's so many things going on. I'm a graduate analyst on the bond trading desk and I don't think it's all that complicated. It's just…
VanillaCall
- 953
- 10
- 26
4
votes
2 answers
Determining if a bond is quoted dirty or clean
Assume we have all available information and contract specifications for a fixed income instrument, except if the price is quoted as a dirty or clean price. How can we determine if the price given is a dirty price or clean price?
pyCthon
- 2,111
- 2
- 18
- 39
4
votes
1 answer
Pricing a bond future with a basket of deposit futures
I have a future on a two-year UK government bond that I wish to price. The bond future expires in 3 months. I was thinking of building a portfolio of 3-month deposit futures (1 x 3 month deposit starting in 3 months, 1 x 3 month deposit starting…
endian
- 143
- 3
3
votes
1 answer
Repo risk - how the desk operate
I am trying to understand how repo traders are being measured(pnl/risk).
I understand the amount of repo that can be done is limited by regulation but want to dig deeper on how the performance is measured.
For long term repo of 1 week to 3 months, I…
kfcnhl
- 31
- 1
3
votes
1 answer
When to use which zero curves
I have a very basic question. Why are there many different zero curves for a given currency/market?
For example, there are zero curves constructed using gov bonds, swaps, STIR futures, OIS, Inflation, currency basis, etc.
When would you use which…
HomerK
- 31
- 1
3
votes
1 answer
Question on pure carry for two bonds
If two bonds have yield of 5% and 2% and assume there's no price change, can we say that the carry is simply 5%-2% = 3% for a year. Does this take into account coupons?
Equivalently, let's say the 10s30s curve is 60 basis points. Can you simply take…
VanillaCall
- 953
- 10
- 26
3
votes
1 answer
Carry and roll (upfront vs running)
I am still confused regarding the differences between upfront and running.
If two bonds have a spread of 50bp, does that equate to 50bp in total return over the course of the year or do I have to multiply 50bp by the duration effect.
Sometimes I…
VanillaCall
- 953
- 10
- 26