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A Real Accurate Formula for the Yield Elasticity of Bond Price

Osborne, Michael - 2012

This article derives a new formula for the yield elasticity of bond price. The formula provides accurate results without resorting to complex mathematics, and gives new meaning to the concept of duration in fixed-income analysis

Persistent link: https://www.econbiz.de/10013102575

A Stochastic Model for Credit Spreads Under a Risk-Neutral Framework Through the Use of an Extended Version of the Jarrow, Lando and Turnbull Model

Dubrana, Ludovic - 2014

The model derives risky corporate bond prices (or equivalently credit spreads) subject to credit default and migration risk, based on an extended version of the Jarrow, Lando and Turnbull model, under a risk-neutral framework, as a result of the simulation of a continuous time, time-homogeneous...

Persistent link: https://www.econbiz.de/10013067094

On the Computation of a Formula for the Duration of a Bond that Yields Precise Results

Osborne, Michael - 2004

In fixed income analysis it is known that the various measures of interest rate sensitivity (duration) yield approximate results. Even with the addition of concepts like convexity, the results remain approximations. This paper summarizes a new approach based on the fact that the time value of...

Persistent link: https://www.econbiz.de/10012785499

Interest rates sensitivity arbitrage : theory and practical assesment for financial market trading

Stadnik, Bohumil - In: Business, mangagement and economics engineering : BMEE 19 (2021) 1, pp. 12-23

. This research assess if it is possible successfully use interest rates sensitivity arbitrage in bond portfolio (also known … as convexity arbitrage) in financial praxis. This arbitrage is sparsely described in literature and an assessment about … its practical success is missing. Research methodology - Methodology steps: mathematical definition of given arbitrage …

Persistent link: https://www.econbiz.de/10012695328

The Risk Parity Principle Applied on a Corporate Bond Index Using Duration Times Spread

Stagnol, Lauren - 2016

In this paper, we apply the principle of Equal Risk Contribution (ERC) to a corporate bond index, an asset class so far left behind in this literature. Specifically, we rely on the Duration Times Spread (DTS) and demonstrate that it is a coherent metric for bond risk. We construct indexes based...

Persistent link: https://www.econbiz.de/10012983532

Level-slope-curvature : fact or artefact?

Lord, Roger; Pelsser, Antoon André Jean - 2005

The first three factors resulting from a principal components analysis of term structure data are in the literature typically interpreted as driving the level, slope and curvature of the term structure. Using slight generalisations of theorems from total positivity, we present sufficient...

Persistent link: https://www.econbiz.de/10011346478

FX Forward Invariance & Discounting with CSA Collateral

Burgess, Nicholas - 2017

In what follows we outline briefly the Credit Support Annex and how it impacts securities pricing. We then proceed to discuss synthetic forward rate calculation and the FX forward invariance relationship from which we show how to calculate CSA collateral adjusted discount factors using GBP...

Persistent link: https://www.econbiz.de/10012951099

Solving SABR in Exact Form and Unifying it with LIBOR Market Model

Islah, Othmane - 2009

SABR stochastic volatility model is appealing for modeling smile and skew of option prices. Hagan, who first proposed this model, derived a closed form approximation for european options and showed that it provides consistent and stable hedges. Here I prove a new exact closed formula for the...

Persistent link: https://www.econbiz.de/10013155518

Rational Savings Account Models for Backward-Looking Interest Rate Benchmarks

Macrina, Andrea - 2020

Interest rate benchmarks are currently undergoing a major transition. The LIBOR benchmark is planned to be discontinued by the end of 2021 and 'replaced' by what ISDA calls an adjusted risk-free rate (RFR). ISDA has recently announced that the LIBOR 'replacement' will most likely be constructed...

Persistent link: https://www.econbiz.de/10012843549

Looking Forward to Backward-Looking Rates : A Modeling Framework for Term Rates Replacing LIBOR

Lyashenko, Andrei - 2020

In this paper, we define and model forward risk-free term rates, which appear in the payoff definition of derivatives, and possibly cash instruments, based on the new interest-rate benchmarks that will be replacing IBORs globally. We show that the classical interest rate modeling framework can...

Persistent link: https://www.econbiz.de/10012850220