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When we say "rates have increased from 2% to 3%," we are really saying that rates have increased 1%, or 100 basis points. However, this is different from percent change, as that would be (.03-.02)/.02 = 50% = 50 basis points. So, when someone says "X changed 50 basis points" I should think in...

Hi guys, I'm looking at an annualized 1 yr spot rate of 8.0 percent (from happier times). If I want to get the semi-annual compounding 1 month rate I can just do 8.0/2 and similarly, for the quarterly compounding rate I can take 8.0/4, right? Specifically, I'm looking at Blacks formula to...

Hi guys, What information can I extract from a widening swap curve (relative to treasuries)? If, say, the 2yr swap spread widens over time, does this tell me that people are expecting rates to rise in the future? What else does it tell me? I know the swap rate equates the fixed/floating leg...

Hi guys, I'm simulating a term structure via the Vasicek model and then adding some spread to that curve. My final product is the curve with which I will discount my cash flows with. I am wondering how I can check to see whether any arbitrage opportunities exist on my simulated curve. Can you...

Guys, I have simulated the spot rate curve and have values for each year (1-30) with which I can price zero coupon bonds. Now, what if want to discount a coupon bond using my simulated curve. My coupon bond pays every 6 months. What discount rate would I use to discount the money i get in...

Hey guys, I'm trying to code this bond pricing methodology up in Ruby and/or Python. Anyone know were I can find an efficient algorithm?

Hi guys, I've noticed that the following formula estimates the duration of a security: ((dv01 * par value)/(market value))*100. I am not understanding the equation. First, dv01 is the change in value(dollars) to a change in yield (usually 1bp). How does it make sense to multiply par with...

Guys, I understand what VAR is etc. etc. but, to me, it seems much more relevant of a statistic to the sell side than buyside. Can someone please explain to me the value the VAR statistic can bring to a bond portfolio manager?

Why does the U of MN Fin Math program not carry as much weight with the community as, say, U Chicago or U Mich? The Minnesota Engineering/Math/Econ programs are all top 10-15 world-wide and their Fin Math program was started by someone who was involved with the start of U Chicago's Program. The...