SERVING THE QUANTITATIVE FINANCE COMMUNITY

Search found 12 matches

by fyvr
May 21st, 2019, 7:07 pm
Forum: Technical Forum
Topic: Bermudan swaption misprice
Replies: 2
Views: 1957

Re: Bermudan swaption misprice

Depends a bit on the strike. The street is long up the wazoo berm vol from callables (so bid is super-soft), but massively short at ultra-low strikes from selling low-strike CMS floors as pension ALM hedges. If you’re looking at an ATM (or close) strike I’m not surprised  you found that the market b...
by fyvr
May 21st, 2019, 6:55 pm
Forum: General Forum
Topic: Bond Pricing (Illiquid Asset)
Replies: 3
Views: 1781

Re: Bond Pricing (Illiquid Asset)

If the bond has defaulted it must trade pari passu to any other bond of equivalent seniority (most likely senior unsecured). If you can find one price, of any bond anywhere, you’ve got the price of all of them .
by fyvr
April 12th, 2019, 5:27 pm
Forum: Student Forum
Topic: Interview Question on Scribd
Replies: 13
Views: 2148

Re: Interview Question on Scribd

Well, you can call it whatever you like, but it’s not really a basis adjustment in the sense that I would define the term. (For me a basis spread is just the difference between the forward curves of two near-identical observables: 3M vs 6M libor, or the delivery price of a bond future vs the forward...
by fyvr
April 10th, 2019, 1:49 pm
Forum: Student Forum
Topic: Interview Question on Scribd
Replies: 13
Views: 2148

Re: Interview Question on Scribd

Not really, and definitely no.

The formula is only rigorously true if the discount curve is the same as the forward (projection) curve.
by fyvr
April 10th, 2019, 1:34 am
Forum: Student Forum
Topic: Interview Question on Scribd
Replies: 13
Views: 2148

Re: Interview Question on Scribd

And as an aside, you should be aware that the formula you wrote down (for the par swap rate) has, strictly speaking, not been true since about 2008.
by fyvr
April 10th, 2019, 1:29 am
Forum: Student Forum
Topic: Interview Question on Scribd
Replies: 13
Views: 2148

Re: Interview Question on Scribd

1) as you’ve demonstrated, the forward period for the cap is also two years, (1, 3) in your notation. It’s not necessarily two periods either; if the LIBOR in question is 3mo then you have eight periods. 2) don’t make the mistake of getting bogged down by formalism, you need to understand things too...
by fyvr
April 9th, 2019, 9:45 am
Forum: Student Forum
Topic: Interview Question on Scribd
Replies: 13
Views: 2148

Re: Interview Question on Scribd

It’s an option, expiring in 1year, into a 2 year swap (which starts at option expiry, if exercised)
by fyvr
April 8th, 2019, 11:21 pm
Forum: Student Forum
Topic: Interview Question on Scribd
Replies: 13
Views: 2148

Re: Interview Question on Scribd

This is an interview oldie (and a famous hedge fund arb trade back in the day). To pose it correctly, you are asked to compare the vol of a 1Y2Y swaption with that of a 2yr cap out of a 1yr forward start (so the relevant forward period is identical).  Remembering that a swap rate is just an ‘average...
by fyvr
April 8th, 2019, 1:06 pm
Forum: Trading Forum
Topic: Gadget?
Replies: 10
Views: 2027

Re: Gadget?

oh ok, it’s sort of a synthetic spread to Bunds, for swaps that are traded with-delta. Thank you Bearish. 

(If you’re thinking I’m an idle sod for not doing that myself, I’m doing the Inca trail trek and weirdly there are no Bloomberg terminals to be found). 
by fyvr
April 8th, 2019, 12:21 pm
Forum: Trading Forum
Topic: Gadget?
Replies: 10
Views: 2027

Re: Gadget?

I’m sure the number is bps. For the life of me though, I can’t figure out it refers to.
by fyvr
April 7th, 2019, 4:05 pm
Forum: Trading Forum
Topic: Gadget?
Replies: 10
Views: 2027

Re: Gadget?

Yeah, I found the definition on the tradition website. The reason I posted the question is that, having read the definition, I’m still not sure what “5yr gadget = 51” actually means. Anybody able to clarify?
by fyvr
April 6th, 2019, 5:45 am
Forum: Trading Forum
Topic: Gadget?
Replies: 10
Views: 2027

Gadget?

Hi, ex-trader here (now a consultant). On the EUR swaps page on Bberg, we have rates from 1-60 years, and then "5yr gadget = 51" and "10yr gadget = 63". What are these?
GZIP: On