i would suggest the myriad of 10,000 year floods in the last 10y are trying to tell you to stip trying to "model" a market operated by beings with emoton.... people are not robots... fear and greed....

<t>ahhh the ol' passport eh? lemme guess, author of the paper was Bankers Trust.... that trade was such a creatively profitable piece of genius...... as far as your queries they both address the concept of "alternate investment opportunity".... anytime you tie up cash (futures margin, bond repo, etc...

...just bear in mind that two rates on the curve have a strong correlation until they don't...

<t>agree with you all...when after 9/11 money market funds were literally paying a fraction of 1%, as fed funds was dropped to 1...if you think back, how many friends/coworkers were closing their mm funds and putting their money in more speculative markets (i actually think that the many.many people...

there are a bunch of embedded options in the contract which will make the price differ from the simple forward price.... these options are numerous and quirky so i suggest you read up on it.....

vol skew is the phenomena of option vols diverging from the at-the-money vol as the strike is changed

<t>agreed - swaps are the now the weapon of choice when moving huge amounts of duration so the swap rate direction now dictates the spread direction..... the thing is that this is the case until it isn't (e.g. 1998)....if wachovia were to go out of biz i got a couple dollars saying you see a massive...

<t>i guess they are "popular" insofar as they are extremely liquid.... though this doesnt qualiify them as ideal for a trade structure.... i can say with certainty that the ebedded options in the contracts are mot at all worthy of dismissal..... wait till a market situation in which the CTD is chang...

maximum theta is when your long straddle which expires tomorrow closes atm with a 200k premium (mark-to-market in your book) and of course rates move in a 1/2 bps range the entire next morning until the 11am expiry.....

dont know squat about this quasi stuff but what is it supposed to be useful for?

if you are talking about exchange traded futures there is no discount factors or anything....dv01 for ed futures is fixed at 25 bucks per contract and the forward rate is what the screen says.....

dunno much about the math code, but putting on PCA flies is a dangerous game.....funny how strongly two rates correlate, until they dont.....

well the greeks are all parameters which can change during the life of the option - the underlying, the vol, etc so you can quantify your risk to different fluent market levels..... at least for vanilla options the strike doesnt move so it doesnt have a relevant risk measurement.....

by current yield do you mean the "Yield To Maturity"? sounds like you are trying to calculate some sort of risk parameter such as modified duration......

<t>classic swap guy / bond guy terminology confusion..... in bondland the asset is the PRICE of the bond, whereas in swapland the asset is the RATE (or the spread).... long swap spreads is like long a stock - if it goes higher you win.... btw if you are purely trying to isolate the swap spread risk ...