<t>thanks, i still dont really understand why looking at z-spreads solves the problem though...intuitively why is the z-spread ASW independent of the indexation lag length? Given a bond with a 3m lag and a bond with an 8m lag of same maturity, how can you draw conclusion that one is richer than the ...

<t>Not sure about your code, but the rate should be 5%...The par swap rate, i.e. that that gives you PV=0 at initiation is essentially the rate at which the PV of the fixed leg is the same as that against the 6m libor forwards. In a flat term structure, the forwards are flat, hence fair value is to ...

you may want to look at how BCA do this.... perhaps there is something on the website, or you could email one of the strategists perhaps..H.

<t>dkosunsky, that is correct, I understand the mechanics of both the 3m and 8m very well, but because of the indexation, how can you possibly compare the breakeven or real yield of one a 3m against an 8m given that they have different cash flows that reference a different period of inflation? I hav...

<t>Does anyone know of a robust method to compare inflation-linked bonds with different indexation lags?I.e. how to compare the relative value of a 30yr bond with a 3m inflation lag to a 30yr bond with a 6m inflation lag?I notice that in some research pieces they compare RPI ASW levels, what is the ...

<t>Many thanks...How does it work for swap carry? If i think abt the cash amount of carry of a vanilla swap (e.g. 5yr par), on a 6m basis, it is going to simply be the fixed rate against 6m libor, using the appropriate daycount. However, others look at the carry by looking at the fwds. Is this the s...

<t>u418936, this is a great help,Does this mean that (Fwd Yld - Spot Yld) encapsulates the 'cost of carry' and the pull to par whereas just looking at the fwd price- spot price) only takes into account the 'cost of carry'? I.e if dv01 =.10;Spot-Fwd Prc = +31c = +.31/.10 bps = +3.1bps (positive carry...

<t>Can someone pls put my mind at rest. I have heard 3 different definitions of bond 'carry', can someone explain the key differences between them and why they differ? E.g, 3m carry1. Cost of Carry = spot prc - 3mfwd price (i.e. coupon vs funding rate, albeit one on bond notional, the other on marke...

<t>Hi,When people talk of the 'roll-down' of a trade, my understanding is that this is effectively the theta for a given time frame. However, how to calculate this? E.g trading 10yrs IR swap, 3month time window ..3m roll down = 10yr3m spot - 10yrs spot , or 10yrs spot - 9.75yrs spot or 10yrs3m fwd -...

<t>Hi,I am trying to calibrate a CDO model i have written to iTraxx data. I have a few years of index data and tranche prices. I am working within the reduced form framework where i model default intensity as a CIR + Jump, i.e. dlambda(t) = kappa*(theta-lambda(t) )*dt + sigma*sqrt(lambda(t) )*dW(t) ...

<t>Jungix, the method you mentioned is a rule of thumb approximation, i.e. [ cum. prob. default X (1-Recovery) ]/Maturity = CDS spreadFor a more accurate method, you may it may be better to solve for the default. prob using an underlying model. But as said above, default prob. will be model dependen...

<t>I think i have not been clear..I realise that the 500bps is a fixed premium throughout the contract, my question was on what NOTIONAL the 500bps is paid... from all of the below input, i think it is safe to say that the 500bps premium is fixed and paid on the REMAINING tranche notional, i.e. so t...

<t>All,one question still remains... we've established that the 500bps is constant, however, does it stop getting paid after the TOTAL tranche is wiped out? I am thinking from a pricing perspective... is it simply a case of taking the 500bps cash flow as given and then set the upfront % such that th...

As far as I am aware yes... however, apparently they are not so reliable. Search for another post i started a while back..Rgds,Ren.

See attached...Rgds,Ren.