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by Martinghoul
August 27th, 2007, 10:13 am
Forum: Student Forum
Topic: Duration of Inflation Linked Bonds
Replies: 3
Views: 72489

Duration of Inflation Linked Bonds

<t>It's a complex subject, with mucho academic brouhaha around it, if memory serves... I remember seeing papers flying around that discuss the proper approach to calculating linker duration when it's done as a leg of an asset swap trade. The basic problem is the inability to separate inflation risk ...
by Martinghoul
August 27th, 2007, 9:21 am
Forum: Trading Forum
Topic: Hedging USD Interest Rates
Replies: 3
Views: 68078

Hedging USD Interest Rates

Why do you want a floor? I don't get it...If your co is currently a payer of LIBOR for 5y, surely just paying fixed, recving LIBOR over the same horizon hedges your exposure to LIBOR completely.Am I missing something here?
by Martinghoul
August 27th, 2007, 8:56 am
Forum: General Forum
Topic: Interest Rates
Replies: 5
Views: 92740

Interest Rates

<t>LIBOR is the rate at which banks lend each other cash, for various periods of time. Key point here is that LIBOR is unsecured cash.The BOE base rate is a base rate, which determines the effective rate at which the Bank of England will lend you money (through the OMO process or the standing facili...
by Martinghoul
August 23rd, 2007, 1:33 pm
Forum: General Forum
Topic: Too much or too little help from the FOMC?
Replies: 1
Views: 66401

Too much or too little help from the FOMC?

Good Lord, surely you don't want to hear any more views on these subjects... It's been endlessly massaged by countless economists, strategists, et al. What more can be said about it...
by Martinghoul
August 23rd, 2007, 11:07 am
Forum: Technical Forum
Topic: What markets make you frown and smile?
Replies: 8
Views: 67393

What markets make you frown and smile?

<t>Pls don't confuse this with arbitrage... The distribution that contains fat tails is based on your historical, backward-looking sample set. Unless you are the Almighty, you do not know what the future distribution looks like (and I do believe the Almighty doesn't do arbitrage). Thus, you can buy ...
by Martinghoul
August 8th, 2007, 5:59 pm
Forum: Technical Forum
Topic: Regarding the termination of IRS
Replies: 11
Views: 68351

Regarding the termination of IRS

<t>I kinda agree with you both, cpulman and David... While there really is no literal notion of accrued interest on a swap, thinking about it that way kinda makes sense, at least to humble moi... Which camp you're in, I guess, does depend on whether you're an old-fashioned bond-type swapper, or a ne...
by Martinghoul
August 8th, 2007, 4:07 pm
Forum: Technical Forum
Topic: Swaption question
Replies: 2
Views: 68045

Swaption question

<t>I think there are two completely different issues at play here...1. American vs European: as far as I know, for swpts cost of carry is 0, so optionality value is always > 0. Therefore, swpts will always be European, because early exercise is suboptimal.2. Cash vs physical: my understanding is tha...
by Martinghoul
August 3rd, 2007, 6:55 pm
Forum: Trading Forum
Topic: Market Vol, Vol trading and Non Farm Payrolls...
Replies: 6
Views: 193678

Market Vol, Vol trading and Non Farm Payrolls...

<t>1) It's the way of the bund, my friend... Locals mark the options in your face sometimes, but c'est la vie...2) Let's say you are long gamma (you bought the ATM straddle). If the mkt moves, you're going to make lots of money from the move, right, 'cause your straddle is now away from the strike (...
by Martinghoul
August 3rd, 2007, 6:27 pm
Forum: Trading Forum
Topic: PCA Weighted Swap Butterflies
Replies: 1
Views: 71812

PCA Weighted Swap Butterflies

Then the loadings can be used as weights, with residuals as rich/cheap signals...
by Martinghoul
August 3rd, 2007, 6:11 pm
Forum: Trading Forum
Topic: Interest Rate Derivative Trading - Programming Skills?
Replies: 14
Views: 76214

Interest Rate Derivative Trading - Programming Skills?

<t>I don't think you'll find any consensus...My background is electircal engineering and I know how to program using, gasp, Assembly. C is like mother's milk to me... On the other hand, I have a couple of colleagues who probably think a compiler is some sort of an exotic bird of prey or something......
by Martinghoul
August 3rd, 2007, 3:51 pm
Forum: Trading Forum
Topic: DV01 vs Delta
Replies: 8
Views: 96416

DV01 vs Delta

<t>In my experience, the difference is mostly one of context... Delta, rather than DV01, is normally used when people talk about options, but nobody really ever says "what's the delta of this bond position I have here". I guess this also clarifies the difference in definitions: DV01 is change in val...
by Martinghoul
July 31st, 2007, 5:47 pm
Forum: Technical Forum
Topic: IR bucket sensitivites
Replies: 5
Views: 68726

IR bucket sensitivites

I shift the resulting curve, not the input instruments... After all you might like to have more buckets than there are input instruments.
by Martinghoul
July 26th, 2007, 5:07 am
Forum: Technical Forum
Topic: Question regarding weights in matched maturity asset swap.
Replies: 4
Views: 72466

Question regarding weights in matched maturity asset swap.

If you want I can send you a paper that may be a good startiing point for you... Cheers.
by Martinghoul
July 25th, 2007, 12:56 pm
Forum: Technical Forum
Topic: Multi-dimensional normal function
Replies: 10
Views: 192040

Multi-dimensional normal function

I have implemented Drezner's popular method for the bi-variate bugger in Excel... Works fine for me, i.e. it's accurate enough. I think I might have a paper knocking around somewhere, if you want it...
by Martinghoul
July 20th, 2007, 7:34 pm
Forum: Technical Forum
Topic: LIBOR/Treasury Basis Risk
Replies: 1
Views: 70448

LIBOR/Treasury Basis Risk

<t>It's called swapspreads... I mean the TRSY/LIBOR spread. Mucho fundamental economics, etc. goes into the analysis, so I wouldn't hazard a guess as to where to begin... This stuff people trade very actively as core, irreducible risks in their portfolios. The tenor makes a difference, i.e. being lo...