This document provides a list and brief descriptions of Excel worksheets that accompany an interest rate markets textbook. The worksheets contain calculations that address specific concepts from the book and are meant to supplement the textbook explanations. There are worksheets for regression analysis, forward rate calculations, yield curve trades, butterfly trades, carry calculations, hedging with bonds and futures, swap spreads, futures baskets, and options pricing using Black-Scholes and Bachelier models. The formulas in the worksheets can offer clarity to the discussions in the textbook.
This document provides a list and brief descriptions of Excel worksheets that accompany an interest rate markets textbook. The worksheets contain calculations that address specific concepts from the book and are meant to supplement the textbook explanations. There are worksheets for regression analysis, forward rate calculations, yield curve trades, butterfly trades, carry calculations, hedging with bonds and futures, swap spreads, futures baskets, and options pricing using Black-Scholes and Bachelier models. The formulas in the worksheets can offer clarity to the discussions in the textbook.
This document provides a list and brief descriptions of Excel worksheets that accompany an interest rate markets textbook. The worksheets contain calculations that address specific concepts from the book and are meant to supplement the textbook explanations. There are worksheets for regression analysis, forward rate calculations, yield curve trades, butterfly trades, carry calculations, hedging with bonds and futures, swap spreads, futures baskets, and options pricing using Black-Scholes and Bachelier models. The formulas in the worksheets can offer clarity to the discussions in the textbook.
Following is a list of the calculations and worksheets available in the Excel file to accompany Interest Rate Markets: A Practical Approach to Fixed Income, along with a brief description. Each table represents a calculation that addresses a specific concept discussed in the book. These calculations are meant to be an adjunct to the explanations in the book and use simple Excel-based formulas rather than elaborate constructs to arrive at the answer. The formulas in the cells of the files can offer further clarity to the discussions of the topics in the book. Regressions.xls Title: Regression This file shows the basic setup of a regression in Excel, including the functions that can be used to determine the coefficient, and displays an example of a best-fit trend line on a chart. ForwardRate.xls Title: Forward Rate Calculation This file has a basic forward rate calculation given interest rates between two different dates using the indifference principle highlighted in Chapter 2. CurveTrades.xls Title: Curve Trade Setup This file shows the setup of a yield curve trade, which involves buying one maturity debt and selling another maturity debt. Given a base amount on one of the securities, the sheet demonstrates the calculation of the amount of the second security. ButterflyTrades.xls Title: Butterfly Trade Setup This file shows the setup of a butterfly trade, which involves buying (selling) one maturity and selling (buying) two securities around it. The trade is meant to express a view on the curvature of the yield curve. The sheet shows the calculations of notionals of the short- and long-maturity securities given a base notional of the middle (body) security. Carry.xls Title: Carry Calculator This file shows the basic calculation of the carry (net income) from owning a bond. The start and end dates for the carry period should be between the coupon period start and end. For carry calculation spanning across coupon dates, the calculation can be split up between the coupon payment dates. The sheet calculates the carry in both price and yield terms, with the duration as an input. CarryToRisk.xls Title: Carry to Risk This file shows the calculation of carry (i.e., rolldown) for a Eurodollar curve and the calculation of the carry-to-risk ratio. The standard deviations are input daily standard deviations and the ratio is annualized. SimpleConversionFactorCalc.xls Title: Treasury Futures Conversion Factor Calculation This file calculates the conversion factor of a futures contract using a combination of rounding and the price/yield function in Excel. The price of a rounded maturity bond with 6% yield is calculated to arrive at the futures conversion factor. HedgingWithBonds.xls Title: Hedging Interest Rate Risk Using Treasury Bonds This file shows the process of hedging the interest rate risk in a fixed-income security using Treasury bonds. Here the example assumes an off-the-run Treasury being hedged with an on-the-run one. The price, duration, DV01, and notionals for the hedge are all calculated. Furthermore, the sheet shows the process of using a regression to determine the yield beta and calculate an adjusted hedge ratio. If either security is changed, the historical data for that security would need to be inserted to determine a new yield beta. HedgingWithFutures.xls Title: Hedging Using Treasury Futures Similar to the file demonstrating hedging with bonds, this file describes the method of calculating a hedge ratio using Treasury futures. Unlike with bonds, there are various ways to calculate DV01. The sheet shows both a simple, rule-of-thumb hedge ratio using the DV01 of the cheapest-to-deliver (CTD) bond as well as a hedge ratio using an empirical regression. As with the bonds file, the data is a sample of the CTD yield series for a particular futures contract, but any changes would require insertion of new data. The calculation of the more elaborate option-adjusted duration is not shown. SwapSpread.xls Title: Swap Spread Setup This file shows the setup for a swap spread trade that involves transacting in a Treasury bond and entering the opposite transaction in a swap. FuturesBasketWorksheet.xls Title: Futures Basket Worksheet This file shows the process for calculating various attributes of a deliverable basket for a futures contract. For each bond, the basic attributes, such as maturity, duration, and carry, are calculated as well as the basis net of carry (BNOC), which leads to the cheapest to deliver. Different scenarios are shown using the calculations as in Chapter 11. Black-Scholes.xls Title: Black-Scholes Options Pricer The sheet shows the basic calculation of an option price using the standard Black-Scholes formula, which assumes a lognormal distribution for the underlying security. Bachelier.xls Title: Bachelier Options Pricer The sheet shows the calculation of an option price using the Bachelier pricing formula, which is used for an underlying normal distribution. Bachelier-type pricers are more common for interest rates where the underlying is closer to a normal distribution than a lognormal one.
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