Svensson Equation

Estimated Curve
0,004%

B0
1.1593265174
R2

0,004%

Adjusted R2

0,005%

B1
B2
-1.1543265174 4.0788706493

B3
4.860322077

t1
t2
e
9.3252369139 11.270418509 2.7182818285

sum
0.00

regression
B0+B1
0.500%

0,003%
0,003%
0,002%
Spot

0,002%

Forward

0,001%
0,001%
0,000%
0

10

15

20

25

Settlement Box
INT.CONV.

FREQ.
DAYS/YR
SET.DATE

1
365.25
7/12

1
365.25
10/12

1
365.25
3/12

BTAN

30
1st Accrued

1st coupon

1st coupon is not a regular one, we need to make an adjustment

to our formula
DE0001137297
2/19/2010

Bund Curve

Svensson Equations:

basis refers to actual/actual so it's 1

Yield adjustment

DE0001137321

11/12/2010

3/16/2011
12/14/2011

DE0001141562

1/15/2010

2/27/2011

DE0001141588

9/24/2010

10/9/2011

DE0001135408

4/30/2010

7/5/2011

ON is the only one that the difference is between the day we are
The others is the difference between the maturity and the settlement date
2-Dec-10
Bond

3 days settlement convention

Coupon
O/N

I want to minimize the difference between the market and the model
Adjusted Yield YTM
Svensson

Market Price

Mkt Yield

Av.Life

Spot

Forward

(ei )2

MDuration

Price

Mispricing

0.500%

0.003
0.310
0.559
0.712
0.775
0.852
1.077
1.274
1.351
1.575
1.849
2.022
2.079
2.348
2.575
3.079
3.345
3.575
3.844
4.079
4.227
4.575
4.841
5.079
5.578
6.082
6.578
7.082
7.578
8.082
8.578
9.082
9.584
13.085
16.584
17.088
17.586
19.090
20.090
23.589
26.096
28.592
29.595
31.595

0.006%
0.156%
0.273%
0.343%
0.372%
0.406%
0.505%
0.590%
0.622%
0.715%
0.825%
0.892%
0.914%
1.015%
1.098%
1.273%
1.361%
1.434%
1.517%
1.588%
1.631%
1.730%
1.802%
1.864%
1.988%
2.106%
2.214%
2.316%
2.409%
2.497%
2.578%
2.654%
2.724%
3.082%
3.266%
3.282%
3.296%
3.325%
3.337%
3.335%
3.304%
3.258%
3.237%
3.190%

0.008%
0.304%
0.532%
0.667%
0.721%
0.787%
0.972%
1.129%
1.188%
1.357%
1.553%
1.671%
1.709%
1.882%
2.022%
2.308%
2.447%
2.561%
2.687%
2.791%
2.854%
2.993%
3.091%
3.174%
3.333%
3.473%
3.593%
3.698%
3.786%
3.862%
3.923%
3.973%
4.012%
4.050%
3.832%
3.789%
3.744%
3.602%
3.502%
3.144%
2.895%
2.664%
2.577%
2.413%

0.002%
0.000%
0.001%
0.001%
0.001%
0.001%
0.000%
0.000%
0.000%
0.000%
0.000%
0.000%
0.000%
0.000%
0.000%
0.000%
0.000%
0.000%
0.000%
0.000%
0.000%
0.000%
0.000%
0.000%
0.000%
0.000%
0.000%
0.000%
0.000%
0.000%
0.000%
0.000%
0.000%
0.000%
0.000%
0.000%
0.000%
0.000%
0.000%
0.000%
0.000%
0.000%
0.000%
0.000%

0.31
0.56
0.71
0.78
0.85
1.02
1.25
1.30
1.52
1.79
1.97
1.94
2.23
2.45
2.82
3.18
3.30
3.65
3.69
3.93
4.21
4.59
4.53
4.96
5.29
5.70
6.00
6.43
6.77
7.29
7.60
8.15
9.20
11.05
11.33
12.19
12.00
12.71
14.86
16.13
17.21
17.19
19.34

99.95
99.85
99.75
100.68
102.63
104.81
100.52
104.52
106.67
106.25
100.22
107.34
105.73
106.69
108.93
102.88
109.73
103.64
108.47
103.52
106.62
99.76
107.85
110.50
109.28
112.32
110.88
112.59
109.06
107.00
104.75
102.29
133.67
140.86
130.26
119.15
140.82
131.28
122.83
112.03
118.24
128.51
101.18

0.14
0.23
0.26
0.26
0.24
0.13
0.20
0.10
0.15
0.06
0.04
-0.05
-0.18
-0.20
-0.24
-0.44
-0.19
-0.25
-0.17
-0.07
-0.12
-0.14
-0.02
0.00
0.18
0.22
0.47
0.54
0.71
0.68
0.63
0.27
-1.08
-0.64
-0.16
-0.35
-0.93
-0.10
-0.17
0.03
-0.21
0.21
0.58

3-Dec-10

100.00

DE0001115582

0.0000%

30-Mar-11

99.82

DE0001115640

0.0000%

29-Jun-11

99.62

DE0001115681

0.0000%

24-Aug-11

99.50

DE0001137271

1.2500%

16-Sep-11

100.42

DE0001141497

3.5000%

14-Oct-11

102.39

DE0001135192

5.0000%

4-Jan-12

104.68

DE0001137297

1.0000%

16-Mar-12

100.32

DE0001141505

4.0000%

13-Apr-12

104.42

DE0001135200

5.0000%

4-Jul-12

106.52

DE0001141513

4.2500%

12-Oct-12

106.19

DE0001137321

1.0000%

14-Dec-12

100.18

DE0001135218

4.5000%

4-Jan-13

107.39

DE0001141521

3.5000%

12-Apr-13

105.91

DE0001135234

3.7500%

4-Jul-13

106.89

DE0001135242

4.2500%

4-Jan-14

109.17

DE0001141547

2.2500%

11-Apr-14

103.32

DE0001135259

4.2500%

4-Jul-14

109.92

DE0001141554

2.5000%

10-Oct-14

103.89

DE0001135267

3.7500%

4-Jan-15

108.64

DE0001141562

2.5000%

27-Feb-15

103.59

DE0001135283

3.2500%

4-Jul-15

106.74

DE0001141588

1.7500%

9-Oct-15

99.90

DE0001135291

3.5000%

4-Jan-16

107.87

DE0001135309

4.0000%

4-Jul-16

110.50

DE0001135317

3.7500%

4-Jan-17

109.10

DE0001135333

4.2500%

4-Jul-17

DE0001135341

4.0000%

4-Jan-18

DE0001135358

4.2500%

4-Jul-18

112.05

DE0001135374

3.7500%

4-Jan-19

108.35

DE0001135382

3.5000%

4-Jul-19

106.32

DE0001135390

3.2500%

4-Jan-20

104.12

DE0001135408

3.0000%

5-Jul-20

102.02

DE0001134922

6.2500%

4-Jan-24

134.75

DE0001135044

6.5000%

4-Jul-27

141.50

DE0001135069

5.6250%

4-Jan-28

130.42

DE0001135085

4.7500%

4-Jul-28

119.50

DE0001135143

6.2500%

4-Jan-30

141.75

DE0001135176

5.5000%

4-Jan-31

131.38

DE0001135226

4.7500%

4-Jul-34

123.00

DE0001135275

4.0000%

4-Jan-37

DE0001135325

4.2500%

4-Jul-39

118.45

DE0001135366

4.7500%

4-Jul-40

128.30

DE0001135432

3.2500%

4-Jul-42

100.60

0.675%
0.624%
0.745%
0.696%
0.808%
0.856%
0.909%
0.892%
0.939%
1.021%
1.196%
1.229%
1.383%
1.451%
1.546%
1.613%
1.704%
1.771%
1.861%
1.989%
2.137%
2.247%
2.383%
2.483%
2.590%
2.664%
2.731%
2.756%
2.998%
3.226%
3.271%
3.272%
3.273%
3.331%
3.326%
3.306%
3.248%
3.246%
3.219%

112.10
110.41

112.00

IMPLIED TERM STRUCTURE

Yi2

bp

3.5%

3.0%

3.0%
2.5%

Adjus tment Forward

2.5%
2.0%
2.0%
1.5%

Yield curve
Adjus ted Yield

1.5%

1.0%

1.0%

0.5%

0.5%

0.0%

0.0%
0

10

15

20

25

30

We use svensson to discount all cfs

Rather than treating a bond as the sum of cfs.

4.0%

3.5%

E(Yi2 )

43.97
The 1st 3 are t bills that's why we calculate it differently
PA = CFA/(1+R(1))^1 + CFA/(1+R(2))^2 + ....
41.34
AT THE SAME TIME I DO
36.35
PB = CFB/(1+R(1))^1 + CFB/(1+R(2))^2
33.93
THE R is given to me by the svensson equation
27.80
13.04
Again in the svensson price we have to make adjustemnts for the odd bonds
15.75
7.86
oddfirst is for the 1st coupon payment being odd. If the situation is in the last one you use odd lprice
10.09
3.31
1.79
-2.46
-8.23
-8.32
-8.68
-13.75
-5.74
-6.94
-4.68
-1.90
-2.79
-3.04
-0.40
0.05
3.48
3.85
7.77
8.45
10.46
9.33
8.27
3.29
-11.71
-5.75
-1.45
-2.88
-7.76
1 basis
point on a running basis in price terms is 19 cents in this case
-0.77
-1.11 This allows us to quantify risk. 5 bp means 1%
0.18
-1.21
1.21
2.98

Estimated Forwards

4.5%

4.0%

The problem of using the yield curve is reinvestment risk

Yield Move

Maturity

10

15

20

25

30

DBR
Theoretical Price model
2-Dec-10

3 days settlement convention

Bond

BBG Ticker Coupon

O/N

DE0001115582

BUBILL

DE0001115640

BUBILL

DE0001115681

BUBILL

DE0001137271

DBR

DE0001141497

OBL

DE0001135192

DBR

DE0001137297

BKO

DE0001141505

OBL

DE0001135200

DBR

DE0001141513

OBL

DE0001137321

BKO

DE0001135218

DBR

DE0001141521

OBL

DE0001135234

DBR

DE0001135242

DBR

DE0001141547

OBL

DE0001135259

DBR

DE0001141554

OBL

DE0001135267

DBR

DE0001141562

OBL

DE0001135283

DBR

DE0001141588

OBL

DE0001135291

DBR

DE0001135309

DBR

DE0001135317

DBR

DE0001135333

DBR

DE0001135341

DBR

DE0001135358

DBR

DE0001135374

DBR

DE0001135382

DBR

DE0001135390

DBR

DE0001135408

DBR

DE0001134922

DBR

DE0001135044

DBR

DE0001135069

DBR

DE0001135085

DBR

DE0001135143

DBR

DE0001135176

DBR

DE0001135226

DBR

DE0001135275

DBR

DE0001135325

DBR

DE0001135366

DBR

DE0001135432

DBR

0.000%
0.000%
0.000%
0.000%
1.250%
3.500%
5.000%
1.000%
4.000%
5.000%
4.250%
1.000%
4.500%
3.500%
3.750%
4.250%
2.250%
4.250%
2.500%
3.750%
2.500%
3.250%
1.750%
3.500%
4.000%
3.750%
4.250%
4.000%
4.250%
3.750%
3.500%
3.250%
3.000%
6.250%
6.500%
5.625%
4.750%
6.250%
5.500%
4.750%
4.000%
4.250%
4.750%
3.250%

Maturity

Yield

Life

3-Dec-10
30-Mar-11
29-Jun-11
24-Aug-11
16-Sep-11
14-Oct-11
4-Jan-12
16-Mar-12
13-Apr-12
4-Jul-12
12-Oct-12
14-Dec-12
4-Jan-13
12-Apr-13
4-Jul-13
4-Jan-14
11-Apr-14
4-Jul-14
10-Oct-14
4-Jan-15
27-Feb-15
4-Jul-15
9-Oct-15
4-Jan-16
4-Jul-16
4-Jan-17
4-Jul-17
4-Jan-18
4-Jul-18
4-Jan-19
4-Jul-19
4-Jan-20
5-Jul-20
4-Jan-24
4-Jul-27
4-Jan-28
4-Jul-28
4-Jan-30
4-Jan-31
4-Jul-34
4-Jan-37
4-Jul-39
4-Jul-40
4-Jul-42

0.50%
0.59%
0.68%
0.70%
0.71%
0.68%
0.62%
0.75%
0.70%
0.81%
0.86%
0.91%
0.89%
0.94%
1.02%
1.20%
1.23%
1.38%
1.45%
1.55%
1.61%
1.70%
1.77%
1.86%
1.99%
2.14%
2.25%
2.38%
2.48%
2.59%
2.66%
2.73%
2.75%
3.00%
3.23%
3.27%
3.27%
3.27%
3.33%
3.33%
3.31%
3.25%
3.25%
3.22%

0.00
0.32
0.57
0.73
0.79
0.87
1.09
1.29
1.36
1.59
1.86
2.03
2.09
2.36
2.59
3.09
3.36
3.59
3.85
4.09
4.24
4.59
4.85
5.09
5.59
6.09
6.59
7.09
7.59
8.09
8.59
9.09
9.59
13.09
16.59
17.09
17.59
19.09
20.09
23.59
26.09
28.59
29.59
31.59

Dur.

Cvex.

Mid Price

Theo. Price

Diff.

ytm

Svensson

Discount

Svensson

bp Spread

Spot

Function

Forward

99.9986
99.82
99.62
99.50
100.42
102.39
104.68
100.32
104.42
106.52
106.19
100.18
107.39
105.91
106.89
109.17
103.32
109.92
103.89
108.64
103.59
106.74
99.90
107.87
110.50
109.10
112.10
110.41
112.05
108.35
106.32
104.12
102.02
134.75
141.50
130.42
119.50
141.75
131.38
123.00
112.00
118.45
128.30
100.60

IMPLIED TERM STRUCTURE

3.5%

3.0%

2.5%

2.0%

1.5%

1.0%
Yield curve

0.5%

0.0%
0.00

5.00

10.00

15.00

20.00

25.00

30.00

DBR
Theoretical Price model
2-Dec-10

3 days settlement convention

Bond

BBG Ticker Coupon

O/N

DE0001115582

BUBILL

DE0001115640

BUBILL

DE0001115681

BUBILL

DE0001137271

DBR

DE0001141497

OBL

DE0001135192

DBR

DE0001137297

BKO

DE0001141505

OBL

DE0001135200

DBR

DE0001141513

OBL

DE0001137321

BKO

DE0001135218

DBR

DE0001141521

OBL

DE0001135234

DBR

DE0001135242

DBR

DE0001141547

OBL

DE0001135259

DBR

DE0001141554

OBL

DE0001135267

DBR

DE0001141562

OBL

DE0001135283

DBR

DE0001141588

OBL

DE0001135291

DBR

DE0001135309

DBR

DE0001135317

DBR

DE0001135333

DBR

DE0001135341

DBR

DE0001135358

DBR

DE0001135374

DBR

DE0001135382

DBR

DE0001135390

DBR

DE0001135408

DBR

DE0001134922

DBR

DE0001135044

DBR

DE0001135069

DBR

DE0001135085

DBR

DE0001135143

DBR

DE0001135176

DBR

DE0001135226

DBR

DE0001135275

DBR

DE0001135325

DBR

DE0001135366

DBR

DE0001135432

DBR

0.000%
0.000%
0.000%
0.000%
1.250%
3.500%
5.000%
1.000%
4.000%
5.000%
4.250%
1.000%
4.500%
3.500%
3.750%
4.250%
2.250%
4.250%
2.500%
3.750%
2.500%
3.250%
1.750%
3.500%
4.000%
3.750%
4.250%
4.000%
4.250%
3.750%
3.500%
3.250%
3.000%
6.250%
6.500%
5.625%
4.750%
6.250%
5.500%
4.750%
4.000%
4.250%
4.750%
3.250%

Maturity

Yield

Life

3-Dec-10
30-Mar-11
29-Jun-11
24-Aug-11
16-Sep-11
14-Oct-11
4-Jan-12
16-Mar-12
13-Apr-12
4-Jul-12
12-Oct-12
14-Dec-12
4-Jan-13
12-Apr-13
4-Jul-13
4-Jan-14
11-Apr-14
4-Jul-14
10-Oct-14
4-Jan-15
27-Feb-15
4-Jul-15
9-Oct-15
4-Jan-16
4-Jul-16
4-Jan-17
4-Jul-17
4-Jan-18
4-Jul-18
4-Jan-19
4-Jul-19
4-Jan-20
5-Jul-20
4-Jan-24
4-Jul-27
4-Jan-28
4-Jul-28
4-Jan-30
4-Jan-31
4-Jul-34
4-Jan-37
4-Jul-39
4-Jul-40
4-Jul-42

0.50%
0.59%
0.68%
0.70%
0.71%
0.68%
0.62%
0.75%
0.70%
0.81%
0.86%
0.91%
0.89%
0.94%
1.02%
1.20%
1.23%
1.38%
1.45%
1.55%
1.61%
1.70%
1.77%
1.86%
1.99%
2.14%
2.25%
2.38%
2.48%
2.59%
2.66%
2.73%
2.75%
3.00%
3.23%
3.27%
3.27%
3.27%
3.33%
3.33%
3.31%
3.25%
3.25%
3.22%

0.00
0.32
0.57
0.73
0.79
0.87
1.09
1.29
1.36
1.59
1.86
2.03
2.09
2.36
2.59
3.09
3.36
3.59
3.85
4.09
4.24
4.59
4.85
5.09
5.59
6.09
6.59
7.09
7.59
8.09
8.59
9.09
9.59
13.09
16.59
17.09
17.59
19.09
20.09
23.59
26.09
28.59
29.59
31.59

Dur.

Cvex.

Mid Price

Theo. Price

Diff.

ytm

Svensson

Discount

Svensson

bp Spread

Spot

Function

Forward

99.9986
99.82
99.62
99.50
100.42
102.39
104.68
100.32
104.42
106.52
106.19
100.18
107.39
105.91
106.89
109.17
103.32
109.92
103.89
108.64
103.59
106.74
99.90
107.87
110.50
109.10
112.10
110.41
112.05
108.35
106.32
104.12
102.02
134.75
141.50
130.42
119.50
141.75
131.38
123.00
112.00
118.45
128.30
100.60

IMPLIED TERM STRUCTURE

3.5%

3.0%

2.5%

2.0%

1.5%

1.0%
Yield curve

0.5%

0.0%
0.00

5.00

10.00

15.00

20.00

25.00

30.00