Category: Quant Development

Beginning Python Quant Developer – Inverse Floater

By Toyin Akin,

Beginning Python Quant Developer – Inverse Floater-750_422

Quant Developer, we look at constructing, pricing and reporting on Inverse Floater derivatives in Python using opengamma strata.

We, at poc-d, have taken opengamma‘s strata library (which has been developed in java) and extended it for online learning of capital market products for C#, VB.Net, C++, Python, Java and Scala developers as well an Microsoft Excel addin for financial analysts.

The learning is hands on, which means you will be provided a copy of the library to follow along.

 

Course Curriculum

  • Module #1 : Inverse Floater Structure
    • xxx
    • xxx
    • xxx
  • Module #2 : Inverse Floater Pricing
    • xxx
    • xxx
    • xxx
  • Module #3 : Inverse Floater FpML
    • xxx
    • xxx
    • xxx
    • xxx
  • Module #4 : Inverse Floater Risks
    • xxx
    • xxx
    • xxx

  • Provided (for hands on)
    • Microsoft Excel Addin which exposes required opengamma strata financial functions within Excel
    • .NET assembly in which to write capital market code against
  • Required
    • Minimum Microsoft Windows 7
    • 4GB of RAM (8GB preferred)
    • Visual Studio 2010 onwards for .NET Development (You can install the free version of Visual studio 2015 community)
    • Optional : Microsoft Excel 2007 onwards

 

Course Access

This course is broken down into modules (as seen in the graphic above).

You can access all the Capital Market courses based on C#, VB.Net, C++, Python, Java, Scala and Microsoft Excel for one low monthly fee. Currently the membership site houses courses that covers Fixed Rate Bonds, Swaps, Inverse Floaters, Swaptions and Cap/Floors.

Or each module can be purchased individually from

 

Inverse Floater Derivative

An inverse floating rate note, or simply an inverse floater, is a type of bond or other type of debt instrument used in finance whose coupon rate has an inverse relationship to short-term interest rates (or its reference rate). With an inverse floater, as interest rates rise the coupon rate falls.[1] The basic structure is the same as an ordinary floating rate note except for the direction in which the coupon rate is adjusted. These two structures are often used in concert.

As short-term interest rates fall, both the market price and the yield of the inverse floater increase. This link often magnifies the fluctuation in the bond’s price. However, in the opposite situation, when short-term interest rates rise, the value of the bond can drop significantly, and holders of this type of instrument may end up with a security that pays little interest and for which the market will pay very little.

Creation

An inverse floating rate note can be created two ways. The first is by placing an existing or newly underwritten fixed-rate security into a trust and issuing both a floating rate note and an inverse floating rate note. The second method is for an investment banking firm to underwrite a fixed-rate security and then enter into an interest rate swap that has a maturity less than the bond’s term. The investor would then own an inverse floater until the swap agreement expires. When creating an inverse floater through the swap market the need to sell in inverse floaters through a Dutch auction is eliminated. In the first scenario the original security placed in trust is referred to as the collateral, from this collateral both the floater and inverse floater are created.[3] The dealer will split up the underlying fixed-rate asset at a specified ratio (e.g. 20/80) and assign each portion to inverse and floater.

 

The reference rate and the frequency at which the rate is reset are contractually set. The rate used is often some form of LIBOR, but it can take different forms, such as tying it to the consumer price index, a housing price index, or an unemployment rate. The rate can be allowed to reset on an immediate, daily, or some type of monthly or yearly schedule. The rate can be computed by taking its set stated rate and subtracting the reference rate at the reset date. Caps and floors are often placed within inverse floaters to avoid unattractive features to investors (such as a negative coupon). Typically, the floor is set at zero and a cap may be set (e.g. 10%). If a floater is involved a cap is put on the floater to match up with the inverse’s floor, and vice versa. This is done since both are derived from the same fixed-rate asset.

Inverse floaters are issued in the collateralized mortgage obligation (CMO), municipal, and corporate markets.

The text below is an edited version taken from the strata web site : http://strata.opengamma.io/introduction/

Introduction to Strata for the Quant Developer

What is Strata?

Strata is the award-winning open source analytics and market risk library from OpenGamma.

Strata allows quant developers to build or enhance existing applications with standardized, off-the-shelf market risk components. It includes:

  • Pricing, financial analytics and curve calibration
  • Reporting
  • Scenario evaluation
  • Trade modelling
  • Market data representation
  • Financial foundations – currencies, indices, holidays, date adjustments, schedules, time-series

Strata has been built from the ground up to be lightweight and flexible. It does not impose any database, server or middleware requirements; these would be built on top of Strata. It provides a high-quality, open source Java toolkit that is designed to be used both in its entirety, as well as for its individual components.

Who is Strata for?

Firms have long employed expensive resources – quants and quant developers – to build and maintain market risk functionality that  offers no real competitive advantage. Where possible, they wish to leverage existing investments in systems and other in-house technologies, while looking externally for just the components required to fill their solution gaps.

Is there an alternative?

One alternative to building in-house is to look towards out-of-the-box offerings provided by financial software vendors. While these vendors offer solutions to industry business issues, the downside is that many firms have been burned by opaque, closed source vendor models, including vendor lock-in to make or support any changes, and “sledgehammer to crack a nut” software footprints.

Solution

Strata delivers the best of both worlds – industry standard market risk functionality, distributed as open source java software to eliminate vendor dependency and return control back to in-house development teams. With open access to standard market risk components and java source code, firms can accelerate the time-to-market of their solutions.

Developers

Strata is aimed at quant or systems developers tasked with delivering analytic solutions into trading, risk, clearing or prime servicing, or collateral businesses. Strata empowers developers with vetted open source java components that deliver standard market risk functionality, allowing them to focus on the unique aspects of solutions delivery to their business stakeholders.

Beginning Python Quant Developer – Cap/Floor

By Toyin Akin,

Beginning Python Quant Developer – Cap-Floor-750_422

Quant Developer, we look at constructing, pricing and reporting on Cap/Floor derivatives in Python using opengamma strata.

We, at poc-d, have taken opengamma‘s strata library (which has been developed in java) and extended it for online learning of capital market products for C#, VB.Net, C++, Python, Java and Scala developers as well an Microsoft Excel addin for financial analysts.

The learning is hands on, which means you will be provided a copy of the library to follow along.

 

Course Curriculum

  • Module #1 : Cap/Floor Structure
    • xxx
    • xxx
    • xxx
  • Module #2 : Cap/Floor Pricing
    • xxx
    • xxx
    • xxx
  • Module #3 : Cap/Floor FpML
    • xxx
    • xxx
    • xxx
    • xxx
  • Module #4 : Cap/Floor Risks
    • xxx
    • xxx
    • xxx
  • Provided (for hands on)
    • Microsoft Excel Addin which exposes required opengamma strata financial functions within Excel
    • .NET assembly in which to write capital market code against
  • Required
    • Minimum Microsoft Windows 7
    • 4GB of RAM (8GB preferred)
    • Visual Studio 2010 onwards for .NET Development (You can install the free version of Visual studio 2015 community)
    • Optional : Microsoft Excel 2007 onwards

 

Course Access

This course is broken down into modules (as seen in the graphic above).

You can access all the Capital Market courses based on C#, VB.Net, C++, Python, Java, Scala and Microsoft Excel for one low monthly fee. Currently the membership site houses courses that covers Fixed Rate Bonds, Swaps, Inverse Floaters, Swaptions and Cap/Floors.

Or each module can be purchased individually from

 

Cap/Floor Derivative

An interest rate cap is a type of interest rate derivative in which the buyer receives payments at the end of each period in which the interest rate exceeds the agreed strike price. An example of a cap would be an agreement to receive a payment for each month the LIBOR rate exceeds 2.5%.

Similarly an interest rate floor is a derivative contract in which the buyer receives payments at the end of each period in which the interest rate is below the agreed strike price.

Caps and floors can be used to hedge against interest rate fluctuations. For example, a borrower who is paying the LIBOR rate on a loan can protect himself against a rise in rates by buying a cap at 2.5%. If the interest rate exceeds 2.5% in a given period the payment received from the derivative can be used to help make the interest payment for that period, thus the interest payments are effectively “capped” at 2.5% from the borrowers’ point of view.

Interest rate cap

An interest rate cap is a derivative in which the buyer receives payments at the end of each period in which the interest rate exceeds the agreed strike price. An example of a cap would be an agreement to receive a payment for each month the LIBOR rate exceeds 2.5%. They are most frequently taken out for periods of between 2 and 5 years, although this can vary considerably.[1] Since the strike price reflects the maximum interest rate payable by the purchaser of the cap, it is frequently a whole number integer, for example 5% or 7%.[1] By comparison the underlying index for a cap is frequently a LIBOR rate, or a national interest rate.[1] The extent of the cap is known as its notional profile and can change over the lifetime of a cap, for example, to reflect amounts borrowed under an amortizing loan.[1] The purchase price of a cap is a one-off cost and is known as the premium.[1]

The purchaser of a cap will continue to benefit from any fall in interest rates below the strike price, which makes the cap a popular means of hedging a floating rate loan.[1]

The interest rate cap can be analyzed as a series of European call options, known as caplets, which exist for each period the cap agreement is in existence. Unlike other types of option, it is generally not necessary for the purchaser of a cap to notify the seller in order to exercise it, as this will happen automatically if the interest rate exceeds the strike price.[1] Each caplet is settled in cash at the end of the period to which it relates.[1]

Interest rate floor

An interest rate floor is a series of European put options or floorlets on a specified reference rate, usually LIBOR. The buyer of the floor receives money if on the maturity of any of the floorlets, the reference rate is below the agreed strike price of the floor.

 

The text below is an edited version taken from the strata web site : http://strata.opengamma.io/introduction/

Introduction to Strata for the Quant Developer

What is Strata?

Strata is the award-winning open source analytics and market risk library from OpenGamma.

Strata allows quant developers to build or enhance existing applications with standardized, off-the-shelf market risk components. It includes:

  • Pricing, financial analytics and curve calibration
  • Reporting
  • Scenario evaluation
  • Trade modelling
  • Market data representation
  • Financial foundations – currencies, indices, holidays, date adjustments, schedules, time-series

Strata has been built from the ground up to be lightweight and flexible. It does not impose any database, server or middleware requirements; these would be built on top of Strata. It provides a high-quality, open source Java toolkit that is designed to be used both in its entirety, as well as for its individual components.

Who is Strata for?

Firms have long employed expensive resources – quants and quant developers – to build and maintain market risk functionality that  offers no real competitive advantage. Where possible, they wish to leverage existing investments in systems and other in-house technologies, while looking externally for just the components required to fill their solution gaps.

Is there an alternative?

One alternative to building in-house is to look towards out-of-the-box offerings provided by financial software vendors. While these vendors offer solutions to industry business issues, the downside is that many firms have been burned by opaque, closed source vendor models, including vendor lock-in to make or support any changes, and “sledgehammer to crack a nut” software footprints.

Solution

Strata delivers the best of both worlds – industry standard market risk functionality, distributed as open source java software to eliminate vendor dependency and return control back to in-house development teams. With open access to standard market risk components and java source code, firms can accelerate the time-to-market of their solutions.

Developers

Strata is aimed at quant or systems developers tasked with delivering analytic solutions into trading, risk, clearing or prime servicing, or collateral businesses. Strata empowers developers with vetted open source java components that deliver standard market risk functionality, allowing them to focus on the unique aspects of solutions delivery to their business stakeholders.

Beginning Python Quant Developer – Swaption

By Toyin Akin,

Beginning Python Quant Developer – Swaption-750_422

Quant Developer, we look at constructing, pricing and reporting on Swaption derivatives in Python using opengamma strata.

We, at poc-d, have taken opengamma‘s strata library (which has been developed in java) and extended it for online learning of capital market products for C#, VB.Net, C++, Python, Java and Scala developers as well an Microsoft Excel addin for financial analysts.

The learning is hands on, which means you will be provided a copy of the library to follow along.

 

Course Curriculum

  • Module #1 : Swaption Structure
    • xxx
    • xxx
    • xxx
  • Module #2 : Swaption Pricing
    • xxx
    • xxx
    • xxx
  • Module #3 : Swaption FpML
    • xxx
    • xxx
    • xxx
    • xxx
  • Module #4 : Swaption Risks
    • xxx
    • xxx
    • xxx
  • Provided (for hands on)
    • Microsoft Excel Addin which exposes required opengamma strata financial functions within Excel
    • .NET assembly in which to write capital market code against
  • Required
    • Minimum Microsoft Windows 7
    • 4GB of RAM (8GB preferred)
    • Visual Studio 2010 onwards for .NET Development (You can install the free version of Visual studio 2015 community)
    • Optional : Microsoft Excel 2007 onwards

 

Course Access

This course is broken down into modules (as seen in the graphic above).

You can access all the Capital Market courses based on C#, VB.Net, C++, Python, Java, Scala and Microsoft Excel for one low monthly fee. Currently the membership site houses courses that covers Fixed Rate Bonds, Swaps, Inverse Floaters, Swaptions and Cap/Floors.

Or each module can be purchased individually from

 

Swaption Derivative

A swaption is an option granting its owner the right but not the obligation to enter into an underlying swap. Although options can be traded on a variety of swaps, the term “swaption” typically refers to options on interest rate swaps

There are two types of swaption contracts:

  • A payer swaption gives the owner of the swaption the right to enter into a swap where they pay the fixed leg and receive the floating leg.
  • A receiver swaption gives the owner of the swaption the right to enter into a swap in which they will receive the fixed leg, and pay the floating leg.

In addition, a “straddle” refers to a combination of a receiver and a payer option on the same underlying swap.

The buyer and seller of the swaption agree on:

  • The premium (price) of the swaption
  • Length of the option period (which usually ends two business days prior to the start date of the underlying swap),
  • The terms of the underlying swap, including:
    • Notional amount (with amortization amounts, if any)
    • The fixed rate (which equals the strike of the swaption)
    • The frequency of observation for the floating leg of the swap (for example, 3 month Libor paid quarterly)

The swaption market

The participants in the swaption market are predominantly large corporations, banks, financial institutions and hedge funds. End users such as corporations and banks typically use swaptions to manage interest rate risk arising from their core business or from their financing arrangements. For example, a corporation wanting protection from rising interest rates might buy a payer swaption. A bank that holds a mortgage portfolio might buy a receiver swaption to protect against lower interest rates that might lead to early prepayment of the mortgages. A hedge fund believing that interest rates will not rise by more than a certain amount might sell a payer swaption, aiming to make money by collecting the premium. Major investment and commercial banks such as JP Morgan Chase, Bank of America Securities and Citigroup make markets in swaptions in the major currencies, and these banks trade amongst themselves in the swaption interbank market. The market making banks typically manage large portfolios of swaptions that they have written with various counterparties. A significant investment in technology and human capital is required to properly monitor the resulting exposure. Swaption markets exist in most of the major currencies in the world, the largest markets being in U.S. dollars, euro, sterling and Japanese yen.

The swaption market is over-the-counter (OTC), i.e., not traded on any exchange. Legally, a swaption is a contract granting a party the right to enter an agreement with another counterparty to exchange the required payments. The counterparties are exposed to each other’s failure to make scheduled payments on the underlying swap, although this exposure is typically mitigated through the use of collateral agreements whereby variation margin is posted to cover the anticipated future exposure

Swaption styles

There are three main categories of Swaption, although exotic desks may be willing to create customised types, analogous to exotic options, in some cases. The standard varieties are

  • Bermudan swaption, in which the owner is allowed to enter the swap on multiple specified dates.
  • European swaption, in which the owner is allowed to enter the swap only on the expiration date. These are the standard in the marketplace.[1]
  • American swaption, in which the owner is allowed to enter the swap on any day that falls within a range of two dates.

This couse will be covering European swaptions.

Valuation

The valuation of swaptions is complicated in that the at-the-money level is the forward swap rate, being the forward rate that would apply between the maturity of the option – time m – and the tenor of the underlying swap such that the swap, at time m, would have an “NPV” of zero; see swap valuation. Moneyness, therefore, is determined based on whether the strike rate is higher, lower, or at the same level as the forward swap rate.

The text below is an edited version taken from the strata web site : http://strata.opengamma.io/introduction/

Introduction to Strata for the Quant Developer

What is Strata?

Strata is the award-winning open source analytics and market risk library from OpenGamma.

Strata allows quant developers to build or enhance existing applications with standardized, off-the-shelf market risk components. It includes:

  • Pricing, financial analytics and curve calibration
  • Reporting
  • Scenario evaluation
  • Trade modelling
  • Market data representation
  • Financial foundations – currencies, indices, holidays, date adjustments, schedules, time-series

Strata has been built from the ground up to be lightweight and flexible. It does not impose any database, server or middleware requirements; these would be built on top of Strata. It provides a high-quality, open source Java toolkit that is designed to be used both in its entirety, as well as for its individual components.

Who is Strata for?

Firms have long employed expensive resources – quants and quant developers – to build and maintain market risk functionality that  offers no real competitive advantage. Where possible, they wish to leverage existing investments in systems and other in-house technologies, while looking externally for just the components required to fill their solution gaps.

Is there an alternative?

One alternative to building in-house is to look towards out-of-the-box offerings provided by financial software vendors. While these vendors offer solutions to industry business issues, the downside is that many firms have been burned by opaque, closed source vendor models, including vendor lock-in to make or support any changes, and “sledgehammer to crack a nut” software footprints.

Solution

Strata delivers the best of both worlds – industry standard market risk functionality, distributed as open source java software to eliminate vendor dependency and return control back to in-house development teams. With open access to standard market risk components and java source code, firms can accelerate the time-to-market of their solutions.

Developers

Strata is aimed at quant or systems developers tasked with delivering analytic solutions into trading, risk, clearing or prime servicing, or collateral businesses. Strata empowers developers with vetted open source java components that deliver standard market risk functionality, allowing them to focus on the unique aspects of solutions delivery to their business stakeholders.

Beginning Python Quant Developer – Fixed/Float Swap

By Toyin Akin,

Beginning Python Quant Developer – Fixed-Float Swap-750_422

Quant Developer, we look at constructing, pricing and reporting on Inverse Floater derivatives in Python using opengamma strata.

We, at poc-d, have taken opengamma‘s strata library (which has been developed in java) and extended it for online learning of capital market products for C#, VB.Net, C++, Python, Java and Scala developers as well an Microsoft Excel addin for financial analysts.

The learning is hands on, which means you will be provided a copy of the library to follow along.

 

Course Curriculum

  • Module #1 : Fixed/Float Swap Structure
    • xxx
    • xxx
    • xxx
  • Module #2 : Fixed/Float Swap Pricing
    • xxx
    • xxx
    • xxx
  • Module #3 : Fixed/Float Swap FpML
    • xxx
    • xxx
    • xxx
    • xxx
  • Module #4 : Fixed/Float Swap Risks
    • xxx
    • xxx
    • xxx

  • Provided (for hands on)
    • Microsoft Excel Addin which exposes required opengamma strata financial functions within Excel
    • .NET assembly in which to write capital market code against
  • Required
    • Minimum Microsoft Windows 7
    • 4GB of RAM (8GB preferred)
    • Visual Studio 2010 onwards for .NET Development (You can install the free version of Visual studio 2015 community)
    • Optional : Microsoft Excel 2007 onwards

 

Course Access

This course is broken down into modules (as seen in the graphic above).

You can access all the Capital Market courses based on C#, VB.Net, C++, Python, Java, Scala and Microsoft Excel for one low monthly fee. Currently the membership site houses courses that covers Fixed Rate Bonds, Swaps, Inverse Floaters, Swaptions and Cap/Floors.

Or each module can be purchased individually from

 

Fixed/Float Swap Derivative

In an interest rate swap, each counterparty agrees to pay either a fixed or floating rate denominated in a particular currency to the other counterparty. The fixed or floating rate is multiplied by a notional principal amount (say, $1 million) and an accrual factor given by the appropriate day count convention. When both legs are in the same currency, this notional amount is typically not exchanged between counterparties, but is used only for calculating the size of cashflows to be exchanged. When the legs are in different currencies, the respective notional amounts are typically exchanged at the start and the end of the swap, which is called cross currency interest rate swap.

Vanilla_interest_rate_swap

Party A is currently paying floating rate, but wants to pay fixed rate. Party B is currently paying fixed rate, but wants to pay floating rate. By entering into an interest rate swap, the net result is that each party can swap their existing obligation for their desired obligation.

The most common interest rate swap involves counterparty A paying a fixed rate (the swap rate) to counterparty B while receiving a floating rate indexed to a reference rate like LIBOR, EURIBOR, or MIBOR. By market convention, the counterparty paying the fixed rate is the “payer” (while receiving the floating rate), and the counterparty receiving the fixed rate is the “receiver” (while paying the floating rate).

A pays fixed rate to B (A receives floating rate)

B pays floating rate to A (B receives fixed rate)

Currently, A borrows from Market @ LIBOR +1.5%. B borrows from Market @ 8.5%.

Consider the following swap in which Party A agrees to pay Party B periodic fixed interest rate payments of 8.65% in exchange for periodic variable interest rate payments of LIBOR + 70 bps (0.70%) in the same currency. Note that there is no exchange of the principal amounts and that the interest rates are on a “notional” (i.e., imaginary) principal amount. Also note that interest payments are settled in net; that is, Party A pays (LIBOR + 1.50%)+8.65% – (LIBOR+0.70%) = 9.45% net. The fixed rate (8.65% in this example) is referred to as the swap rate.[2]

At the point of initiation of the swap, the swap is priced so that it has a net present value of zero. If one party wants to pay 50 bps above the par swap rate, the other party has to pay approximately 50bps over LIBOR to compensate for this.

Vanilla_interest_rate_swap_with_bank

Normally the parties do not swap payments directly, but rather each sets up a separate swap with a financial intermediary such as a bank. In return for matching the two parties together, the bank takes a spread from the swap payments (in this case 0.30% compared to the above example)

Interest rate swaps are used to hedge against or speculate on changes in interest rates.

Speculation

Interest rate swaps are also used speculatively by hedge funds or other investors who expect a change in interest rates or the relationships between them. Traditionally, fixed income investors who expected rates to fall would purchase cash bonds, whose value increased as rates fell. Today, investors with a similar view could enter a floating-for-fixed interest rate swap; as rates fall, investors would pay a lower floating rate in exchange for the same fixed rate.

Interest rate swaps are also popular for the arbitrage opportunities they provide. Varying levels of creditworthiness means that there is often a positive quality spread differential that allows both parties to benefit from an interest rate swap.

The valuation of vanilla swaps was often done using the so-called textbook formulas using a unique curve in each currency. Some early literature described some incoherence introduced by that approach and multiple banks were using different techniques to reduce them. It became even more apparent with the 2007–2012 global financial crisis that the approach was not appropriate. The now-standard pricing framework is the multi-curves framework.

The present value of a plain vanilla (i.e., fixed rate for floating rate) swap can be computed by determining the present value (PV) of the fixed leg and the floating leg.

The value of the fixed leg is given by the present value of the fixed coupon payments known at the start of the swap

The value of the floating leg is given by the present value of the floating coupon payments determined at the agreed dates of each payment. However, at the start of the swap, only the actual payment rates of the fixed leg are known in the future, whereas the forward rates are unknown. The forward rate for each floating payment date is calculated using the forward curves.

During the life of the swap the same valuation technique is used, but since, over time, both the discounting factors and the forward rates change, the PV of the swap will deviate from its initial value. Therefore, the swap will be an asset to one party and a liability to the other.

Interest rate swaps expose users to many different types of financial risk[7]

Predominantly they expose the user to market risks. The value of an interest rate swap will change as market interest rates rise and fall. In market terminology this is often referred to as delta risk. Other specific types of market risk that interest rate swaps have exposure to are basis risks (where various IBOR tenor indexes can deviate from one another) and reset risks (where the publication of specific tenor IBOR indexes are subject to daily fluctuation). Interest rate swaps also exhibit gamma risk whereby their delta risk increases or decreases as market interest rates fluctuate.

The text below is an edited version taken from the strata web site : http://strata.opengamma.io/introduction/

Introduction to Strata for the Quant Developer

What is Strata?

Strata is the award-winning open source analytics and market risk library from OpenGamma.

Strata allows quant developers to build or enhance existing applications with standardized, off-the-shelf market risk components. It includes:

  • Pricing, financial analytics and curve calibration
  • Reporting
  • Scenario evaluation
  • Trade modelling
  • Market data representation
  • Financial foundations – currencies, indices, holidays, date adjustments, schedules, time-series

Strata has been built from the ground up to be lightweight and flexible. It does not impose any database, server or middleware requirements; these would be built on top of Strata. It provides a high-quality, open source Java toolkit that is designed to be used both in its entirety, as well as for its individual components.

Who is Strata for?

Firms have long employed expensive resources – quants and quant developers – to build and maintain market risk functionality that  offers no real competitive advantage. Where possible, they wish to leverage existing investments in systems and other in-house technologies, while looking externally for just the components required to fill their solution gaps.

Is there an alternative?

One alternative to building in-house is to look towards out-of-the-box offerings provided by financial software vendors. While these vendors offer solutions to industry business issues, the downside is that many firms have been burned by opaque, closed source vendor models, including vendor lock-in to make or support any changes, and “sledgehammer to crack a nut” software footprints.

Solution

Strata delivers the best of both worlds – industry standard market risk functionality, distributed as open source java software to eliminate vendor dependency and return control back to in-house development teams. With open access to standard market risk components and java source code, firms can accelerate the time-to-market of their solutions.

Developers

Strata is aimed at quant or systems developers tasked with delivering analytic solutions into trading, risk, clearing or prime servicing, or collateral businesses. Strata empowers developers with vetted open source java components that deliver standard market risk functionality, allowing them to focus on the unique aspects of solutions delivery to their business stakeholders.

Beginning Python Quant Developer – Fixed Rate Bond

By Toyin Akin,

Beginning Python Quant Developer – Fixed Rate Bond-750_422

Quant Developer, we look at constructing, pricing and reporting on Fixed Rate Bond securities in Python using opengamma strata.

We, at poc-d, have taken opengamma‘s strata library (which has been developed in java) and extended it for online learning of capital market products for C#, VB.Net, C++, Python, Java and Scala developers as well an Microsoft Excel addin for financial analysts.

The learning is hands on, which means you will be provided a copy of the library to follow along.

 

Course Curriculum

  • Module #1 : Fixed Rate Bond Structure
    • xxx
    • xxx
    • xxx
  • Module #2 : Fixed Rate Bond Pricing
    • xxx
    • xxx
    • xxx
  • Module #3 : Fixed Rate Bond Risks
    • xxx
    • xxx
    • xxx
  • Provided (for hands on)
    • Microsoft Excel Addin which exposes required opengamma strata financial functions within Excel
    • .NET assembly in which to write capital market code against
  • Required
    • Minimum Microsoft Windows 7
    • 4GB of RAM (8GB preferred)
    • Visual Studio 2010 onwards for .NET Development (You can install the free version of Visual studio 2015 community)
    • Optional : Microsoft Excel 2007 onwards

 

Course Access

This course is broken down into modules (as seen in the graphic above).

You can access all the Capital Market courses based on C#, VB.Net, C++, Python, Java, Scala and Microsoft Excel for one low monthly fee. Currently the membership site houses courses that covers Fixed Rate Bonds, Swaps, Inverse Floaters, Swaptions and Cap/Floors.

Or each module can be purchased individually from

 

Fixed Rate Bond Securities

In finance, a fixed rate bond is a type of debt instrument bond with a fixed coupon (interest) rate, as opposed to a floating rate note. A fixed rate bond is a long term debt paper that carries a predetermined interest rate. The interest rate is known as coupon rate and interest is payable at specified dates before bond maturity. The fixed-rate bond, although a conservative investment, is highly susceptible to a loss in value due to inflation. The fixed-rate bond’s long maturity schedule and predetermined coupon rate offers an investor a solidified return, while leaving the individual exposed to a rise in the consumer price index and overall decrease in their purchasing power.

The coupon rate attached to the fixed-rate bond is payable at specified dates before the bond reaches maturity; the coupon rate and the fixed-payments are delivered periodically to the investor at a percentage rate of the bond’s face value. Due to a fixed-rate bond’s lengthy maturity date, these payments are typically small and are not tied into interest rates.

Purchasing a fixed rate bond is knowing, from the very start, what to expect out of the investment. As such, beginners in the investment world, as well as more experienced but conservative ones see this as a good and stable option. Those who are not very well-versed in investments could benefit, because it would no longer becomes necessary to monitor each change in the economy that might have a detrimental effect to the expected return of the bond.

Regardless of how the official Bank interest rate moves over the term of the bond its interest rate stays fixed until the bond expires.

The text below is an edited version taken from the strata web site : http://strata.opengamma.io/introduction/

Introduction to Strata for the Quant Developer

What is Strata?

Strata is the award-winning open source analytics and market risk library from OpenGamma.

Strata allows quant developers to build or enhance existing applications with standardized, off-the-shelf market risk components. It includes:

  • Pricing, financial analytics and curve calibration
  • Reporting
  • Scenario evaluation
  • Trade modelling
  • Market data representation
  • Financial foundations – currencies, indices, holidays, date adjustments, schedules, time-series

Strata has been built from the ground up to be lightweight and flexible. It does not impose any database, server or middleware requirements; these would be built on top of Strata. It provides a high-quality, open source Java toolkit that is designed to be used both in its entirety, as well as for its individual components.

Who is Strata for?

Firms have long employed expensive resources – quants and quant developers – to build and maintain market risk functionality that  offers no real competitive advantage. Where possible, they wish to leverage existing investments in systems and other in-house technologies, while looking externally for just the components required to fill their solution gaps.

Is there an alternative?

One alternative to building in-house is to look towards out-of-the-box offerings provided by financial software vendors. While these vendors offer solutions to industry business issues, the downside is that many firms have been burned by opaque, closed source vendor models, including vendor lock-in to make or support any changes, and “sledgehammer to crack a nut” software footprints.

Solution

Strata delivers the best of both worlds – industry standard market risk functionality, distributed as open source java software to eliminate vendor dependency and return control back to in-house development teams. With open access to standard market risk components and java source code, firms can accelerate the time-to-market of their solutions.

Developers

Strata is aimed at quant or systems developers tasked with delivering analytic solutions into trading, risk, clearing or prime servicing, or collateral businesses. Strata empowers developers with vetted open source java components that deliver standard market risk functionality, allowing them to focus on the unique aspects of solutions delivery to their business stakeholders.