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how to build treasury spot curve

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Jeffrey Yu-2

how to build treasury spot curve

Hi, is there any existing object in QuantLib can help building the treasury spot curve?

On the short end of the curve, we’ll have:

O/N,

4 week t-bill,

13 week t-bill,

26 week t-bill,

Then followed by 40 listing contracts of ED futures,

Plus ct2, ct5, ct10 and ct30.

Any feedback would be appreciated!

Jeff

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Allen Kuo-2

Re: how to build treasury spot curve

Hi:

If you want to bootstrap fit: Examples/Swap/swapvaluation.cpp shows how to bootstrap a multi-instrument curve. The T-bonds would have to use the FixedRateBondHelper (not shown in the Example). The T-bills could be massaged into the DepositeRateHelper form or you can try writing a "ZeroCouponBondHelper" for the task. The Eurodollar futures should work directly (though you want to be sure you want to combine futures with gov't issued securities in a single curve).

If you want a least-squares type of fit, see Examples/FittedBondCurve/FittedBondCurve.cpp. This only takes fixed rate bonds right now- you can try something like setting the coupon to a very small number in a FixedRateBond to mimic a T-bill, but no guarantees on that. It does not reproduce input prices exactly, since the purpose is to smooth out some of the noise and give some indication of bond richness/cheapness.

Allen

Jeffrey Yu <[hidden email]> wrote:

Hi, is there any existing object in QuantLib can help building the treasury spot curve?

On the short end of the curve, we¡¯ll have:

O/N,

4 week t-bill,

13 week t-bill,

26 week t-bill,

Then followed by 40 listing contracts of ED futures,

Plus ct2, ct5, ct10 and ct30.

Any feedback would be appreciated!

Jeff
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Simon Ibbotson - Straumur

Re: how to build treasury spot curve

If you are trying to create an interbank curve from a USD government curve (and hence are mixing the Eurodollar futures with the government bonds) then the market does quote swap spreads (i.e. spreads over government bond yields). QuantLib can help you get the bond yields but you’d probably have to embed the bond into a derived Quote object (which would take in a swap spread Quote and the bond price Quote) which would provide the derived swap rate.

Note that the market does not quote spreads over the short-dated T-bills and you would expect to see a disparity in rates between these and the Eurodollar – particularly between the 13 week T-bill and the first Eurodollar future which could create problems in the curve. This is partly due to a difference in the capital requirements between trading desks that trade interbank rates and desks that trade government securities.

Simon

From: [hidden email] [mailto:[hidden email]] On Behalf Of Allen Kuo
Sent: 07 March 2008 02:10
To: Jeffrey Yu; [hidden email]
Subject: Re: [Quantlib-users] how to build treasury spot curve

Hi:

Allen

Jeffrey Yu <[hidden email]> wrote:

Hi, is there any existing object in QuantLib can help building the treasury spot curve?

On the short end of the curve, we¡¯ll have:

O/N,

4 week t-bill,

13 week t-bill,

26 week t-bill,

Then followed by 40 listing contracts of ED futures,

Plus ct2, ct5, ct10 and ct30.

Any feedback would be appreciated!

Jeff

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[hidden email]
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