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FTS Treasury Calculator

Welcome to the Treasury Calculator Module.  This module is designed to let you analyze current yield curves, forward curves, yield curve smoothing, compute position values and risk management measures.  You can automatically retrieve current data from the web to perform this analysis or provide your own data that you have stored in a spreadsheet.

How Do I Get Started?

Step 1:  To automatically retrieve data from the web select Federal Reserve Data from the drop down menu and then click on the button Get Data.  You will see the grid fill up with data once it is retrieved.

Finally, if the quote date from your PC is different from the reported quote date because of time zone or other differences then you can correct this manually to match the date of the disclosed data.

Now you are ready to work with this data.

Note:  You can also read in your own data from a spreadsheet.  This greatly enhances the applicability of the Treasury Calculator module.  Click on how to read in from a spreadsheet to see how.

Step 2:  Click on the button titled "Curves."

The above screen appears.  This lets you plot and analyze the yield curve in different ways.  That is, you can plot the yield curve (plots yield to maturity against maturity for each instrument), Zero Curve (bootstrapped implied zero coupon bond curve) and the bootstrapped Forward Curve.   In addition, you can choose what compounding assumption you want to represent the curve in.

Smooth Approximations to the Yield Curve

Yield curves can only be inferred from the set of available market prices.  This means that in practice they will appear, as displayed in the display window, as appearing to have linear sub-segments.  If it is assumed that the actual curve is better described as being smooth then some type of interpolation must be used.  In this module you can apply two techniques, a Cubic Spline approach or a Nelson-Siegel approximation.

Note:  If the original curve is inverted, a cubic spline approximation may not perform well in practice.

Step 3:  Click on the button "Analytics"  This is subject lets you compute duration, convexity, dollar duration (i.e., duration times value) and dollar convexity numbers for the existing instruments plus any position you want to paste in.

The advantage of pasting in a position of cash flows is that the value and the risk management statistics are computed relative to the current yield curve.  The position you paste in can be an instrument, fixed income portfolio or even an investment project.

Step 4:  In this same Analytics subject you can use the calculator to engineer your own fixed income position from the instruments you have provided.  For example you can input the target value and a target \$ duration and the calculator will solve for the position that maximizes yield or minimizes convexity.

For example, if your target \$ value is 10000 and target \$ duration is 20000 then your target duration is 2.  Now you can observe what instruments are required in a position that maximizes yield versus minimizing convexity.

Current Developments

As a user, you are encouraged to provide feedback as to what type of flexibility you would like to be added.  You can do this by using the forum at www.ftsweb.com or by sending email to fts@ftsweb.com.

OS Financial Trading System, PO Box 11356, Pittsburgh, PA 15238 USA, Phone 1-800-967-9897, Fax 1-412-967-5958, Email fts@ftsweb.com,

(C) Copyright 2000, OS Financial Trading System