Japanese Bond Analysis Seminar

JGB 15YR Floating Rate Note

JGB Inflation Linked Note
Portfolio function

Bloomberg L.P.
2010,Tokyo
Ver.1.1

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Contents

Page
JGB 15yr Floater (“15yr FRN”)
Ticker code 2
OAS analysis 3-4
Yield Analysis (YA) 5
Forward Curve analysis 6-7
Regression Analysis 8
Private security 9
Excel Download
Grid Pont Delta 10
OAS 11
Calculation Overrides 12
Portfolio Functions
Create portfolio 13-
13-14
Portfolio Macro 15
Key Rate Risk 16
Stress Test 17
Value at Risk 18
JGB Inflation-
Inflation-inked Bond(“ILB”)
Ticker/Default setting 19
JGB ILB Evaluation 20--22
20
Break-
Break-even-
even-inflation(BEI) 23-24
Yield Beta / Hedging 25
Multiple Regression Analysis2
Analysis26
Inflation Swap 27--30
27
Supplement：
Supplement：JGB 15yr FRN
Theoretical Value 31--37
31

© copyright 2010 BLOOMBERG L.P. all rights reserved

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15yr FRN Analysis_1 Finding ticker codes / Outline of functions

<Govt> TK<GO> 21<GO> 【JGB ticker codes】

Each year series has short codes:

JN* 2 Year Series
JS* 5 Year Series
JB* 10 Year Series
JF* 15 Year Floater
JL* 20 Year Series
JX* 30 Year Series
JBI* CPI-Linked, 10 Year Series

Follow short code with series:

Example:15YR FRN Series 43:JF43 <Govt>

JF43 <Govt> OAS1<GO> 【OAS Analysis】

Instructions：
① Set bond price.
①
② ② Set settle date then hit <GO> to
calculate “OAS”.

See pages 3-4 for more details.

JF43 <Govt> YA<GO> 【Floating Rate Notes Analysis】

Set one of the margins to calculate
prices or enter “price” to evaluate
margins.

See page 5 for details.

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15yr FRN Analysis_2 Option-Adjusted Spread (OAS) Analysis

Select a bond then type OAS1 <GO>

Example:JF43<Govt>OAS1 <GO>

① ② ③ ④

【OAS Analysis】
① Calculate ④ Volatility
Set output to be calculated. You can For Lognormal model, this is the
choose one from the following. “O” will annualized volatility of the short rate to
come up as a default. calculate OAS. 20% is set as a default for
JGB 15yr Floaters.
P：Price
O：Option-adjusted spread (OAS) ⑤ Settle
V：Volatility The date securities must be delivered and
paid for to complete transaction.
② Price
The ask price of the bond.
③ OAS(bp)
The option-adjusted spread, in basis points
(bp).This represents the incremental return
due to credit risk.

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15yr FRN Analysis_3 Benchmark yield shift / customize

JF43 <Govt> OAS1<GO> 【OAS Analysis】Parallel shift

To perform analyses using parallel
yield curve shifts, please set
“Calculate” field to “P” and enter the
basis points into “Shift” column then
hit <GO>.

 For JGB, curve I18 (Japanese

Government bond) is used as a
default curve on OAS1 screen.
 Please enter IYC1 I18<GO> and
<PAGE FWD> to see the components
of the curve.

JF43 <Govt> OAS1<GO> 【OAS Analysis】Yield customize

Instructions：
① On front page, change “Calculate”
field to “P”
② Click on “2) Customize” upper
right corner of the screen.
③ Set “Yield” for simulation. If you
need to set yield for each year,
change “Curve” field to “X”
④ After that, hit <GO> and <MENU>
to go back to front page. Then you
will find the price based on your
customized yield curve.

For key rate risk analysis, see page

16.

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15yr FRN Analysis_4 FRN analysis

Select a bond then type YA <GO>

Example:JF43<Govt>YA <GO>

③
⑤

【Floating Rate Notes Analysis】

① Assumed Rate： ③ Price：
The assumed average rate of the Enter market price in the column.
benchmark for all future refixes. For JGB
④：Discount Margin
15yr FRN, the rate is based
It corresponds to compound yield for fixed
on the latest auction result of JGB 10yr
coupon bonds.
series. See JGBY10YR<Index> for
reference rates. ⑤：Spread For Life
② Coupon rate： It corresponds to simple yield for fixed
coupon bonds.
Next coupon rate is shown. Margins on YA
function for FRN assumes that the rate
will not be changed up to maturity date.

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Forward Curve Analysis_1 To find forward JGB10yr rates

FWCV<GO> 【Forward curves analysis】

Select a currency.

As for FMC curve numbers, refer to
FMC<GO>.

Set “105” into “FMC#” column

(Curve 105 is a JGB par coupon
curve)

Change the term to

“10-Y”
Rates are shown on page 2

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Forward Curve Analysis_2 Forward Curve Matrix

FWCM<GO> 【Forward Curve Matrix】

Set currency and curve fields upper
left corner of this screen. You can
select either swap or government
curves. The fields are sticky.

X-Axis is forward, Y-Axis is Tenor.

You can now perform additional
analysis in other functions with the
rates as they are tickerized.

To customize Forwards/Tenors, click
on “Options”->Customize
Forwards/Tenors from the toolbar.
Then add/remove appropriate rates
and click on “Update” button.

To draw a graph of JGB 10yr forward

rates, click on “View”->
“Graph”.

Changing “Choose Curve to Graph”

to “Tenor Curve” and click on “10yr”
curve then forward rates of 10yr JGB
are drawn.

The forward curve is based on JGB
cash bonds. To find current securities
which are used in the curve, type
IYC1 I18<GO>.

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Regression Analysis Creating yield spread tickers

CIX<GO>1<GO> 【Custom index expression】

Procedure：
① Enter CIX<GO>1<GO> to create a
new custom index.
② Choose "Spread” .
②
③ Enter appropriate (any)“Ticker” and
“Name” field. Also, enter ticker
codes into “Security” field in
Sell/Buy field.
Example: Create a JGB 20yr-10yr spread
：GJGB10<Index>
Sell：
Buy：：GJGB20<Index>

Enter <GO>1<GO>1<GO> to save

③
the new index.

Type CIX<GO> to show all custom
indices.

To pull up a custom index, type the
ticker which you named with
preceded by a period (.).

Example： ：
JF40<GOVT> (the created JGB 20yr-10yr
【Yield regression analysis】
spread )<Index>YRH<GO>

YRH is to estimate the historical
relationship between the selected
two securities.

You can use YRH to calculate yield
beta (1bp value) of a selected JGB
15yr FRN to the JGB 20yr-10yr
spread. To calculate it, set
“Val/Dif/Per” column to “D”.

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Create private securities Create a hypothetical JGB 15yr FRN

Select a similar bond then type PPCR2<GO> 【Private Placement update】

Example:JF43<Govt>PPCR2<GO>
Procedure:
③
① Enter Maturity Date.
①
② Set appropriate dates.
④
⑤ ③ Set the privilege. There are three
types of privileges:
Firm： Other members in your firm can
view the security
②
User： Only the securities creator can
view, update, or delete
Firm Update：Other members of your firm
can access, modify, or delete the
security

④ You can add comments or notes.

⑥ ⑦ ⑤ After registering the bond, it allows
you to send the security to other users
⑧ via e-mail.
⑥ Enter quoted margin for a Floating
Rate Note(FRN).
⑦ Put previous and next coupon
payment date.
⑧ Put previous and next coupon
payment date(s) and previous coupon
rate(s).
.ALL<Corp><GO>

Type<GO>1<GO> to register the
bond.

Type .ALL<GO> to show all private
securities.

To modify a private bond, pull it up
④ then type PPCR3<GO>.

Most of the bond functions such as
OAS1 can be applied to private
securities.

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 Grid Point Delta (GPD) Download GPD on excel

Example
【Exhibit 1】
】
【API Data Download】

① Example procedure：
③
① Enter ticker codes horizontally without
any blank cells. We use JGB 15YR FRN
② tickers in Exhibit 1.
② Enter the following field names
vertically without blank cells:
GRID_PT_DELTA_3M
(Grid point delta 3M)
GRID_PT_DELTA_6M
(Grid point delta 6M)
GRID_PT_DELTA_1Y
(Grid point delta 6M)
・
・
GRID_PT_DELTA_30Y
(Grid point delta 30Y)

 You can easily find appropriate field names

④ by using FLDS<GO>. Select a bond then and
FLDS<GO> then put key words (e.g. GRID)
into upper left side of the screen.
：JF40<Govt>FLDS<GO>
Example：

③ Select the cell where the ticker code

row and the field name line cross then
click on “Fill range” button on
Bloomberg tool.
④ Grid point deltas of each security will
show up.

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 Option Adjusted Spread (OAS) Download OAS on excel

Example
【Exhibit 1】
】 【API Data download】
Example procedure：
1. Enter bond tickers from cell B3
vertically.
2. Enter field names which you would
like to show horizontally. In Exhibit
1, we use the following field names:
FLT_SPREAD (Quoted margin)
MATURITY(Maturity date)
PX ASK (Ask price)
MTY_YEARS
(Years from settle to maturity)
OAS SPREAD ASK (Ask OAS)

 You can easily find appropriate field

names by using FLDS<GO>. Select a
bond then and enter FLDS<GO> then put
key words (e.g. MATURITY) into upper
left side of the screen.
：JF40<Govt>FLDS<GO>
Example：

③ Select the cell where the ticker code

row and the field name column
intersect cross then click on “Fill
range” button on Bloomberg tool
then the data will be downloaded.

O AS

10
9
8
7
6
OAS

5
4
3
2
1
0
8 10 12 14 16
YR

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 Calculation Overrides Yield/Price/OAS calculation on excel

Example
【API Data Download】
【Exhibit 1】
】
Example procedure：
1. Enter bond tickers from cell B5
vertically.
2. Enter field names which you would
like to show horizontally. In Exhibit
1, we use the following field names:
PX_ASK (Ask price)
OAS_SPREAD_ASK (Ask OAS)
OAS_VOL_ASK(OAS Volatility)

3. Enter the following formula in cell

C5 then copy it to other cells in line
C：
＝BLP(B5,$C$4:$E$4, G5:I5)
4. In this example, row G to I
correspond to row C to E
respectively so, for example, enter
102.45 in cell G5 and hit <GO> then
it will return OAS in cell D5.

 To see more details for calculation

override, please refer to
BBXL<GO>12<GO> for BLP
functions and API<GO> for BDP
function.

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Create portfolio Create portfolio
PRTU<GO>1<GO> 【Create portfolio】
Procedure：
① ④ ① Enter a name into “Name” field.
②
③ ② Set position type.
③ Set asset class. For bond portfolios,
select “Fixed Income”.
④ Select base currency of the portfolio.

7<Go> 【Add/Edit securities】

ProcedureⅠ：
① Enter tickers into “Security” row. The
① ② ③ ④ ticker of a swap is “Deal #” + <corp>.
② Enter positions of each security. For
bonds, enter face amount in the
thousands. For swaps, enter 1 into
position row.
③ Market prices will be loaded
automatically into “Mkt Px”(Market
Price) row. If there is no price, you
have to enter these fields by yourself.
④ Enter cost prices of each security.

To save a portfolio, type 1<GO>.

ProcedureⅡ(Import securities from excel)

① The column in Excel should match the
columns on PRTU. Prepare columns of
securities, position, current price, cost
on excel in that order. Current price
column can be blank if there are
market prices.
② Highlight the data you would like to
import, then drag the icon into the grid
on PRTU to import the data.

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Portfolio edit List, Update, Share portfolio

PLST<GO> 【Portfolio Listing】

Procedure：

①
Type PLST<GO> to display a list of

portfolios that you have created or
have permission to view.

It shows your portfolio, portfolios you
have privilege to update, and portfolios
you have privilege to view only.

Click on a portfolio then you can find
①
③ a list of portfolio analysis functions.

Select a portfolio then type PFST<GO> 【Portfolio update】

Procedure：

You can use PFST to update/add
positions. Once you finish updating,
type 1<GO> to save your updates

You can also update your portfolios by
typing PRTU<GO>.

PDIS<GO> 1<GO> 【Portfolio distribution】

Procedure：
①
① Select portfolios which you would like to
share by clicking the boxes on the left of
portfolio names.
② Create groups of users with whom you
② would like to share portfolios. You can use
individual names or a group of users which
are created by SPDL<GO>.
③
③ You can choose the following options for
privilege level：
View：only allow the recipient to see the
securities
Price：allow the recipient to update prices only
Update：allow the recipient to edit
securities and to update prices

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Create portfolio Macro Combine portfolios

PMAC<GO> 【Portfolio macro setup】

You can combine your portfolios to
form a single portfolio called a
macro.

Select “not yet defined”

① Procedure：
③ ②
① Name a macro.
② Set base currency of the macro.
③ Enter each portfolio’s number into
“Port” column. To display portfolio
numbers, type PRTU<GO> and look
at “Num” column.

【How to generate a report on a macro】

Example :PRTS<GO>

If a function has a field of “macro”,
then enter a macro number in the field
to run a report. To find macro numbers,
enter PMAC<GO>.

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 Key rate risk Algorithmics Model

Select a portfolio then enter KRR<GO> 【Key rate risk report】

① You can choose following options：
① Portfolio ：a portfolio for the report

② 1st Distr ：The primary distribution.

The dropdown menu displays
a list of choices.
2nd Distr ： The secondary distribution.
The dropdown menu displays a
list of choices.

View ：Display format. There are

following two options:
Aggregated
Detailed

② The categories that appear depend on

the options you selected from the
“Distr” fields.
③ To display the securities, click on the
appropriate category.
③

To set schedule reports, once you run

a report by clicking on “Reports”
->”Schedule Report”, then enter
RPT<GO> and click on “SC” number
of an appropriate report and set
frequency, date, and time.

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Stress Test Algorithmics Model

Select a portfolio then enter WRST<GO> 【Stress test report】

① You can set a portfolio to run and
① choose time horizon for the report.

② ② Display a portfolio’s potential loss and

gain across a series of historical and
hypothetical market conditions.
③ Additional search criteria may appear：
1st Distribution：
The primary distribution
category
2nd Distribution：
The secondary distribution
category
Chart ：An option to display charts or
explanations of each scenario
Scenarios ：The name of stress test scenario
③
④ To display data for a specific scenario,
click on the appropriate scenario.

To set schedule reports, once you run a

report by clicking on “Reports”
->”Schedule Report”, then enter
RPT<GO> and click on “SC” number
of an appropriate report and set
frequency, date, and time.

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 Value at Risk (VaR) Algorithmics Model

Select a portfolio then enter VAR<GO>

【Value at Risk Report】
① You can choose following options：
① Portfolio ：a portfolio for the report
1st Distr1 ：The primary distribution.
② The dropdown menu displays
a list of choices.
2nd Distr ： The secondary distribution.
The dropdown menu displays a
list of choices.
Methodology：There are following three
types of VaR methodology：
Parametric
Historical
Monte Carlo

Confidence Interval：A measure of the

degree of confidence for a
random variable of interest. The
followings are selectable:
95%/97.5%/99%
Time Horizon：The time period for which
③ the data appears.

② The result of VaR will be displayed

that depends on the options you
selected from the “Distr” fields.
③ Displays VaR of each security,
CVaR(Conditional expected shortfall/
expected loss giveVaR:Then a loss
threshold (VAR) has been reached).
The row appears only when you
select Historical or Monte Carlo
Method.

To find the details of each model,
type DOCS # 2037900 <GO> and
④ refer to
“ALPHA:VarRMethodology”.

For comparison of risk
methodologies, refer to page 37.

To set schedule reports, refer to last
bullet point of page 16.

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JGB Inflation linked Ticker codes / Default settings

ILB<GO> 【Inflation-linked bonds】

To display a menu of inflation-linked
bonds for various countries.

JBI# (# indicates series number) is
the short code for Japanese
Government inflation linked bond .
e.g. JBI10 <Govt>

COVR<GO> 【Bond calculation override】

For Japanese bonds, you can choose
simple yield or compound yield as a
default setting.

It applies to all JPY bonds.

The override is used in YA, FPA, and
others listed on the page.

COVR<GO> on page 4

To set yield beta assumption(see page
25) on YA function

Default setting is 0.5

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JGB ILB analysis_1

JBI10 <Govt> YA<GO> 【Inflation-Indexed Yield Analysis】

You can calculate the price or yield
① for a bond and determine the cash
③
due at settlement date.

①
①Yield calculations
Real yield (Simple/ Compound)
② The standard yield-to-maturity
calculation (without inflation
adjustment).
Inflation assumption
It’s based on annual percentage
change of reference CPI.

②
②Sensitivity Analysis
Yield-Beta Assumptions
Yield beta attempts to measure the
slope of the relationship between
nominal yields and real yield.

To set simple/compound yield and
yield-beta default settings, type
COVR<GO> (see page 19).

To calculate historical yield-beta, use
YRH function (see page 25).

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JGB ILB analysis_2

JBI9 <Govt> YA<GO> 【 Inflation-Indexed Yield Analysis 】

③Economic Factors
③
Base CPI value
The base CPI value at the security’s
issue date. There is a three-month lag.
For instance, the June 10 2006 is the
index level used for Sept.10, 2006.
Reference CPI
④
The adjusted CPI value as of the
settlement date. Daily accretion is
③ based on straight-line interpolation.
Flat Index Ratio
＝CPI @ Last CPN Date ÷Base CPI
Index Ratio
(Please refer to ALLX JCIB<GO>
for historical data)
②
＝Reference CPI÷BaseCPI
(Round off to three decimal places)
Accrued Ratio Growth
＝Index Ratio－Flat Index Ratio
④
④Payment Invoice
Flat
＝Flat Index Ratio×Market Price
Inflation Accrual
＝Accrued Ratio Growth×Market
Price
Coupon Accrued interest
＝A×Face÷100×Index Ratio
(Truncate decimal points)
A＝100×coupon (%)×Accrued Interest÷365
(Truncate at the 8th decimal point)

Net Amount
＝Flat＋Inflation Acc＋Coupon Acc
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JGB ILB analysis_3 Evaluation based on BEI

JBI9 <Govt> YAS<GO>

② ①

【Yield/ Spread Analysis】

① Enter a nominal bond for the selected Inflation-linked note.
② Enter opposite Break-even-inflation rate (“BEI”) and hit <GO> to calculate the price
and yield. In the above screen, BEI is -200bp.
③ To save the nominal bond, click on high lighted field.

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BEI analysis_1 Break-even-inflation rates

Example:
JBI9 <Govt> JB282 <Govt>HS <GO> 【Historical spread analysis】

Exhibit # shows the historical spread
(BEI) between nominal JGB and
Inflation-linked JGB.

ILBE<GO> 【World Inflation Breakeven Rates】

① ① You can choose the
country/region, the life of the
bond, period, pricing status, and
the type of break even rates.

You can compare the BEI across
the globe.

BEIs are calculated by
subtracting the yield on inflation
bonds from the closest-maturity
government bond sold by the
same country in the same
currency.

To display a historical graph,
click on the BEI and select GP.

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BEI analysis_2 Compare BEI rates

“Multiple Security”
G<GO>1<GO>→“ 【Multiple Security graph】
Sample procedure：
① G<GO>1<GO> and choose
“Multiple Securities” then click on
“Next” .
② Set the period and data range of the
graph and enter security ticker codes.
You can set up to 20 securities.
① Then click on “Next”.
③ After that, enter graph title and
display settings then click on
② “Finish”.
④ The graphs are drawn.

To choose the axes, click on “Edit”

upper left corner of the graph and set
“Axis”.

To display a list of the custom charts
which you have created, type
G<GO>.
【Exhibit 1】
】
④
The ticker codes used in the Exhibit 1
are as follows:：
：UKGGBE10<Curncy>
U.K.：
：USGGBE10<Curncy>
U.S.：
：JYGGBE10<Curncy>
Japan：

 Please refer to ILBE<GO> to find

these tickers.

August 2007- June 2009 (10year BEI)

：United Kingdom
Red line：
：United States
White line：
：Japan
Yellow line：

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Yield beta and hedging Yield-beta / Hedging

Example:
JBI6 <Govt> JB274 <Govt>YRH <GO>
【Yield regression analysis】
①
You can use YRH to calculate yield
beta (1bp value) of a selected JGB
② inflation-linked bond to the nominal
③ JGB. To calculate it please set the
followings:
①Click on “Edit” and change “Yield” to
“Semi-annual”
②Change “Regression” field to
“Difference”
③Historical betas are shown.
On the left screen, it shows historical
beta for past 2 years. Beta equals 0.617

JBI6 <Govt> YA <GO> 【Calculating hedge ratio】

The case of using a historical beta
Hedge ratio
＝the risk(*2) of the inflation linked
×Index Ratio÷
note× ÷the risk of the
nominal bond
In this case,
＝3.476× ×1.002÷
÷5.9711
≒0.58
Hence, in this case, JBI#6 with face
amount JPY 100million corresponds to
JB#274 with face amount JPY58
million.

JB274 <Govt> YA <GO>

(*1)It’s not needed if you set “Compound” for
Japanese bonds on COVR<GO>.
(*2)Risk：＝100 times the price value of a basis
point change in yield.

Set “S” to calculate

“Risk” based on
compound yield(*1)
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Historical correlation Historical correlation graph

MRA<GO> 【Multiple Regression 】

Procedure：
①
① Type MRA<GO> and select a matrix.
② Enter graph title.
③ Enter ticker codes. In the exhibit 1,
we use GTII10<GOVT> as a
dependent security and
GT10<GOVT> as an independent
security.
④ Set the type of data. In the exhibit 1,
we use D (Difference).

After setting the above, type

<GO>1<GO> to update. Then
【Exhibit 1】
】 2<GO> to display matrix, also hit
<page fwd> to find historical
graphs/data of correlation coefficient ,
②
R2 and others.
③ ④

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Inflation swap analysis Inflation Swap

SWPM <GO> 【Swap Manager】

Use SWPM to create, value, and
update Interest rate swaps, Cap and
other derivatives. Also, SWPM can
evaluate some major structured
notes.

SWPM can now evaluate JPY and
AUD’s zero coupon inflation swaps.

SWPM-ILFX<GO> 【Zero coupon inflation swap】

The columns which are used mainly only
for inflation swap are as follows:
Leverage：It’s applied for CPI index. The
default for the leverage is 1.
①
Seasonality：Whether or not the projected
CPI should be seasonal adjusted (See
Page28)
Lag & Interp：The lag period and
Interpolation method. The default for JPY is
3M lag and DIR(Daily Index Reference)
respectively.
Principal Link：Whether or not the notional
links to CPI index. The default is 0.

To save deals, enter “Counterparty”,

and “Ticker” then click on “Actions”
->”Save”.

To pull up saved deals, go to
“Actions”->”Load” and select the
deal.

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Inflation swap default / data Default settings

SWIL<GO> 【Inflation Bond/Swap settings】

SWIL is a function to display/update
inflation swap curves and projected
CPI.

It shows inflation swaps and
projected CPI of each currency.
Projected CPI is calculated from
inflation swap rate.

You can select country, market
source, and data contributor on the
upper part of this screen.

To save your updates, click on
“Save” or enter 20<GO>.

SWIL<GO> 【Seasonality section】

You can set CPI seasonality
adjustment on this screen.

On seasonality section (①) you can
①
select if you apply seasonality or
not, seasonality type (historical data
or manual input data), years of
average for historical seasonality.
Default setting uses 5yr historical
average for seasonality adjustment.

When you select “historical” for
seasonality type, the following
formula is used to calculate Month
over Month：
Ln(CPIm/CPIm-1)
CPIm: CPI of current month
CPIm-1:CPI of previous month

To save your updates, click on

“Save” or enter 20<GO>.

-28-
Inflation swap data Market data
ILBM<GO> 【World inflation swap monitor】

Use ILBM to monitor pricing data
and to draw graphs for inflation
swaps.

Pricing source of the data depends
on SWIL settings.

Graph

【Example of JPY Inflation swap

：MTTK<GO>9<GO>
Example： contributor page 】

This page shows JPY zero-coupon
inflation swap rates.

To find all contributors for JPY
inflation swaps, type MRKT<GO>
and enter “Inflation Swaps” into
“Market Type” and also set “JPY”
to “Currency”.
 Note that when content appears grey and
cannot be accessed, you may need to
request entitlement from the contributor.
Please refer to the help page of this screen
for details.

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Seasonality Seasonality Graph

【Seasonality graph － Example of

“Seasonality”
G<GO>1<GO>→“ JPY CPI MoM】
Procedure：
① Type G<GO>1<GO> then select
“Seasonality” and click on “Next”
button.
② Enter the followings:
① Ticker：JNCPIXFM Index
Number of years：5
Period：Monthly
Data Range：1/4/03-1/04/08

③ After entering these fields, click on

“Next” button then enter “Title” and
select “Folder” then click on
“Finish” to complete.
④ A seasonality graph will be
displayed.
②

To display a list of all custom charts,
type G<GO>.

To display a custom chart directly,
type G#<GO>(# is the number of the
③ chart).

④  To find JPY CPI tickers, type

ECST<GO>22<GO> and select
“CPI/CGPI/CSPI”.

Japan CPI ex fresh food

(MoM)

January 2003-December 2007

Seasonality graph for January to December

-30-
Supplement：
15YR FRN Theoretical value_1
Example：
Example：JGB 15yr FRN series 37
JF37 <Govt> DES<GO>

Cash flow
D15.0

p D14.5 100
Dn：： Discount factor for n year
D1.0 ： Theoritical price
P：
： Next coupon
c：
D0.5
C ・・・・・

p 6M 1YR 14.5YR 15YR

FWD10YR - α

Evaluation：

JGB 15yr FRN can be dismantled as follows:
＝ Principle amount＋
JGB 15yr FRN＝ ＋coupons＋
＋options
＝ Zero coupon bond(①
①)＋
＋Constant maturity treasury swap(CMT)(②
②)
＋Floor option(③
③)

To evaluate a theoretical value of a JGB 15yr FRN, please register each of the
components on Bloomberg then enter them into a portfolio. After that, evaluate the
portfolio regarding as a bond.

We will see the details of each component from next page.
-31-
Supplement ：
15YR FRN Theoretical value_2 Evaluate principle amount

When using a calculator

PFC<GO> 【Cash flow analyzer】
④ By using PFC, we can evaluate the present
value of the principle of JGB 15yr FRN
②
Procedure：
① ③
① Enter 18 into the field. For IYC curve
numbers, refer to IYC1<GO>21<GO>.
② Enter redemption date.
③ Set coupon payment dates.
④ Present value will show up.

When creating a hypothetical bond to register a portfolio.

Select a similar security then type PPCR<GO>
【Create private security】
：JLP60 <Govt>PPCR2<GO>
Example：
Procedure：
① ③
① Set bond conditions such as
coupon and maturity date.
② Enter interest accrual date, First
Settle Date, and First Coupon Date
of a bond.

② ③ Privilege set up field.

PPCR is a function to create a
hypothetical bond by editing an
existing bond. In this example, we
use a JGB principle STRIPS of
JL20<govt> as an original bond.
To find JGB STRIPS tickers, see
<Govt>TK<GO>21<GO>.

Enter 1<GO> to update.

To find all registered private bonds,
type .ALL<Corp><GO>.

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Supplement ：
15YR FRN Theoretical value_3 Create JGB curve for evaluation

SWDF <GO> <PageFwd> then click on “Custom 【Custom Swap Curves】

Curves”
Procedure:
①
① To set a JGB curve, select a curve and
enter any curve name into “Title”
field. Also, set “Currency” to “JY”
and “Source” to “5” then hit
<GO>1<GO> to update.
② Click on the curve which you’ve
created and enter “18” into the field at
the bottom. As for the IYC curve
numbers, please refer to exhibit 1.
③ ③ Erase all spreads by pushing the space
key and holding it down. After that
hit<GO>1<GO> to update the curve.

【Exhibit 1】
IYC1<GO>

-33-
Supplement ：
15YR FRN Theoretical value_4 Evaluate coupon part

“Swap&Options”
SWPM<GO>→“
【Swap Manager】
“CMS Swaps”
→“ ”→“
“Fix-Float CMS”
Procedure：
①
⑤ ① Set “Receive Float”.
④
② ② Enter “Notional amount”,
“Currency”, “Effective”, “Maturity”
etc to meet the bond’s conditions.
③ Set both Discount curve and Forward
③ curve to the custom curve which
you’ve created on page 33.
④ Change “Cpn” to zero.
⑤ ・Change “Tenor” to “10YR” and
also enter “JGBY10YR” into
“Index” field on floating side.
・Enter “-75”(Quoted margin of JGB
15yr FRN #37) into “Spread” field.
“Actions”
SWPM<GO>→“ ”→“
“Load”
”
・Change the “Day count” field to
“Act/365” on floating side.

The calculation result will be shown

in “Premium” field at the bottom of
the page.

After entering all conditions, hit
31<GO>to save the deal.

To find all registered deals, click on
“Actions”-> “ Load”.

To select the convexity adjustment
methodology, click on “DETAIL”
button of floating side and set “Conv
Adjustment” field. “Replicate”
method is used as a default.

-34-
Supplement ：
15YR FRN Theoretical value_5 Coupon floor option valuation

“Swaps&Options”
SWPM <GO>→“ ”→“
“Options”
”
“Floor”
→“ ”→“
“CMS”
” 【Floor option analysis】

① ① Enter “Counterparty”, “Ticker”, and

“Series”.
② ③ ② Set “Currency”, “Notional”
④ “Effective”, “Maturity” and other
conditions to meet a bond conditions.
⑤
③ Change “Tenor” to “10YR” and also
enter “JGBY10YR” into “Index”
field on floating side.
⑥ ④ ・Enter Quote margin (-75bp for JGB
15yr FRN #37) into “Spread
column”.
・Change “Day Count” to
“ACT/365”.
⑤ Enter “0” into “Floor Strike” field.
“Actions”
SWPM<GO>→“ ”→“
“Load”
”
⑥ Set a JGB curve which you’ve
created by SWDF(see page 33) to
both “Dscnt Curve” and “Fwd
Curve”.

The calculation result will be shown

in “Premium” field at the bottom of
the page.

You can see other results such as
ATM strike level, DV01, at the
bottom part of the page.

After entering all conditions, click
on “Actions”->”Save” to save the
deal.

To find all registered deals, click on
“Actions”->“ Load”.

To select the convexity adjustment
methodology, change “Conv Adj”
field.

-35-
Supplement ：
15YR FRN Theoretical value _6 Create portfolio
PRTU<GO>1<GO> 【Create portfolio】
Procedure：
① ④ ① Enter an appropriate name into
② “Name” field.
③
② Set position type.
③ Set asset class. For bond portfolios,
select “Fixed Income”.
④ Select base currency of the portfolio.

7<Go> 【Add/Edit securities】

Procedure：
① Enter tickers into “Security” column.
① ② ③ ④ In this case, register each component
of a JGB 15yr FRN the column.
② Enter positions of each security. For
bonds, enter face amount in the
thousands. For swaps, enter 1 into
position column.
③ Market prices will be loaded
automatically into “Mkt Px”(Market
Price) column. If there is no price, you
have to enter these fields by yourself.
④ Enter cost price of each security.

To save a portfolio, type 1<GO>.

Select a portfolio then enter PDSP<GO> 【Portfolio Display】

PDSP displays the total market value,
current position, cost price, and
percentage change.

You can regard the total market value
of a portfolio as a theoretical value of
a JGB 15yr FRN.

-36-
Comparison of VaR models

【Value at Risk function】

An extract from DOCS # 2037900<GO>

“VaR Methodology”

-37-
-38-