- Joined
- 1/20/18
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- 2
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- 11
Hi everyone, I'm trying to solve this problem. It consists in a Monte Carlo simulation that should allow me to understand what will be the trend of an index yield in the future.
My problem is that I cannot understand what does this request mean:
" Simulate 1000 conditional paths 30 steps ahead for any given series conditioned on 5yr US Treasury yields being at 6%"
If the path is not conditioned, what I did was:
1.calculate the differences of the yield values (in the past) day by day.
2.select 30 random values (among these differences) and sum them up --> this gives me a path
3. repeat this process 1000 times.
This allows me to find 1000 paths --> 1000 different values the yield can assume in 30 days.
These 1000 paths will be independent and I can apply on them some statistical analysis.
Do you have any idea on how to do the same thing when "conditional paths" are used? Or simply explain me what means to condition the US treasury yield to that of a 5yr US Treasury yields being at 6%?
Thanks in advance
Fuivito
My problem is that I cannot understand what does this request mean:
" Simulate 1000 conditional paths 30 steps ahead for any given series conditioned on 5yr US Treasury yields being at 6%"
If the path is not conditioned, what I did was:
1.calculate the differences of the yield values (in the past) day by day.
2.select 30 random values (among these differences) and sum them up --> this gives me a path
3. repeat this process 1000 times.
This allows me to find 1000 paths --> 1000 different values the yield can assume in 30 days.
These 1000 paths will be independent and I can apply on them some statistical analysis.
Do you have any idea on how to do the same thing when "conditional paths" are used? Or simply explain me what means to condition the US treasury yield to that of a 5yr US Treasury yields being at 6%?
Thanks in advance
Fuivito
