Bond

ORE defines the product's scope as follows:

A Bond is set up using a BondData block, and can be both a stand-alone instrument with trade type Bond, or a trade component used by multiple bond derivative instruments.

Source: ORE User Guide, Products catalogue, bond.tex.

A bond is an IOU that anyone can buy and sell. The borrower, the issuer, promises to pay interest on the borrowed amount for a fixed period. It repays the amount at the end. Governments and companies issue bonds to fund themselves. Investors hold them for income, for safety, or to trade them.

The short form names the bond and the position only:

• SecurityId. The identifier of the bond, typically its ISIN with the ISIN: prefix. The bond details are read from reference data.
• BondNotional. The size of the position in the bond's currency.
• CreditRisk. Whether the product carries credit sensitivities.

The long form inlines the issuer, the credit curve, the security, the reference curve, settlement details, and a full LegData block for the coupon leg. The leg data selects the coupon structure. It can be fixed, floating, zero-coupon, or amortising.

ORE's own words on the credit flag:

If set to false, the product class will not be set to Credit, and there will be no credit sensitivities.

Source: ORE User Guide, Products catalogue, bond.tex.

A bond whose reference data carries no CreditCurveId shows no credit sensitivities even with the flag on. This is typical for highly rated government bonds. A bond whose reference data sets a CreditCurveId is an IR/CR product. ORE prices it with credit sensitivities.

The price of a bond is the present value of its remaining coupons and principal, discounted at the yield. Fixed coupons make the price move inversely with rates. Floating coupons reset and damp that move. Duration measures the price sensitivity to a yield shift. It falls as maturity approaches.

The risk factors differ by product class:

• Plain IR class. The discount curve in the bond's currency moves the value. It acts through the reference curve and any credit spread embedded in the price.
• IR/CR class. The credit spread of the issuer moves the value as well. It gives a CS01-type sensitivity to the credit curve.
• Deal parameters. Coupon level, maturity, notional, and day-count conventions scale or shape every sensitivity.

A fixed-rate bond converges to par as maturity approaches. Fewer and fewer coupons remain. Its duration declines along the way. A floating-rate bond stays near par through each reset, because the next coupon tracks the market. Around call or redemption features the price behaviour changes as the option dates approach.

Governments and companies issue bonds to borrow. Investors buy them for income, for capital preservation, or for trading. A bank books bond positions to manage funding, collateral, and credit exposure. In ORE Studio a customer imports bond trades, prices them, and runs credit and rate sensitivities on the ORE engine.

ORE's own catalogue shows the short form with reference data:

<BondData>
  <SecurityId>ISIN:XS0982710740</SecurityId>
  <BondNotional>100000000.0</BondNotional>
  <CreditRisk>true</CreditRisk>
</BondData>

Source: ORE User Guide, Products catalogue, bond.tex, listing BondData (reference-data form).

A full fixed-coupon bond trade sits in the ORE trade corpus at assets/test_data/golden_dataset/Products/Example_Trades/Cash_Bonds.xml. Native ORE example portfolios with bonds sit under external/ore/examples/CreditRisk/Input/CreditPortfolioModel/portfolio.xml.