1 / 6

Definitions

Definitions. Term structure of interest rates : relationship between the yields on bonds (typically Treasuries) and their terms to maturity. Yield curve : graphical portrayal of the term structure. Yield Curves. flat descending (or inverted) ascending (includes steep and normal) humped.

rocco
Download Presentation

Definitions

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Definitions • Term structure of interest rates: relationship between the yields on bonds (typically Treasuries) and their terms to maturity. • Yield curve: graphical portrayal of the term structure.

  2. Yield Curves flat descending (or inverted) ascending (includes steep and normal) humped

  3. Factors Influencing Bond Yields • General level of interest rates • Default risk • Term to maturity • Tax treatment • Marketability • Call or Put features • Call: issuer can retire bond early • Put: holder can retire bond early • Convertibility (for instance to stock)

  4. Example 1: Geometric Average Over the past 4 years your investment advisor says he grew your money at 10%, 50%, -60%, 40%. Should you be happy?

  5. Example 1: Geometric Average Over the past 4 years your investment advisor says he grew your money at 10%, 50%, -60%, 40%. Should you be happy? Always true that: Geometric Average ≤Arithmetic Average

  6. Things for Sure To Know for Exam … Everything on slides of Modules 2.2, 2.3, 2.4, 2.5, 2.6 until this slide How to price a zero coupon bond – semiannually Two components of interest rate risk Names of 7 categories of US debt on Module 2.5, slide 21 Total amount of US bond debt vs. marketcap of all US stocks Names of the four types of yield curves Monday 5:00 to 6:00pm accessibility. Good to send email.

More Related