Blogs about: Bond Valuation
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Pure Expectations Theory
The pure expectations theory explains the term structure in terms of expected future short-term interest rates. According to the pure expectations theory, the market sets the yield on a two-year bond… more →
CFA Flash Cards
Bond Valuation: Definition, Types and Value Determining Factors
wrote 1 month ago: The process and technique used for determining the real and future value of a bond is called bond va … more →
Pure Expectations Theory
wrote 10 months ago: The pure expectations theory explains the term structure in terms of expected future short-term inte … more →
Liquidity Preference Theory
wrote 10 months ago: According to the liquidity preference theory, the term structure of interest rates is determined by … more →
Nominal spread, static spread, zero-volatility spread, option-adjusted spread
wrote 10 months ago: Nominal spread = Yield to Maturity of Bond – YTM of similar U.S. Treasury Static spread not ov … more →
Computing the full price of a bond (also dirty price) [w periods]
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wrote 10 months ago: w periods = days between settlement date and next coupon date / days in coupon period PV = expected … more →
Price Value of a basis point
wrote 10 months ago: Represents the change in price of a bond when its yield changes by one basis point or 0.01%. PVBP = … more →
Which is the most effective spread measure for valuing an option-free corporate bond?
wrote 10 months ago: Zero-volatility spread … more →
Yield Ratio
wrote 10 months ago: Yield Ratio = Yield on bond X / Yield on bond Y In the U.S. the yield on bond Y is frequently the on … more →
Yield to Maturity definition
wrote 10 months ago: Is simply the IRR of all future cash flows from the bond. … more →
Market Segment Theory
wrote 10 months ago: The market segmentation theory argues that within the different maturity sectors of the yield curve … more →
Price of a Callable Bond
wrote 10 months ago: = Price of option free bond – Cost of the option … more →
Bond Equivalent Yield of an Annual Pay Bond
wrote 10 months ago: BEY = 2[(1 + annual pay yield)^.5 - 1] … more →
Current Yield of a bond (simplest formula)
wrote 10 months ago: current yield = annual dollar coupon interest / price annual dollar coupon interest is the interest … more →
Credit Spread Risk
wrote 10 months ago: The risk that an issuer’s debt obligation will decline due to an increase in the credit spread … more →
Zero-coupon bonds and reinvestment risk
wrote 10 months ago: Zero-coupon bonds have NO reinvestment risk … more →
Computing the Accrued Interest and the Clean Price of a bond
wrote 10 months ago: days in accrued interest period = days in coupon period – days between settlement and next cou … more →
Bond-equivalent Yield convention
wrote 10 months ago: Is double the semiannual yield. … more →
Which bonds are most sensitive to changes in market interest rates?
wrote 10 months ago: All other things being equal, low coupon + long maturity equals greatest sensitivity to interest rat … more →
Call Risk
wrote 10 months ago: The risk associated with a call-able bond being called before maturity. … more →
