Chapter 4: Using Futures Markets
... fall. Therefore, the trader sells a futures contract on U.S. Treasury bonds. If long-term interest rates rise as the trader expected, the trader will earn a profit. The risk is that the long-term interest rate will decline rather than increase. In which case the position trader will lose money. ...
... fall. Therefore, the trader sells a futures contract on U.S. Treasury bonds. If long-term interest rates rise as the trader expected, the trader will earn a profit. The risk is that the long-term interest rate will decline rather than increase. In which case the position trader will lose money. ...
The Case for CosT- BenefiT analysis of finanCial
... buys $100 in assets cannot finance the purchase with more than $95 in debt, so that at least $5 in equity is held by investors. Real capital requirements are much more complex, allowing firms to take on more debt when assets are safe and less when they are risky, and to treat certain safe types of d ...
... buys $100 in assets cannot finance the purchase with more than $95 in debt, so that at least $5 in equity is held by investors. Real capital requirements are much more complex, allowing firms to take on more debt when assets are safe and less when they are risky, and to treat certain safe types of d ...
Measuring and marking counterparty risk
... transfer risks, allowing for substantially improved risk sharing. They have also created connections among markets and market participants that are only just starting to be understood. Counterparty risk, an example of one such connection, is the risk that a party to an OTC derivatives contract may f ...
... transfer risks, allowing for substantially improved risk sharing. They have also created connections among markets and market participants that are only just starting to be understood. Counterparty risk, an example of one such connection, is the risk that a party to an OTC derivatives contract may f ...
Using Cash Flow Dynamics to Price Thinly Traded Assets
... approach, focusing on cash flow dynamics to account for risk. This is not a new concept, although, as far as we are aware, so far this approach has not been used to explicitly infer cash flow yields of untraded investment assets. In the literature so far, for example, Da and Warachka (2009) show tha ...
... approach, focusing on cash flow dynamics to account for risk. This is not a new concept, although, as far as we are aware, so far this approach has not been used to explicitly infer cash flow yields of untraded investment assets. In the literature so far, for example, Da and Warachka (2009) show tha ...
The Role of Corporate Bonds for Finance in Austria
... In addition, there are the capital market statistics, for which longer time series are available, but only with a view to bonds issued on the Austrian bond market, excluding placements in international markets and issues denominated in foreign currencies. Given that in recent years the bulk of corpo ...
... In addition, there are the capital market statistics, for which longer time series are available, but only with a view to bonds issued on the Austrian bond market, excluding placements in international markets and issues denominated in foreign currencies. Given that in recent years the bulk of corpo ...
The Term Structure of Interest Rates
... • John Moody began the modern bond rating business by publishing Moody’s Analyses of Railroad Investments in 1909. • By the 1920s, the work of rating agencies expanded to cover an increasing number of industries. • In the post-World War II period, prosperity diminished the role of rating agencies, b ...
... • John Moody began the modern bond rating business by publishing Moody’s Analyses of Railroad Investments in 1909. • By the 1920s, the work of rating agencies expanded to cover an increasing number of industries. • In the post-World War II period, prosperity diminished the role of rating agencies, b ...
Effect of Nonbinding Price Controls In Double Auction Trading
... The research task is to isolate the treatment effect of nonbinding price controls on competitive market outcomes including market dynamics. The design used for this exercise has the following key features. 1. All experiments use an electronic (computerized) DA mechanism characterized by a bid/ask co ...
... The research task is to isolate the treatment effect of nonbinding price controls on competitive market outcomes including market dynamics. The design used for this exercise has the following key features. 1. All experiments use an electronic (computerized) DA mechanism characterized by a bid/ask co ...
Mechanics of Futures Markets
... Opening and Closing Futures Position An investor could instruct a broker to buy for exp. one October oil futures contract. There is period of time during the delivery month when delivery can be made. Trading usually ends some time during the delivery period. The party with the short position choose ...
... Opening and Closing Futures Position An investor could instruct a broker to buy for exp. one October oil futures contract. There is period of time during the delivery month when delivery can be made. Trading usually ends some time during the delivery period. The party with the short position choose ...
Risk Cannot Explain the Muni Puzzle
... grade municipals they estimate implied default probabilities are between 1.5 and 3%. Furthermore, there are theoretical reasons to believe that default risk will cause the term structure to have a steeper slope. For example, Kim, Ramaswamy, and Sundaresan (1993) argue that credit spreads for high-qu ...
... grade municipals they estimate implied default probabilities are between 1.5 and 3%. Furthermore, there are theoretical reasons to believe that default risk will cause the term structure to have a steeper slope. For example, Kim, Ramaswamy, and Sundaresan (1993) argue that credit spreads for high-qu ...
Changes in Equilibrium Interest Rates
... Wealth. When the economy is growing rapidly in a business cycle expansion and wealth is increasing, the quantity of bonds demanded at each bond price (or interest rate) increases as shown in Figure 3. To see how this works, consider point B on the initial demand curve for bonds B d1. It tells us tha ...
... Wealth. When the economy is growing rapidly in a business cycle expansion and wealth is increasing, the quantity of bonds demanded at each bond price (or interest rate) increases as shown in Figure 3. To see how this works, consider point B on the initial demand curve for bonds B d1. It tells us tha ...
Chapter 5: The Structure of Interest Rates
... • Expectations theory makes it possible to figure out future interest rates on long-term bonds by calculating average interest rate of shorter-term bonds • Fluctuations in one-year interest rates over time result in a yield curve of varying slope Copyright © Houghton Mifflin Company. All rights rese ...
... • Expectations theory makes it possible to figure out future interest rates on long-term bonds by calculating average interest rate of shorter-term bonds • Fluctuations in one-year interest rates over time result in a yield curve of varying slope Copyright © Houghton Mifflin Company. All rights rese ...
Bondch6s
... Treasury securities. For example, if the Treasury were to finance a deficit by selling shortterm Treasury securities, the price of the short-term government securities (T-bills) would be pushed down, providing higher yields. In the corporate bond market, the higher rates on short-term government sec ...
... Treasury securities. For example, if the Treasury were to finance a deficit by selling shortterm Treasury securities, the price of the short-term government securities (T-bills) would be pushed down, providing higher yields. In the corporate bond market, the higher rates on short-term government sec ...
Determination of Forward and Futures Prices
... The coupon payment has a present value of 40e-0.03x4/12=$39.60. Of the $900, $39.60 is therefore borrowed at 3% per annum for 4 months so that it can be repaid with the coupon payment. The remaining $860.40 is borrowed at 4% per annum for 9 months. The amount owing at the end of the 9-month period i ...
... The coupon payment has a present value of 40e-0.03x4/12=$39.60. Of the $900, $39.60 is therefore borrowed at 3% per annum for 4 months so that it can be repaid with the coupon payment. The remaining $860.40 is borrowed at 4% per annum for 9 months. The amount owing at the end of the 9-month period i ...
Morgan Stanley
... trading portfolios • VaR estimated by using a model based on historical simulation for major market risk factors and Monte Carlo simulation for namespecific risk in corporate shares, bonds, loans and related derivatives • Historical simulation involves constructing a distribution of hypothetical dai ...
... trading portfolios • VaR estimated by using a model based on historical simulation for major market risk factors and Monte Carlo simulation for namespecific risk in corporate shares, bonds, loans and related derivatives • Historical simulation involves constructing a distribution of hypothetical dai ...
Worth the risk? The appeal and challenges of high
... Although there is a positive relationship (higher starting yields do increase the probability of realising a positive future excess return versus the broad investment-grade market, particularly during periods of high initial yield spreads), it’s important to note that a positive spread has not alway ...
... Although there is a positive relationship (higher starting yields do increase the probability of realising a positive future excess return versus the broad investment-grade market, particularly during periods of high initial yield spreads), it’s important to note that a positive spread has not alway ...
OPTION PRICING WHEN UNDERLYING STOCK
... formula implies arbitrage opportunities only if thsir assumptions hold with certainty. ‘In this paper, the term ‘option’ refers to a call option although a corresponding analysis would apply to put options. For a list of the assumptions used to derive their formula, see Black and Scholes (1973,p. 64 ...
... formula implies arbitrage opportunities only if thsir assumptions hold with certainty. ‘In this paper, the term ‘option’ refers to a call option although a corresponding analysis would apply to put options. For a list of the assumptions used to derive their formula, see Black and Scholes (1973,p. 64 ...
Natural and manmade disasters can be powerful leaning experiences
... higher price. A few sellers may initiate the price change and may even see their sales slow for a short time, while those who are slow to raise prices sell out. Some sellers will raise prices in a more passive way, simply by holding back inventories of goods, then selling them when the price has gon ...
... higher price. A few sellers may initiate the price change and may even see their sales slow for a short time, while those who are slow to raise prices sell out. Some sellers will raise prices in a more passive way, simply by holding back inventories of goods, then selling them when the price has gon ...