The availability of swaps and the equilibrium pricing are driven only by the interaction of supply and demand. It is not affected by technical market factors. The swap market is not regulated which makes swap rates across different countries comparable. Swap curves across countries are more comparable than sovereign bond yield curves because swap curves […]
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Convenience yield is the monetary benefit from holding a commodity physically instead of being long the respective futures and is affected significantly by inventory levels. A supply surplus lowers the spot price and also the convenience yield.
GREATER The value of a non-callable bond increases by more than the callable bond because the value of the call goes up. Callable Bond = Non-callable bond – call value
trailing D/P = 4 * most recent quarterly DIV / market price per share leading D/P = next 4 quarters forces DIVs / market price per share D0/Po = (r – g) / (1 + g)
Bonds with different maturity dates are more or less sensitive to changes in the market interest rate depending on the time until they mature. Bonds most at risk are long term with a low coupon.
Discount Yield = [(Face Value – Price) / Face Value][360/Days] Days to maturity in a 360 day year is convention. BEY is more accurate. Can possibly be simplified further to: (1-P)(360/NSM) = Discount Yield
Yield Ratio = Yield on bond X / Yield on bond Y In the U.S. the yield on bond Y is frequently the on-the-run U.S. Treasury Bond.
Is simply the IRR of all future cash flows from the bond.
d = (1 – P)(360 / Nsm) P = settlement price per $1 of maturity value Nsm = number of days between settlement date and the maturity date d = yield on a discount basis
BEY = 2[(1 + annual pay yield)^.5 – 1]