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Search results for 'yield'

February 19, 2018

The sensitivity of the futures price to a yield change (formula)

Δf ≈ – Modified Duration of the futures * futures price * basis point change in the implied yield on the futures. Advertisements

February 3, 2018

High-yield bonds have ____ exposure to interest rate risk than investment grade bonds.

Less High-yield portfolio managers are more likely to focus on credit risk and less likely to focus on interest rate and yield curve dynamics.

February 3, 2018

Investment grade bonds have ____ exposure to credit risk than high-yield bonds.


January 25, 2018

The relationship between portfolio Convexity, Macaulay duration, dispersion and cash flow yield

Convexity = (Macaulay duration^2 + Macaulay duration + Dispersion) / (1 + Cash flow yield)^2

January 21, 2018

Does cashflow matching make assumptions about the yield curve or interest rates?


January 21, 2018

Rolling Yield (formula)

Rolling Yield = Yield Income + Rolldown Return Yield Income = Annual Average Coupon / Current Bond Price Rolldown Return = (Bond Price at end of period – Bond Price at beginning of period)/Bond Price at beginning of period

January 21, 2018

Expected change in price based on investor’s views of yield and yield spreads (formula)

E(Change in price based on investor’s views of yields and yield spreads) = [-MD * ΔYield]+[½*Convexity*(ΔYield)^2] MD is the modified duration of a bond ΔYield is the expected changes to both the yield curve and yield spread convexity estimates the effect of the non-linearity of the yield curve

December 17, 2017

Other than changes in the rate of inflation what 2 factors impact the yields on inflation-indexed bonds?

Overall economic growth and its corresponding impact on real interest rates. Inflation-indexed bonds are not immune to interest rate risk. Investor demand for bonds has an inverse impact on IIB yields. Lack of investor demand drives up the yields issuers must pay in order to sell the bonds they need to issue.

November 27, 2016

The value of an embedded call on a callable bond ____ as the yield curve flattens.

Increases So the value of a callable bond will still likely increase but not as much as a straight bond when the yield curve flattens, assuming the yield curve was upward sloping to begin with.

November 14, 2016

The strategy of riding the yield curve is one in which a bond trader…

…attempts to generate a total return over a given investment horizon that exceeds the return of a bond with maturity matched to the horizon. The strategy involves buying a bond with maturity more distant then the investment horizon. Assuming an upward sloping yield curve, if the curve does not change shape or level as the […]