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11 Cards in this Set
 Front
 Back
Spot yield curve X and y Discount factor Discount function 
Graph of rate against period Today's rate if 1dollar to be received in different period ( 6 months, or 1 year and so on. ) Discount factor and spot rate mapping for different period


Forward curve 3 yr loan starting at t2 F for price ( calculate by discount factor), f for rate 
Rate. .. r ( t,1) against period , If spot curve is upward sloping then forward curve will be upward sloping Cube root of (1+r2)(1+r3)(1+r4) 

If forward rate given spot rate 
Eg: 3 √ r3,1;, r4,1,;5,1 

Forward rate model 


Relation btw spot curve and forward rate curve 


Find spot if series of fwd rate given 
Spot price is a geometric mean 

Yield to maturity against spot rates 
Weighted avg 

Ytm is expected return? 


Expected return is not ytm, it's calculation is annualised hpr Hpr Annualised hpr 
End  original/ original. Fv PV/PV (1+hpr) power nth root of no of years ie 1/t. 

f(1,1) > r(2) f(1,2) > f(1,1) ,In eg it's year fwd If r(30) then max fwd is f(4,26) Why yield and price are inverse in relationship ?? 


riding the yield curve 
Wider the spread , longer the bond, greater the total return. 