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8 Cards in this Set
- Front
- Back
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Duration |
Duration of 1.5 tells that 1% increase in the IR will decrease the value of the bond by 1.5% |
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When will option free bind have the longest key rate duration? |
Year of it's maturity because it is then when it has largest CF. |
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Convexity |
Density of bonds DURATION to changes in IR. |
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Level vs Steepness vs Curvature |
Level = parallel shift (up and down shift movement) Steepness= non-parallel shift (when short term changes more than long term and vice versa) Curvature = references movements in three segments of the yield curve: when middle falls, shirt and long term segments rise and vice versa. |
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Effective Duration - what does it measures? |
Measures the sensitivity of a bonds price to a small parallel shift in "BENCHMARK" yield curve. |
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Effective convexity - what does it measures? |
Convexity of bond based on BENCHMARK yield change than Regular convexity (which is based on YTM) |
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Single-name cds |
It's on a SENIOR UNSECURED obligation of a specific borrower |
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Evidence shows that Forward rates are upwardly bias predictor of spot rate |
H |
