Topic: Fixed Income Securities

Sensitivity Measures for a Portfolio

In financial markets assets are managed at a portfolio level which in other words means a large number of securities are managed in a group. It would be very inconvenient to consider movements in each position that composes the portfolio individually. A more practical...

Taylor Series Expansion

In financial markets participants would like to measure the effect of changes in the price of the bond due to changes in yield. This enables better risk management of financial assets as the impact of asset values is determinable. Recomputing the value of the bond...

Infinite Series and Its Applications

Bonds consist of fixed coupons and the pricing of the bond involves the use of combinations of infinite series.  A typical example would be the sum of terms that increase at an infinite rate. This formula can be proved by multiplying both sides of the equation by...

Price Yield Relationship for Bonds

For a bond with a cash flow pattern the present value can be calculated using the following formula: Where the numerator denotes the coupon or principal in that period, t is the number of periods, T is the number of periods to final maturity and y is the discount...

Discounting of Cash Flows

A zero coupon bond is a fixed income instrument with only one cash flow i.e. the face value of the bond which is paid to the investor at the maturity date. It is a more appropriate instrument for exemplifying the discounting of cash flows. Present Value The price of...

Page 4 of 12« First...23456...10...Last »