Content Library

Full Blown Active Management

Active Fund Management - By Larger Risks

Enhanced Indexing Strategy - Small Risks

Enhanced Indexing Strategy - Primary Risks

Pure Bond Indexing Strategy

Classification of Bond Indexing Strategies

Regulation of Commodity Markets

Commodity Markets: Price Discovery, Price Risk Management and Regulation

Types of Markets for Commodity Trading

Commodity Traders and Future Value

The traders in commodity markets for different commodities are of two types.

Commodity Markets - Types of Commodities

Typically, there are different types of commodities which are popularly acceptable as tradable with a time value across the global markets.

Defining Commodities

Commodities are typically the products which are extracted out of natural resources in short supply on earth.

Modified Duration of a Bond

Modified duration indicates the percentage change in the price of a bond for a given change in yield. It is a more adjusted measure of Macaulay duration that produces a more accurate estimate of bond price sensitivity.

Properties of Duration

Now that we understand what duration is, and how it is calculated, let’s take a look at some of the important properties of duration.

Calculating the Macaulay Duration Using Excel

This video takes a simple example and demonstrates how the duration of the bond is calculated using excel.

Duration of a Bond - Video

This video provides an introduction to the bond concept and the steps involved in calculating it.

What is Macaulay Duration?

The duration of a fixed income instrument is a weighted average of the times that payments (cash flows) are made. The weighting coefficients are the present value of the individual cash flows.

Using Beta Distribution for Estimating Recovery Rates

Most of the people use the beta distribution to model recovery rates. In probability theory and statistics, the beta distribution is a family of continuous probability distributions defined on the interval (0, 1) parameterized by two positive shape parameters, typically denoted by alpha and beta.

Factors Affecting Recovery Rates

It is practically impossible to accurately predict the recovery rates. There are various factors that will affect the recovery rates of a defaulted loan.

Understanding Recovery Rates

The recovery rates are a crucial element for calculating credit risk. The loss given default of an asset or a portfolio is calculated as 1 minus the recovery rate.