...Fixed Income Securities Tools for Today’s Markets Second Edition BRUCE TUCKMAN John Wiley & Sons, Inc. Copyright © 2002 by Bruce Tuckman. All rights reserved. Published by John Wiley & Sons, Inc., Hoboken, New Jersey. Published simultaneously in Canada. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, 978-750-8400, fax 978-750-4470, or on the web at www.copyright.com. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, 201-748-6011, fax 201-748-6008, e-mail: permcoordinator@wiley.com. Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created or extended by sales representatives or written sales materials. The advice and strategies...
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...2 The Instruments : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : v 1 1 2 I Instruments with Fixed Payments 2 Bond Arithmetic 2.1 Prices and Yields in the US Treasury Market : : : : : : : : : : : : : : : : : 2.2 Replication and Arbitrage : : : : : : : : : : : : : : : : : : : : : : : : : : : : 2.3 Day Counts and Accrued Interest : : : : : : : : : : : : : : : : : : : : : : : : 2.4 Other Conventions : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : 2.5 Implementation Issues : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : 2.6 Common Yield Fallacies : : : : : : : : : : : : : : : : : : : : : : : : : : : : : 2.7 Forward Rates optional : : : : : : : : : : : : : : : : : : : : : : : : : : : : 8 9 9 14 17 19 23 24 26 3 Macrofoundations of Interest Rates 39 CONTENTS i 4 Quantifying Interest Rate Risk 4.1 Price and Yield : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : 4.2 More on Duration : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : 4.3 Immunization : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : 4.4 Convexity optional : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : 4.5 Fixed Income Funds : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : 4.6 Statistical Measures of Price Sensitivity optional : : : : : : : : : : : : : : 44 45 48 51 55 56 57 5 Floating Rate Notes and Interest Rate Swaps 5.1 Floating Rate Notes : : : : :...
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...Problems and Solutions 1 CHAPTER 1—Problems On 12/04/01, consider a fixed-coupon bond whose features are the following: • • 1.1 Problems on Bonds Exercise 1.1 face value: $1,000 coupon rate: 8% • coupon frequency: semiannual • maturity: 05/06/04 What are the future cash flows delivered by this bond? Solution 1.1 1. The coupon cash flow is equal to $40 8% × $1,000 = $40 2 It is delivered on the following future dates: 05/06/02, 11/06/02, 05/06/03, 11/06/03 and 05/06/04. The redemption value is equal to the face value $1,000 and is delivered on maturity date 05/06/04. Coupon = Exercise 1.3 An investor has a cash of $10,000,000 at disposal. He wants to invest in a bond with $1,000 nominal value and whose dirty price is equal to 107.457%. 1. What is the number of bonds he will buy? 2. Same question if the nominal value and the dirty price of the bond are respectively $100 and 98.453%. Solution 1.3 1. The number of bonds he will buy is given by the following formula Number of bonds bought = Cash Nominal Value of the bond × dirty price Here, the number of bonds is equal to 9,306 n= 2. n is equal to 101,562 n= Exercise 1.4 10,000,000 = 101,571.31 100 × 98.453% 10,000,000 = 9,306.048 1,000 × 107.457% On 10/25/99, consider a fixed-coupon bond whose features are the following: • face value: Eur 100 2 Problems and Solutions • • coupon rate: 10% coupon frequency: annual • maturity: 04/15/08 Compute the accrued interest taking into account the four different day-count...
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...Chapter 1 Why Study Financial Markets and Institutions? ( Multiple Choice Questions 1. Financial markets and institutions (a) involve the movement of huge quantities of money. (b) affect the profits of businesses. (c) affect the types of goods and services produced in an economy. (d) do all of the above. (e) do only (a) and (b) of the above. Answer: D 2. Financial market activities affect (a) personal wealth. (b) spending decisions by individuals and business firms. (c) the economy’s location in the business cycle. (d) all of the above. Answer: D 3. Markets in which funds are transferred from those who have excess funds available to those who have a shortage of available funds are called (a) commodity markets. (b) funds markets. (c) derivative exchange markets. (d) financial markets. Answer: D 4. The price paid for the rental of borrowed funds (usually expressed as a percentage of the rental of $100 per year) is commonly referred to as the (a) inflation rate. (b) exchange rate. (c) interest rate. (d) aggregate price level. Answer: C 5. The bond markets are important because (a) they are easily the most widely followed financial markets in the United States. (b) they are the markets where interest rates are determined. (c) they are the markets where foreign exchange rates are determined. (d) all of the above. Answer: B 6. Interest rates are important to financial institutions...
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...Chapter 1 Why Study Financial Markets and Institutions? ( Multiple Choice Questions 1. Financial markets and institutions (a) involve the movement of huge quantities of money. (b) affect the profits of businesses. (c) affect the types of goods and services produced in an economy. (d) do all of the above. (e) do only (a) and (b) of the above. Answer: D 2. Financial market activities affect (a) personal wealth. (b) spending decisions by individuals and business firms. (c) the economy’s location in the business cycle. (d) all of the above. Answer: D 3. Markets in which funds are transferred from those who have excess funds available to those who have a shortage of available funds are called (a) commodity markets. (b) funds markets. (c) derivative exchange markets. (d) financial markets. Answer: D 4. The price paid for the rental of borrowed funds (usually expressed as a percentage of the rental of $100 per year) is commonly referred to as the (a) inflation rate. (b) exchange rate. (c) interest rate. (d) aggregate price level. Answer: C 5. The bond markets are important because (a) they are easily the most widely followed financial markets in the United States. (b) they are the markets where interest rates are determined. (c) they are the markets where foreign exchange rates are determined. (d) all of the above. Answer: B 6. Interest...
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...Working with Securities 09 basic Search (autocomplete) 10 Full Search 11 browsing Menus 09 NavIGaTION 12 PERFORMING aNaLySIS 12 Navigating Functions 13 Stock/Company Screening 14 analyzing a Company 15 analyzing an Index, bond or Currency 16 ExPORTING DaTa 16 The bloomberg Excel add-In 19 Drag & Drop 19 Printing and Other Export Options 20 GETTING HELP aND LEaRNING MORE CONTENTS>>>>>>>>>> 21 aPPENDIx 21 Equity 21 Fundamental analysis 22 analytics 23 M&a analysis 23 Fixed Income 25 Swaps 26 Money Markets 27 Structured Finance analytics 28 Price Discovery 29 analytics 29 Descriptive 29 Relative value 29 Ticketing 29 Hedging 30 additional FI Functions 31 FI Futures and Options 32 Repo analysis Data 32 Calculators 33 High yield/Syndicated Loans/Distressed Research 34 Municipal bonds INTRODUCTION For more than 20 years, bloomberg has been committed to helping universities and colleges incorporate the bLOOMbERG PROFESSIONaL® service into their academic programs to better prepare students for the global job market. >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> Universities and colleges around the globe use Bloomberg to bring the real world of finance into the classroom, providing students with access to the same information platform used by leading decision makers in business, finance and government. The BLOOMBERG PROFESSIONAL® service and BLOOMBERG TERMINAL® seamlessly integrate the very best in data, news and analytics. The Terminal is a 24-hour, global financial...
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...Functions 08 Working With Securities 10 NAVIGATION 10 Basic search (Autocomplete) 11 Full Search 12 Browsing Menus 13 PERFORMING ANALYSIS 13 Navigating Functions 14 Stock/Company Screening 15 Analyzing a Company 16 Analyzing an Index, Bond or Currency 17 EXPORTING DATA 17 The Bloomberg Excel Add-In 20 Drag & Drop 20 Printing & Other Export Options 20 GETTING HELP & LEARNING MORE 22 APPENDIX 22 Equity 22 Fundamental Analysis 23 Analytics 24 M&A Analysis 24 Fixed Income 26 Swaps 27 Money Markets 28 Structured Finance Analytics 29 Price Discovery 29 Analytics 29 Descriptive 30 Relative Value 30 Ticketing 30 Hedging 30 Additional Fixed-Income Functions 32 FI Futures & Options 33 Repo Analysis Data 33 CALCULATORS 33 High Yield/Syndicated Loans/ Distressed Research 34 Municipal Bonds INTRODUCTION For more than 20 years, Bloomberg has been committed to helping universities and colleges incorporate the Bloomberg Professional® service into their academic programs to better prepare students for the global job market. Universities and colleges around the globe use Bloomberg to bring the real world of finance into the classroom, providing students with access to the same information platform used by leading decision makers in business, finance and government. The Bloomberg Professional service and Bloomberg Terminal seamlessly integrate the very best in data, news and analytics. The Terminal is a 24-hour, global financial services system that provides transparent...
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...－ Mock Exam 1 （AM）模考试题 Q1-5 Question 1 Accepting an incentive offered by a client to a portfolio manager, such as a free vacation or a cash bonus, to reward good performance in a future period is: A) a violation of the Standards. B) not a violation of the Standards as long as client confidentiality is maintained. C) a violation of the Standards unless the manager gets written consent from her employer. D) not a violation of the Standards as long as the manager informs her employer that she intends to accept the incentive. Question 2 Charmaine Townsend, CFA, has been managing a growth portfolio for her clients using a screening process that identifies companies that have high earnings growth rates. Townsend has decided that, because of a volatile economy, she is going to adopt a value strategy using a screening process that identifies companies that have low price-earnings multiples. Townsend will violate the Code and Standards if she makes this change in her investment process without: A) notifying her supervisor before she makes the change. B) getting written permission from her clients in advance of the change. C) promptly notifying her clients of the change. D) getting prompt written acknowledgment of the change from her clients within a reasonable time after the change was made. Question 3 Phoenix Investments has been in business for three years and is striving to be GIPS compliant. It has met all the requirements...
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...ACCT-346 Quizzes and Exams http://uphomework.com/downloads/acct-346-quizzes-exams/ ACCT/346 All Quizzes and Exams Solved – A Grade Guaranteed ACCT346 Test Bank All Quizzes + Midterm Exam + Final Exam Chapter 1- 20 CHAPTER 1 TRUE/FALSE QUESTIONS 1. The purpose of the financial system is to bring savers and borrowers together. 2. Businesses are never DSUs. 3. A financial claim is an “IOU” from a deficit spending unit. 4. Investment bankers help DSUs bring new primary security issues to market. 5. Deposits in a credit union by a household are an example of direct finance. 6. When an SSU owns a financial claim created by financial intermediation, its residual claim is against a DSU. 7. Assets of financial intermediaries include direct financial claims only. 8. Finance companies take small consumer deposits and make large consumer loans. 9. Liabilities of financial intermediaries are indirect financial claims. 10. Direct finance requires a more or less exact match of preferences. 11. There must be an equal number of DSUs and SSUs in a period. 12. Every financial claim appears on two balance sheets. 13. Without a financial sector, real investment must be financed internally by the DSU. 14. Depository intermediaries issue claims that are for the most part highly liquid. 15. A household is an SSU when income for the period exceeds spending. 16. An SSU must hold a claim until its scheduled maturity. 17. Financial claims or securities are written for the mutual...
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...A Decade of Reforms in Government Securities Market in India and the Road Ahead* RAKESH MOHAN I. INTRODUCTION It gives me great pleasure to deliver this keynote address at the Annual Conference of FIMMDA jointly organised by the Fixed Income Money Market Dealers Association of India (FIMMDA) and Primary Dealers Association of India (PDAI). Many of you would recall that the FIMMDA-PDAI conference held in Bangkok in 2002 was addressed by Governor, Dr. Y. V. Reddy when he was Deputy Governor. My address today is like a footnote to the comprehensive address given by Dr Reddy in Bangkok1 . He had covered a whole range of issues relevant for the development of the debt market including the need and motivation for development of domestic debt markets, the key issues relating to the development of the government securities market and also of the corporate bond market. He had emphasised the importance of the development of institutions and infrastructure such as the development of institutional investors, self-regulatory organisations, credit rating agencies, the relative roles of banks and bond markets, development of primary dealers, efficient clearing and settlement mechanisms and the like. More importantly, he had laid out the road map for the development of Indian debt markets in a very detailed manner for the following two years. I am here to really give you a progress report. First, it is very gratifying to see that most of reforms contemplated by him at that time...
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...Ethical and Professional Standards The candidate should be able to demonstrate a thorough knowledge of the CFA Institute Code of Ethics and Standards of Professional Conduct, familiarity with the Global Investment Performance Standards, and familiarity with corporate governance issues and risks affecting companies. Study Session 1 Ethical and Professional Standards Reading Assignments 1.* “Code of Ethics and Standards of Professional Conduct” Standards of Practice Handbook, 9th edition (CFA Institute, 2005) * 2. “Guidance” for Standards I – VII, Standards of Practice Handbook, 9th edition (CFA Institute, 2005) * 3. Introduction to the Global Investment Performance Standards (GIPS®) Global Investment Performance Standards (GIPS®), pp. i–iii and 1–9, (CFA Institute, 4.* 2005) A. Preface: Background of the GIPS Standards B. I. Introduction C. II.0. Provisions of the Global Investment Performance Standards – Fundamentals of Compliance * 5. The Corporate Governance of Listed Companies: A Manual for Investors (CFA Institute, 2005) Learning Outcomes 1. “Code of Ethics and Standards of Professional Conduct” The Code of Ethics establishes the framework for ethical decision making in the investment profession. The candidate should be able to state the six components of the Code of Ethics. The Standards of Professional Conduct are organized into seven standards: I. Professionalism II. Integrity of Capital Markets III. Duties to Clients and Prospective...
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...Chapter 11: 4, 7, 8, 10, 11, 12, 14, 15, 18, 20, 21, 22, 23, 24, 26, 27 Chapter Eleven Credit Risk: Individual Loan Risk Chapter Outline Introduction Credit Quality Problems Types of Loans • Commercial and Industrial Loans • Real Estate Loans • Individual (Consumer) Loans • Other Loans Calculating the Return on a Loan • The Contractually Promised Return on a Loan • The Expected Return on a Loan Retail versus Wholesale Credit Decisions • Retail • Wholesale Measurement of Credit Risk Default Risk Models • Qualitative Models • Quantitative Models Summary Appendix 11A: Credit Analysis (www.mhhe.com/saunders7e) Appendix 11B: Black-Scholes Option Pricing Model (www.mhhe.com/saunders7e) Solutions for End-of-Chapter Questions and Problems 1. Why is credit risk analysis an important component of FI risk management? What recent activities by FIs have made the task of credit risk assessment more difficult for both FI managers and regulators? Credit risk management is important for FI managers because it determines several features of a loan: interest rate, maturity, collateral and other covenants. Riskier projects require more analysis before loans are approved. If credit risk analysis is inadequate, default rates could be higher and push a bank into insolvency, especially if the markets are competitive and the margins are low. Credit risk management has become more complicated...
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...FIFTH EDITION 2005 Transforming Real Estate Finance A CMBS Primer Primary Analysts: Howard Esaki Marielle Jan de Beur Masumi Goldman This book is an overview of the Commercial Mortgage-Backed Securities (CMBS) market. The contents of this publication are over eight years in the making and include excerpts of research reports from as early as 1997. In this fifth edition of our primer, we have reorganized the chapters to highlight the different investment options within CMBS. New material since our last edition includes sections on the various types of AAA CMBS classes, total rate of return swaps, floating rate large loan transactions, and an updated version of the commercial mortgage default study. We hope you find this book useful and welcome comments so that we can improve future editions. FIFTH EDITION 2005 Transforming Real Estate Finance A CMBS Primer Primary Analysts: Howard Esaki Marielle Jan de Beur Masumi Goldman The Primary Analyst(s) identified above certify that the views expressed in this report accurately reflect his/her/their personal views about the subject securities/instruments/issuers, and no part of his/her/their compensation was, is or will be directly or indirectly related to the specific views or recommendations contained herein. This report has been prepared in accordance with our conflict management policy. The policy describes our organizational and administrative arrangements for the avoidance, management and disclosure...
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................................................................. 12 Chapter Seven: Capital Allocation between the Risky asset and the risk-free Asset ....... 17 Chapter Eight: Optimal Risky Portfolios:......................................................................... 20 Chapter Nine: The Capital Asset Pricing Model .............................................................. 24 Chapter Ten: Index Models: ............................................................................................. 28 Chapter Eleven: Arbitrage Pricing Theory and multifactor models of risk and return .... 32 Chapter Twelve: Market Efficiency and Behavioral Finance........................................... 35 Chapter Fourteen: Bond prices and yields ........................................................................ 43 Chapter Fifteen: The Term Structure of Interest Rates..................................................... 48 Chapter Sixteen: Managing Bond Portfolios .................................................................... 53 Chapter Eighteen: Equity Valuation Models .................................................................... 57 Chapter Twenty: Option Markets: Introduction ............................................................... 59 Chapter Twenty-one: Option...
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...CORPORATE FINANCE T H IRD E DIT ION JONATHAN BERK STANFORD UNIVERSITY PETER D E MARZO STANFORD UNIVERSITY Boston Columbus Indianapolis New York San Francisco Upper Saddle River Amsterdam Cape Town Dubai London Madrid Milan Munich Paris Montreal Toronto Delhi Mexico City Sao Paulo Sydney Hong Kong Seoul Singapore Taipei Tokyo To Rebecca, Natasha, and Hannah, for the love and for being there —J. B. To Kaui, Pono, Koa, and Kai, for all the love and laughter —P. D. Editor in Chief: Donna Battista Acquisitions Editor: Katie Rowland Executive Development Editor: Rebecca Ferris-Caruso Editorial Project Manager: Emily Biberger Managing Editor: Jeff Holcomb Senior Production Project Manager: Nancy Freihofer Senior Manufacturing Buyer: Carol Melville Cover Designer: Jonathan Boylan Cover Photo: Nikreates/Alamy Media Director: Susan Schoenberg Content Lead, MyFinanceLab: Miguel Leonarte Executive Media Producer: Melissa Honig Project Management and Text Design: Gillian Hall, The Aardvark Group Composition and Artwork: Laserwords Printer/Binder: R.R. Donnelley/Jefferson City Cover Printer: Lehigh Phoenix Text Font: Adobe Garamond Credits and acknowledgments borrowed from other sources and reproduced, with permission, in this textbook appear on the appropriate page within text and on this copyright page. Credits: Cover: Sculpture in photo: Detail of Flamingo (1973), Alexander Calder. Installed in Federal Plaza, Chicago. Sheet metal and paint, 1615.4 x 1828.8 x 731...
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