Trend Analysis and Regression
Trend analysis can develop a sense of the volatility of a time series by looking at how the historical data varies around the trend...
Trend Analysis and Regression
Trend analysis can develop a sense of the volatility of a time series by looking at how the historical data varies around the trend line, although trend analysis provides no summary measure of volatility. Trend-fitting calculations are simple, and most spreadsheets automate the process of trend analysis. Regression analysis is a way to describe the relationship between two or more
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Trend analysis can develop a sense of the volatility of a time series by looking at how the historical data varies around the trend line, although trend analysis provides no summary measure of volatility. Trend-fitting calculations are simple, and most spreadsheets automate the process of trend analysis. Regression analysis is a way to describe the relationship between two or more
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Basic Statistical and Quantitative Methods
The use of quantitative data is at the heart of finance. There are several core evaluative techniques used to interpret quantitative data, so that...
Basic Statistical and Quantitative Methods
The use of quantitative data is at the heart of finance. There are several core evaluative techniques used to interpret quantitative data, so that financial decisions are based on a reasonable forecast of the future. Indeed, all financial decisions contain some implicit forecast. Every decision made by a banker or bank customer is made under conditions of uncertainty. Uncertainty arises
More DetailsI'M INTERESTEDBasic Statistical and Quantitative Methods
The use of quantitative data is at the heart of finance. There are several core evaluative techniques used to interpret quantitative data, so that financial decisions are based on a reasonable forecast of the future. Indeed, all financial decisions contain some implicit forecast. Every decision made by a banker or bank customer is made under conditions of uncertainty. Uncertainty arises
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Uncertain Cash Flow Combinations
Measures of association are important because most risk analysis involves more than a single series of prices, rates, or cash flows, and financial managers...
Uncertain Cash Flow Combinations
Measures of association are important because most risk analysis involves more than a single series of prices, rates, or cash flows, and financial managers must analyze the risk of combinations of securities. Association between assets affects the overall level of risk in the portfolio. Hedging, one of the primary means of reducing risk, depends on determining whether there is positive
More DetailsI'M INTERESTEDUncertain Cash Flow Combinations
Measures of association are important because most risk analysis involves more than a single series of prices, rates, or cash flows, and financial managers must analyze the risk of combinations of securities. Association between assets affects the overall level of risk in the portfolio. Hedging, one of the primary means of reducing risk, depends on determining whether there is positive
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Duration and Convexity
Interest rate risk is taken seriously by bond investors. Investors want to be able to compare the risk of holding different bonds, since bonds...
Duration and Convexity
Interest rate risk is taken seriously by bond investors. Investors want to be able to compare the risk of holding different bonds, since bonds have varying sensitivity to changes in interest rates. Duration and convexity are tools that enable the portfolio manager and individual investor to identify the risk in specific bonds. This not only lets them choose the right
More DetailsI'M INTERESTEDDuration and Convexity
Interest rate risk is taken seriously by bond investors. Investors want to be able to compare the risk of holding different bonds, since bonds have varying sensitivity to changes in interest rates. Duration and convexity are tools that enable the portfolio manager and individual investor to identify the risk in specific bonds. This not only lets them choose the right
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Duration Properties
In simple terms, duration or, more specifically, modified duration (which will be defined later) is a measurement of the price sensitivity of a financial...
Duration Properties
In simple terms, duration or, more specifically, modified duration (which will be defined later) is a measurement of the price sensitivity of a financial instrument (more specifically, any series of cash flows) to changes in interest rates. That is, modified duration is a means to determine, with a high degree of accuracy, how much the present value (or price) of
More DetailsI'M INTERESTEDDuration Properties
In simple terms, duration or, more specifically, modified duration (which will be defined later) is a measurement of the price sensitivity of a financial instrument (more specifically, any series of cash flows) to changes in interest rates. That is, modified duration is a means to determine, with a high degree of accuracy, how much the present value (or price) of
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Quantitative and Fixed Income Analysis
The calculation and interpretation of prices, yields, and volatility are critical to risk managers. The key calculations needed to pass the FRM exam are:...
Quantitative and Fixed Income Analysis
The calculation and interpretation of prices, yields, and volatility are critical to risk managers. The key calculations needed to pass the FRM exam are: time value of money (using both discrete and continuous compounding); bond prices and yields; annuities; duration and convexity; correlation; slope of a line (univariate regression); and joint probability and the binomial distribution. In addition, an understanding
More DetailsI'M INTERESTEDQuantitative and Fixed Income Analysis
The calculation and interpretation of prices, yields, and volatility are critical to risk managers. The key calculations needed to pass the FRM exam are: time value of money (using both discrete and continuous compounding); bond prices and yields; annuities; duration and convexity; correlation; slope of a line (univariate regression); and joint probability and the binomial distribution. In addition, an understanding
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Net Present Value and Internal Rate of Return
When choosing between investments with unequal cash flows generated over equal time periods, the most common calculations are net present value and internal rate...
Net Present Value and Internal Rate of Return
When choosing between investments with unequal cash flows generated over equal time periods, the most common calculations are net present value and internal rate of return. NPV is the sum of all the present values of the cash flows for a given investment. Internal rate of return is the discount rate that will produce a net present value of zero
More DetailsI'M INTERESTEDNet Present Value and Internal Rate of Return
When choosing between investments with unequal cash flows generated over equal time periods, the most common calculations are net present value and internal rate of return. NPV is the sum of all the present values of the cash flows for a given investment. Internal rate of return is the discount rate that will produce a net present value of zero
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Compound Interest
The frequency of compounding is one of the key differences between quoting conventions in different markets. Annual returns are expressed as an annual nominal...
Compound Interest
The frequency of compounding is one of the key differences between quoting conventions in different markets. Annual returns are expressed as an annual nominal interest rate, also called the quoted interest rate, which is the annual rate before compounding. A periodic rate is the nominal rate divided into periods: daily, monthly, quarterly, or semi-annually. If quoted instruments do not have
More DetailsI'M INTERESTEDCompound Interest
The frequency of compounding is one of the key differences between quoting conventions in different markets. Annual returns are expressed as an annual nominal interest rate, also called the quoted interest rate, which is the annual rate before compounding. A periodic rate is the nominal rate divided into periods: daily, monthly, quarterly, or semi-annually. If quoted instruments do not have
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Credit Spreads, Correlation and CDS Indexes
Credit derivatives pricing is based on the credit or risk spread over a floating rate benchmark (e.g., LIBOR or EURIBOR) at which a particular...
Credit Spreads, Correlation and CDS Indexes
Credit derivatives pricing is based on the credit or risk spread over a floating rate benchmark (e.g., LIBOR or EURIBOR) at which a particular entity's debt will trade. This spread has historically been different for bonds and loans, but the development of the credit derivatives market has caused these spreads to narrow - a logical expectation, as both spreads reflect
More DetailsI'M INTERESTEDCredit Spreads, Correlation and CDS Indexes
Credit derivatives pricing is based on the credit or risk spread over a floating rate benchmark (e.g., LIBOR or EURIBOR) at which a particular entity's debt will trade. This spread has historically been different for bonds and loans, but the development of the credit derivatives market has caused these spreads to narrow - a logical expectation, as both spreads reflect
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Correlation and Causality
Measures of association are important, because most risk analysis involves more than a single series of prices, rates, or cash flows. Financial managers must...
Correlation and Causality
Measures of association are important, because most risk analysis involves more than a single series of prices, rates, or cash flows. Financial managers must analyze the risk of combinations of securities. A portfolio manager may have hundreds of different stocks, bonds, or loans in a portfolio and wants to measure and minimize the risk of the entire portfolio. A corporate
More DetailsI'M INTERESTEDCorrelation and Causality
Measures of association are important, because most risk analysis involves more than a single series of prices, rates, or cash flows. Financial managers must analyze the risk of combinations of securities. A portfolio manager may have hundreds of different stocks, bonds, or loans in a portfolio and wants to measure and minimize the risk of the entire portfolio. A corporate
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Theoretical Spot Yield Curves and Z-Spreads
The general approach to pricing bonds is to use one interest rate or yield and apply it to all of the cash flows occurring...
Theoretical Spot Yield Curves and Z-Spreads
The general approach to pricing bonds is to use one interest rate or yield and apply it to all of the cash flows occurring during the life of the bond, calculate the present value of these cash flows using that one yield to maturity, and summing those present values to establish the price of the bond. This assumes that the
More DetailsI'M INTERESTEDTheoretical Spot Yield Curves and Z-Spreads
The general approach to pricing bonds is to use one interest rate or yield and apply it to all of the cash flows occurring during the life of the bond, calculate the present value of these cash flows using that one yield to maturity, and summing those present values to establish the price of the bond. This assumes that the
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Valuing Bonds Using Option-Adjusted Spreads
Option-adjusted spread (OAS) methodology addresses a major difficulty in valuing bonds with embedded options: the fact that the bond’s cash flows change when the...
Valuing Bonds Using Option-Adjusted Spreads
Option-adjusted spread (OAS) methodology addresses a major difficulty in valuing bonds with embedded options: the fact that the bond's cash flows change when the options are exercised. By explicitly incorporating an estimate of interest rate volatility into the bond's value, OAS methodology produces better valuations and more informed decisions by fund managers, traders, and issuers. The unit covers the development,
More DetailsI'M INTERESTEDValuing Bonds Using Option-Adjusted Spreads
Option-adjusted spread (OAS) methodology addresses a major difficulty in valuing bonds with embedded options: the fact that the bond's cash flows change when the options are exercised. By explicitly incorporating an estimate of interest rate volatility into the bond's value, OAS methodology produces better valuations and more informed decisions by fund managers, traders, and issuers. The unit covers the development,
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Trend Analysis and Regression
Trend analysis can develop a sense of the volatility of a time series by looking at how the historical data varies around the trend line, although trend analysis provides no summary measure of volatility. Trend-fitting calculations are simple, and most spreadsheets automate the process of trend analysis. Regression analysis is a way to describe the relationship between two or more
More DetailsI'M INTERESTED
Basic Statistical and Quantitative Methods
The use of quantitative data is at the heart of finance. There are several core evaluative techniques used to interpret quantitative data, so that financial decisions are based on a reasonable forecast of the future. Indeed, all financial decisions contain some implicit forecast. Every decision made by a banker or bank customer is made under conditions of uncertainty. Uncertainty arises
More DetailsI'M INTERESTED
Uncertain Cash Flow Combinations
Measures of association are important because most risk analysis involves more than a single series of prices, rates, or cash flows, and financial managers must analyze the risk of combinations of securities. Association between assets affects the overall level of risk in the portfolio. Hedging, one of the primary means of reducing risk, depends on determining whether there is positive
More DetailsI'M INTERESTED
Duration and Convexity
Interest rate risk is taken seriously by bond investors. Investors want to be able to compare the risk of holding different bonds, since bonds have varying sensitivity to changes in interest rates. Duration and convexity are tools that enable the portfolio manager and individual investor to identify the risk in specific bonds. This not only lets them choose the right
More DetailsI'M INTERESTED
Duration Properties
In simple terms, duration or, more specifically, modified duration (which will be defined later) is a measurement of the price sensitivity of a financial instrument (more specifically, any series of cash flows) to changes in interest rates. That is, modified duration is a means to determine, with a high degree of accuracy, how much the present value (or price) of
More DetailsI'M INTERESTED
Quantitative and Fixed Income Analysis
The calculation and interpretation of prices, yields, and volatility are critical to risk managers. The key calculations needed to pass the FRM exam are: time value of money (using both discrete and continuous compounding); bond prices and yields; annuities; duration and convexity; correlation; slope of a line (univariate regression); and joint probability and the binomial distribution. In addition, an understanding
More DetailsI'M INTERESTED
Net Present Value and Internal Rate of Return
When choosing between investments with unequal cash flows generated over equal time periods, the most common calculations are net present value and internal rate of return. NPV is the sum of all the present values of the cash flows for a given investment. Internal rate of return is the discount rate that will produce a net present value of zero
More DetailsI'M INTERESTED
Compound Interest
The frequency of compounding is one of the key differences between quoting conventions in different markets. Annual returns are expressed as an annual nominal interest rate, also called the quoted interest rate, which is the annual rate before compounding. A periodic rate is the nominal rate divided into periods: daily, monthly, quarterly, or semi-annually. If quoted instruments do not have
More DetailsI'M INTERESTED
Credit Spreads, Correlation and CDS Indexes
Credit derivatives pricing is based on the credit or risk spread over a floating rate benchmark (e.g., LIBOR or EURIBOR) at which a particular entity's debt will trade. This spread has historically been different for bonds and loans, but the development of the credit derivatives market has caused these spreads to narrow - a logical expectation, as both spreads reflect
More DetailsI'M INTERESTED
Correlation and Causality
Measures of association are important, because most risk analysis involves more than a single series of prices, rates, or cash flows. Financial managers must analyze the risk of combinations of securities. A portfolio manager may have hundreds of different stocks, bonds, or loans in a portfolio and wants to measure and minimize the risk of the entire portfolio. A corporate
More DetailsI'M INTERESTED
Theoretical Spot Yield Curves and Z-Spreads
The general approach to pricing bonds is to use one interest rate or yield and apply it to all of the cash flows occurring during the life of the bond, calculate the present value of these cash flows using that one yield to maturity, and summing those present values to establish the price of the bond. This assumes that the
More DetailsI'M INTERESTED
Valuing Bonds Using Option-Adjusted Spreads
Option-adjusted spread (OAS) methodology addresses a major difficulty in valuing bonds with embedded options: the fact that the bond's cash flows change when the options are exercised. By explicitly incorporating an estimate of interest rate volatility into the bond's value, OAS methodology produces better valuations and more informed decisions by fund managers, traders, and issuers. The unit covers the development,
More DetailsI'M INTERESTED