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Bonds - 2
Bonds - 2
Bonds - 2
Liquidity Preference
Theory
Bond Risk
Price risks
Malkiels interest rate theories
Duration as a measure of interest rate risk
Risks
Interest rate risk
Price risk
Reinvestment risk
Default risk
Examples 1. zerocoupon
2. coupon bonds
Corporate Bonds
Default Risk
10
11
Theorem 1
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Theorem 2
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Theorem 3
15
TYPES
Duration as A Measure of
Interest Rate Risk
The concept of duration
Calculating duration
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The Concept of
Duration (contd)
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R = nominal rate
r = real rate
h = expected inflation rate
Approximation
R=r+h
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22
Priority of claims in
liquidation
1.
2.
3.
4.
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6.
7.