Study Session 13: Fixed Income: Topics in Fixed Income Analysis

Spot rate

What actually do spot rates/ yield curve tell us ?

Im confused.

Does it tell us that any further debt (new debt) will be issued at those spot rate prevailing?

Can someone explain to me what MMT spread is when dealing with corporate bonds? I’ve tried Googling it and all I get is info on Modern Monetary Theory.

TIA

Hello everyone.

I am having some issues with the following questions!! Hopefully you will be able to shed some light on them.

1- Jorgen, CFA, obtains the following quotes for zero coupon government bonds all with a par value of \$100.

Type of price: Spot  Delivery(years):0 Maturity (years): 3  Price: 95.51

Type of price: Forward Delivery(years):2 Maturity (years): 3  Price: 94.55

Need help ** Calculate the arbitrage free forward rate

Hi Can some one help me on the below,

Ansh Agri exports agro products to Walmart,usa for 15000 usd on Jan 10. Walmart will make the payment on mar 10. The dollar price on jan 10 was rs. 72.15. concerned about currency risk, it enters into a Non deliverable forward with Axis bank, where the forward rate is fixed at rs 74.55 per dollar with the expiry of the contract on mar 10. If on mar 10 the spot closed at ₹.70.95, who is going to gain from the transaction and what will be the settlement.

Maturity matching buy and hold strategy

Can someone please explain what is maturity matching buy and hold strategy in context of active portfolio management of short term bonds …

Hi guys, just a quick question because it seems that I got confused.

If you have a bond in your portfolio and you want to hedge for credit risk, are you buying or selling the CDS?

Winters AM - Binomial IR tree question

Winters AM is a fixed income management firm that invests in a wide variety of debt instruments. Lauren Winters, CFA is focusing on bonds with embedded optionality. She builds the following binomial IR tree based on 10% vol. Her goal is to value a new annual pay 4.5% bond, callable at 100.5 and maturing in 3 years with a par value of \$100.

Q43. The value of the bond is closest to:

a) 102.26

b) 102.76

c) 102.82

can someone please talk me through this one as I am lost! thanks

Callable bonds

Hello,

Can anyone help me understand why the price of the callable bond is capped by the price of the call option if it is near the exercise date.
Thank you!

CDS - Recovery Rate/Payout Rate

Hello, I am confused by an example given in Book 39 (CDS - the last Fixed Income Book). They say if a CDS defaults, the buyer will receive 1-recovery rate * notional amt. Infact, they give 1 or 2 examples after this is explained. But in Section 3.1, they give another example:

Key rate duration

Does anybody understand why a bond trading at a premium has a positive key rate duration while a discount bond has a negative key rate duration?