精讲课程18知识

Ethics&ProfessionalSS2-SS4-SS6-FinancialReportingandSS10Ethics&ProfessionalSS2-SS4-SS6-FinancialReportingandSS10-SS13-EquitySS15-FixedAlternative ØStudySession15:BasicØStudySession15:BasicüReading50:Fixed-IncomeSecurities:DefiningüReading51:Fixed-IncomeMarkets:Issuance,Trading,andüReading52:IntroductiontoFixed-IncomeüReading53:IntroductiontoAsset-BackedØStudySession16:AnalysisofüReading54:UnderstandingFixed-IncomeRiskandüReading55:FundamentalsofCredit考纲对比考纲对比Reading51增加了一条考纲“Describe学习建议ØØ知识点之间逻辑关系较强，需加强总结；学习建议ØØ知识点之间逻辑关系较强，需加强总结；Ø如遇到一遍没听懂的，建议重听一到两遍；ØØ坚持，才是王道你的与坚持，才是王道你的与众不同，来自于多坚持的每一分钟ØØDescribefivebasicfeaturesoffixed-incomeØCalculatethepromisedcashflowsbasedonØ固定收益证券是某一市场主体的财务责任，该主体承Ø固定收益证券是某一市场主体的财务责任，该主体承ØSupranationalOrganizations,suchasWorldBank.ØØSupranationalOrganizations,suchasWorldBank.ØSovereign(national)governments,suchasChina.ØNon-sovereign(local)governments,suchascityofØQuasi-governmententities,suchasagenciesthatareownedbygovernment.ØCompanies,suchascorporateØMoneymarketsecurities:oneyearorØCapitalmarketsecurities:morethanoneØPerpetualbond:nostatedmaturityØTheamountthattheissueragreestorepaythebondholdersonthematuritydate.ØTheØTheannualamountofinterestØCoupon=couponrate×par•üTheinterestratethattheissueragreestopayeachyearuntilthematuritydate.CouponüCouponpaymentsmaybemadeannually,semi-annually,quarterly,ormonthly,etc.üGenerallysemi-annuallypaidin•ØDual-currencybonds:makecouponpaymentsinonecurrencyandpaytheparvalueatmaturityinanotherØDual-currencybonds:makecouponpaymentsinonecurrencyandpaytheparvalueatmaturityinanotherØCurrencyoption•givebondholderstherighttoselectoneofcurrenciesforeachpaymentinwhichtheywanttoCanbeviewedasacombinationofasingle-bondplusaforeigncurrency•Abondhasparvalueof$100andmaturityof3years.couponrate5%andcouponpaymentaremadesemi-annually.Abondhasparvalueof$100andmaturityof3years.couponrate5%andcouponpaymentaremadesemi-annually.pleasefigureoutitscashflowwithatimeline.Thereare6periodicpaymentsof$2.5andthepaymentmaturityof3012ØImportance:Ø•FivebasicfeaturesofØImportance:Ø•Fivebasicfeaturesoffixed-incomesecurity:maturity,parvalue,couponrateandfrequency,currencyCashflowoffixedincomeperiodiccouponpayments+parvalueat•ØExam是Fixedincome可能出PeriodiccouponpaymentBondindenture&otherØBondindenture&otherØDescribethecomponentsofbondØDescribethelegal,regulatoryandtaxconsiderationrelatedtobondinvestment.BondØTheBondØThelegalcontractthatdescribetheformofbond,obligationsofissuer,andtherightsof•••••LegalidentityofthebondissueranditslegalSourceofrepaymentproceedsAssetorcollateralbackingCreditenhancementsBondLegalidentityofthebondissuerBondLegalidentityofthebondissueranditslegalØTheissuerisidentifiedintheindenturebyitslegal••Corporatelegalentity:e.g.Wal-martStoreSpecialpurposeBondØHowissuerBondØHowissuerservicethedebtandrepaythe•Supranationalbond:repaymentofpreviousloans,incapitalfromitsSovereignbonds:taxrevenues,printNon-sovereigngovernmentdebt:generaltaxingauthority,cashflowsoftheprojectfunded,specialtaxesor••BondØHowBondØHowissuerservicethedebtandrepaythe•Securitizedbonds:cashflowfromunderlyingCorporatebonds:cashflowfromits•BondØAwaytoBondØAwaytoreduce/alleviatecreditrisk,anddecreases•Securedbonds:backedbyassetsorfinancialpledgedtoensuredebtrepaymentincaseofdefault.Unsecuredbonds:havenocollateral,bondholdershaveonlyageneralclaimontheissuer'sassetsandcashDebentures:aregenerallyunsecuredbondsinjurisdictions,e.g.••BondØBondØCollateraltrustbonds:securedbysecuritiessuchascommonshares,otherbondsorotherfinancialassets.ØEquipmenttrustcertificates:securedbyspecifictypeofequipmentorphysicalassets.ØMortgage-backedsecurities(MBS):debtobligationthatrepresentclaimstocashflowfrompoolsofmortgageBondØVarietyofprovisionsBondØVarietyofprovisionsusedtoreducethecreditriskdecreasethebond’s•InternalcreditüSubordination:waterfallstructure,üOvercollateralization:postmorecollateralthanisneededtoobtainorsecurefinancing.üExcessspread:morecashflowreceivedfromtheassetsusedtosecuretheissuethantheinterestpaidtoBond•ExternalcreditüBond•ExternalcreditüSuretybond:reimburseinvestorsforanylossesincurrediftheissuerdefaults,byainsurancecompany.üBankguarantee:sameassuretybondbutbyaüLetterofcredit:promisetolendmoneytoissuingentityforanycashflowshortfalls.BondØLegallyenforceablerulesthatBondØLegallyenforceablerulesthatborrowersandagreeonatthetimeofanewbond•Negativecovenants:prohibitionsonborrower(canüRestrictionsonassetüNegativepledgeofüRestrictionsonadditionalAffirmativecovenants:promisesbyborrower(shouldüMaintainfinancialüTimelypaymentofprincipalandLegalandregulatoryNationalbondØIncludesallthebondsissuedandtradedinaspecificcountry,andLegalandregulatoryNationalbondØIncludesallthebondsissuedandtradedinaspecificcountry,anddenominatedinthecurrencyofthatcountry.•Domesticbonds:issuedbyentitiesthatareinthatForeignbonds:issuedbyentitiesthatareincorporatedinanothercountry(Yankee/panda/Samurai/kangaroo•LegalandregulatoryEurobondØIssuedoutsideLegalandregulatoryEurobondØIssuedoutsidethejurisdictionofanysinglecountryandcanbedenominatedinanycurrency.•Eurobonds:issuedandtradedonEurobondLegalandregulatoryGlobalbondØConsistofnationalbondmarketsLegalandregulatoryGlobalbondØConsistofnationalbondmarketsandEurobond•Globalbonds:issuedsimultaneouslyinthemarketandinatleastonedomesticbondEurobondGlobalGlobalForeignNationalDomesticLegalandregulatoryBearerbondsØLegalandregulatoryBearerbondsØDoesnotkeeprecordsofwhoownsthebonds,onlytheclearingsystemknowswhothebondownersare.ØMostEurobondsarebearerØOwnershipisrecordedbyeithernameorserialØMostdomesticandforeignbondsareregisteredØSomeinvestorsmaypreferbearerbondstoregisteredbonds,possiblyfortaxreasons.ØTheincomeportion(interest)ØTheincomeportion(interest)isgenerallytaxedattheordinaryincometaxrate.CapitalgainorØUsuallytreateddifferentlyfromtaxableØInsomecountries,thereisadifferenttaxrateforlong-termandshort-termcapitalgains.ØImportance:Ø•5componentsofbondØImportance:Ø•5componentsofbondindenture:legalidentityofbondissueranditslegalform,sourceofrepaymentproceeds,assetorcollateralbacking,creditenhancements,covenants.Otherconsiderations:legal,regulatory,and•ØExamtipsCovenants的类别的辨识是常见考点StructureofCashFlow-StructureofCashFlow-ØDescribethestructureofprincipalØDescribethestructureofcouponpayment,includingfixedcouponandfloatingcoupon.Structureofcashflows:principalBulletØStructureofcashflows:principalBulletØTheentirepaymentofprincipaloccursatØHasaperiodicrepaymentscheduleof•Fullyamortizedbond:hasaschedulethatoutstandingprincipaltozerobythematuritydate.Partiallyamortizedbond:onlyaportionoftheprincipalisrepaidbythematuritydate.üBalloonpayment:amountrequiredatmaturityretirethebond’soutstanding•Structureofcashflows:principalExample:bulletCash010203040Structureofcashflows:principalExample:bulletCash01020304050Structureofcashflows:principalCash01234Structureofcashflows:principalCash0123450Structureofcashflows:principalCash01234Structureofcashflows:principalCash0123450Structureofcashflows:principalStructureofcashflows:principalØReferstoanissuer’splanstosetasidefundsovertimetoretirethebond,retireamountisbasedontheprovision.Advantage:lesscreditStructureofcashflows:couponStructureofcashflows:couponØpaysafixedperiodiccouponoveraspecifiedtimetomaturity,e.g.plainvanillabond/conventionalbond.•Zero-coupon(purediscount)bond:donotpayStep-upcouponbondsØCouponincreasesbyspecifiedmarginsatspecifiedStructureofcashflows:couponStructureofcashflows:couponØPaysnocouponsforitsfirstfewyearsbutthenpaysahighercouponfortheremainderofitslife.Zero-couponbondcanbethoughtasanextremeØAllowstheissuertopayinterestintheformofamountsofthebondissueratherthanasacashStructureofcashflows:couponStructureofcashflows:couponØDonothaveafixedcoupon,andcouponrateislinkedtoanexternalreferencerate,suchasLIBOR.•Couponrate=referencerate+quotedmarginüReferencerateresetperiodically,quotedmarginisusuallyconstant.üVariable-ratenote:thespreadisnotüCouponpaymentsareinarrears:basedonpreviousperiod’sreferencerate.Structureofcashflows:couponØAlmostStructureofcashflows:couponØAlmostallFRNshavequarterlyØFRNsmayincludeafloorora•FloorpreventscouponfromfallingbelowaminimumCappreventscouponfromrisingaboveaspecifiedmaximumrate.•ØInverseorreverseFRN(inverse•Couponrate=-referencerate+quotedStructureofcashflows:couponIndex-linkedbonds(指Structureofcashflows:couponIndex-linkedbonds(指数挂钩债券•Couponpaymentsand/orprincipalrepaymentlinkedtospecificInflation-linkedbonds:couponpaymentsand/orprincipalrepaymentlinkedtoainflationindex(CPI,RPI).Example:TIPS(TIPS-treasuryinflationprotectionüPrincipeprotected(changewithüCouponratedoesnotüCouponwillchange(becauseprincipal••Structureofcashflows:couponCredit-linkedcouponbondsStructureofcashflows:couponCredit-linkedcouponbonds(信用挂钩债券ØCouponchangeswhenthebond’screditrating•Ratingdecreaseleadstohighcouponrate,whichresultinfurtherdeteriorationofthecreditEquity-linkednotes(ELN,股权挂钩债券ØFinalpaymentbasedonthereturnofanequityØTypicallyprincipalprotectedifnoØCanbethoughtofasazero-couponbondwithareturnprofilelinkedtothevalueoftheequityindex.ØImportance:Ø•CashflowstructureØImportance:Ø•CashflowstructureofprincipalüBulletüAmortizingbonds:fullyamortizingbond,partialamortizingbond.üSinkingfundØContent•CashflowstructureofØContent•CashflowstructureofcouponüFixedcoupon:fixed-ratecouponbonds,step-upcouponbonds,deferredcouponbonds,PIKcouponüFloatingcoupon:floating-ratenotes,index-bonds,credit-linkedcouponbonds,equity-linkedØExamtips主要是考Cashflow类别的辨识StructureofCashFlow-StructureofCashFlow-ØDescribecontingencyprovisionsembeddedinbond,includingcallable,puttable,andconvertiblebond.ØIdentifytheimpactsofcontingencyprovisionsborrower/lender,andonpriceoryieldoftheStructureofcashflows:contingencyStructureofcashflows:contingencyØClausethatallowsforsomeactioniftheeventorcircumstancedoesoccur.Embeddedoption(内嵌期权)contingencyprovisionindentureforbonds,provideissuersorbondholderstheright,butnottheobligation,totakesomeaction.üCallablebondsüPutablebondsüConvertiblebondsStructureofcashflows:contingencyCallableØGivesStructureofcashflows:contingencyCallableØGivestheissuertherighttoredeemallorpartofthebondbeforethespecifiedmaturitydate.ØCanprotectissuersagainstdeclineininterest•••Callprice:thepricetoredeemtheCallprovisionsarebeneficialtotheInvestorsfacemorereinvestmentrisk,andwillaskhigheryield,andpaylowerprice;•Callablebondnon-callablebond–callStructureofcashflows:contingencyPuttableØStructureofcashflows:contingencyPuttableØGivesthebondholderstherighttosellthebondbacktotheissueratapre-determinedpriceonspecifieddates.ØCanprotectinvestoragainstincreaseininterest••••Putprice:thepricetosellbackthePutprovisionsarebeneficialtotheinvestors;Investorswillaskloweryield,andpayhigherprice;Puttablebond=non-puttablebond+putStructureofcashflows:contingencyConvertibleØGivesbondholdertherighttoexchangethebondforaspecifiedStructureofcashflows:contingencyConvertibleØGivesbondholdertherighttoexchangethebondforaspecifiednumberofcommonsharesinissuingcompany.ØHybridsecuritywithbothdebtandequity•Conversionprice:thesharepriceatwhichbondcanbeconvertedintoConversionprovisionsarebeneficialtobondholder.Investorswillaskloweryield,andpayhigherprice.Convertiblebond=straightbond+calloptionon•••Structureofcashflows:contingencyConvertiblebondStructureofcashflows:contingencyConvertiblebondØContingentconvertiblebonds:converttocommonequityautomaticallyifaspecificeventoccurs.ØWarrant(认股权证)entitlestheholdertobuyunderlyingstockoftheissuingcompanyatfixedpriceuntilexpiration•AnattachedoptionratherthananembeddedØImportance:Ø•BondswithcontingencyØImportance:Ø•Bondswithcontingencyprovision:callableputtablebonds,convertibleüCallablebonds:benefittheissuer(borrower),lowerpriceandhigheryield;üPuttableandconvertiblebonds:benefitthe(lender),higherpriceandlowerØExamtips对谁有好处，怎么影响债券的price和yieldØDescribeclassificationsofØDescribeclassificationsoffixed-incomeØDescribeprimarymarketsandsecondaryØDescribegovernment-relatedbondsandcorporateClassificationbytypeofClassificationbytypeofØGovernmentandgovernment-relatedØCorporateØStructuredfinanceØInvestmentgradeØNon-investmentgradeØØMoneymarketsecurity:originalmaturityofoneyearorØCapitalmarketsecurity:originalmaturitylongerthanoneClassificationbytypeofØFixed-rateØFloating-rateØThemostwidelyusedreferencerateforfloating-rateIsagroupofratesfordifferentcurrenciesanddifferentborrowingperiodsrangingfromovernighttooneyear.TheratesarebasedonexpectedratesforunsecuredloansonebanktoanotherintheinterbankmoneyIssuanceandtradingofPrimarybondIssuanceandtradingofPrimarybondØMarketsinwhichissuersfirstsellbondstoPublicoffering:anymemberofthepublicmaybuythePrivateplacement:onlyaselectedgroupofinvestorsmaybuythebonds.SecondarybondØmarketsinwhichexistingbondsaresubsequentlytradedamongIssuanceandtradingofPublicØIssuanceandtradingofPublicØUnderwrittenoffering:theinvestmentbank(underwriter)guaranteesthesaleofthebondissueatanofferingprice,andtakestheriskassociatedwithsellingthebonds.Syndicatedoffering:agroup,orsyndicate,ofinvestmentbanksunderwritetheissuance.ØBesteffortsoffering:theinvestmentbankonlyservesasaandsellthebondissueforaIssuanceandtradingofIssuanceandtradingofØAuction:anissuingmechanismthatinvolvesbiddingandhelpfulforpricediscovery.CommonlyusedbyissuinggovernmentØShelfregistration(上架注册):issuerpreparesasingle,all-encompassingofferingcircularthatdescribesarangeoffuturebondissuances,allunderthesameüIssuebondovertimewhenissuerneedstoraisefundsandsaveIssuanceandtradingofØIssuanceandtradingofØOrganizedexchange:providesaplacewherebuyersandsellerscanmeettoarrangetheirtradesØOTCmarkets:buyandsellordersinitiatedfromvariouslocationsarematchedthroughacommunicationnetworkDealerswillpostbidandaskØtheprocessthatthebondsarepassedtothebuyerandpaymentisreceivedbythesellerØIssuedbynationalgovernmentsØIssuedbynationalgovernmentsandbackedbythetaxingØOn-the-run:mostrecentlyissuedbonds,alsoreferredtoasabenchmarkissue.ØCandenominatedinlocalcurrencyorforeignItiscommontoobserveahighercreditratingforsovereignbondsissuedinlocalcurrencythanforthoseissuedinaforeigncurrency.ØU.STreasuries:sovereignbondsinØU.STreasuries:sovereignbondsintheUnited••T-Bills:originalmaturityisoneyearorT-Notes:originalmaturityislongerthanoneyearandupto10•originalmaturityislongerthan10Non-ØissuedbygovernmentbelowthenationallevelsuchasNon-Øissuedbygovernmentbelowthenationallevelsuchasregions,states,andQuasi-ØIssuedbyentitiescreatedbynationalgovernment,e.g.sponsoredenterprises(FannieMae,FreddieMac),usuallyratedveryØissuedbysupranationalagencies(multilateralBankØBilateralloan:fromBankØBilateralloan:fromasinglelendertoasingleØSyndicatedloan:fromagroupoflendertoasingleØShortterm,unsecuredpromissoryØTraditionally,onlythelargest,moststablecompaniesissuedcommercialpaperØOftenwithØOftenwithoriginalmaturitiesonlessthan1•Medium-termnote(MTN):amisnomer,canhavelongØ•Marketclassification:byØ•Marketclassification:byissuer,bycreditquality,bymaturity,coupon,PrimaryüPublicoffering:underwrittenoffering,besteffortsoffering,üPrivate•••Governmentrelatedbonds:sovereignbonds,•Governmentrelatedbonds:sovereignbonds,non-sovereignCorporatedebt:bankloan,commercialpaper,corporatenotesandbonds(MTN).•ØExamtips掌握概念为主，publicofferingShort- ØDescribeshort-termfundingShort- ØDescribeshort-termfundingalternativestoØDescribeRepoanditsShort-termfundingtoØDemandShort-termfundingtoØDemanddeposits/Checkingaccounts:availabletocustomers"ondemand,andtypicallypaynointerestØSavingaccounts:payinterestbutdonotofferthesametransactionalconvenienceasdemanddepositsØMoneymarketaccount:offermoneymarketratesofreturnanddepositorscanaccessfundsatshortornonoticeAnintermediatebetweendemanddepositandsavingaccountsShort-termfundingtoØShort-termfundingtoØCentralbankfunds:bankswithreservesurplusloanmoneytobankswithreserveshortage.ØInterbankfunds:loansanddepositsbetweenShort-termfundingtoShort-termfundingtoØLarge-denominationnegotiablecertificatesofdepositCDrepresentsaspecifiedamountoffundsondepositforaspecifiedmaturityandinterestrateNegotiableCDallowsanydepositor(initialorsubsequent)totheCDintheopenmarketpriortothematurityRepurchaseØThesaleofRepurchaseØThesaleofasecuritywithasimultaneousagreementbythesellertobuyitbackatanagree-onprice(repurchaseprice)andfuturedate(repurchasedate).ØInpractical,arepocanbeviewedasacollateralized•••Overnightrepo:thetermisoneTermrepo:thetermismorethanoneRepotomaturity:thetermisuntilthefinalmaturityRepurchaseØReporate:RepurchaseØReporate:theinterestrateimpliedbytwoØThereporateishigher•••••RepotermisCreditqualityofthecollateralsecurityislower;Collateralsecurityisnotdeliveredtothelender;Collateralsecurityisinlowdemandorhighsupply;InterestrateforalternativesourcesoffundsareRepurchaseØRepomargin/haircut:theRepurchaseØRepomargin/haircut:thedifferencebetweenthemarketvalueofthecollateralsecurityandthevalueoftheloan.ØTheropemarginishigher••••RepotermisCreditqualityofthecollateralsecurityislower;Creditqualityoftheborrowerislower;CollateralsecurityisinlowdemandorhighRepurchaseØReverserepurchaseagreement/ReverseRepurchaseØReverserepurchaseagreement/Reverserepo:viewrepothroughthecashlendingcounterparty.•ØShort-termfundingØShort-termfundingtoüRetailüShort-termwholesalefunds:centralbankfunds,interbankfunds,large-denominationnegotiable•Repo:overnightrepot,term•Repo:overnightrepot,termrepo,repotoüFactorsonreporate&repomargin:repoterm(↑),creditqualityofcollateralandborrower(↓),collateraldelivery(↓),collateraldemand(↓)orsupply(↑),interestrate(↑).ØExam常考点：影响Reporate和RepomarginBondPricingwithYTM&SpotBondPricingwithYTM&SpotØCalculatebondpricegivenamarketdiscountØIdentifytherelationshipsamongabond’sprice,couponrate,maturity,andyield-to-maturity.ØDefinespotratesandcalculatebondpricewithspotBondPricingbondwithasinglediscountØBondpriceistheBondPricingbondwithasinglediscountØBondpriceisthepresentvalue(PV)ofthepromisedcash•Marketdiscountrate:discountrateusedinthePVtherequiredrateofreturn(requiredyield)byinvestorsgiventheriskofthebondinvestment.nPM (1+r)P= (1+r)t=F:facevalueoftheBondExampleØSupposethecouponrateonabondis4%andthepaymentismadeonceayear.IfBondExampleØSupposethecouponrateonabondis4%andthepaymentismadeonceayear.Ifthetime-to-maturityisfiveyearsandthemarketdiscountrateis6%,thepriceofthebondshould 104 P =Whencouponrate<discountrate,thebondispriceddiscount,oradiscountBondExampleØSupposethecouponrateonabondis6%andthepaymentismadeonceayear.Ifthetime-to-maturityisfiveyearsandthemarketdiscountrateis6%BondExampleØSupposethecouponrateonabondis6%andthepaymentismadeonceayear.Ifthetime-to-maturityisfiveyearsandthemarketdiscountrateis6%,thepriceofthebondshould (1.06 (1.06 (1.06 (1.06106 (1.06P++++=100Whencouponrate=discountrate,thebondispricedatoraparBondExampleØSupposethecouponrateonabondis8%andthepaymentismadeonceayear.IfBondExampleØSupposethecouponrateonabondis8%andthepaymentismadeonceayear.Ifthetime-to-maturityisfiveyearsandthemarketdiscountrateis6%,thepriceofthebondshould 108 P (1.06)1 (1.06)2 (1.06)3 (1.06)4 (1.06)5=108.425Whencouponrate>discountrate,thebondispricedpremium,orapremiumSupposethatathree-year,zero-couponbondwithSupposethatathree-year,zero-couponbondwithparof100hasarequiredrateofreturnof10%,whatisthebondA.B.C.Bis 74.62(1+BondYield-to-ØTheinternalrateofreturnofonthecashBondYield-to-ØTheinternalrateofreturnofonthecashØIfthemarketpriceofabondisknown,thevaluationequationcanbeusedtocalculateitsYTM.n PM P=t=t(1+YT+tn))(1+YTBondYield-to-ØThreecriticalassumptionsforBondYield-to-ØThreecriticalassumptionsfor•••TheinvestorholdthebonduntilTheissuermakesfullandtimelycouponandprincipalpayments;TheinvestorisabletoreinvestcouponpaymentsatYTM.BondpriceandRelationshipbetweenbondprice&BondpriceandRelationshipbetweenbondprice&ØThebondpriceisinverselyrelatedtothe•••Atpremium:couponrate>Atpar:couponrate=Atdiscount:couponrate<CouponBondpriceandØIllustratestheBondpriceandØIllustratesthechangeofbondpriceovertimeiftheyieldkeepconstant.Ø“Pulltopar"effect:ifnodefault,bondpriceapproachesparvalueasitstime-to-maturityapproacheszero.Supposethatafour-year,5%annualcouponpaymentispricedatSupposethatafour-year,5%annualcouponpaymentispricedat105per100ofparvalue.Whatistheyield-to-A.B.C.Ais105= + + + (1+(1+(1+(1+BondPricingbondswithspotØUseasequenceofspotratesthatcorrespondtotheBondPricingbondswithspotØUseasequenceofspotratesthatcorrespondtotheflowdatestocalculatethebond•Spotrates/zerorates:YTMonzero-couponmaturingatthedateofeachcashAmorefundamentalapproachtopricingbond,anditthe“no-arbitragenPM nP=t)+t)(1+(1+t=tnZn:spotrateforperiodBondØSupposethattheone-yearspotrateis2%,thetwo-yearspotrateis3%,andthethree-yearspotrateisBondØSupposethattheone-yearspotrateis2%,thetwo-yearspotrateis3%,andthethree-yearspotrateis4%.Then,thepriceofathree-yearbondthatmakesa5%annualcouponpayment 10 P++=102.9123Ø••••BondØ••••Bondprice:PVofcashYTM:IRRofcashSpotrates:YTMsonzero-couponBondpriceVs.YTM,andbondpriceVs.üBondprice-yieldcurve:premium,atpar,üConstant-yieldpricetrajectory:pulltoØExam必须掌握bondprice必须掌握bondpriceQuoteConventions&MatrixØDescribeandQuoteConventions&MatrixØDescribeandcalculatetheflatprice,accruedinterest,andthefullpriceofabond.ØDescribematrixBondpriceandØBonddealersusuallyquoteflatpricewhilethefullwillbeBondpriceandØBonddealersusuallyquoteflatpricewhilethefullwillbepaidandtherecanbeadifferencebetweenthem.Fullprice=Flatprice+Accruedinterest(AI)(应计利息)Dirtyprice=Cleanprice+Accruedinterest记PMPTM+FPM()tTFullprice=·1+r++11+r21+rnBondpriceandØAccruedinterest(AI):theproportionalshareoftheBondpriceandØAccruedinterest(AI):theproportionalshareoftheTcouponTTAI·PM……n01Conventionstocountdays:actual/actualandüVaryfrommarkettomarket,butactual/actualismostcommonforgovernmentbondsand30/360isoftenusedoncorporate BondpriceandØConsidera5%semiannualcouponbondwithparvalueofBondpriceandØConsidera5%semiannualcouponbondwithparvalueof100andrequiredyieldof4.8%.Thebondwillmatureson15February2024andcouponaremadeon15Februaryand15Augustofeachyear.Thebondistobepricedforsettlementon14May2015,andthatdateis88daysintothe181-dayperiod.WhatshouldbethepricepaidandwhatshouldbethepriceBondpriceandØ1818814th,BondpriceandØ1818814th,15th,PMT=2.5,N=18,FV=100,I/Y=0.024,Fullprice(pricepaid)=101.45*(1+2.4%)88/181=102.62AI=(88/181)*2.5=1.22Flatprice(pricequoted)=102.62-1.22=BondØEstimatethemarketBondØEstimatethemarketdiscountrateandpricebasedonthepriceofmorefrequentlytradedcomparablebonds.Comparablebonds:similartimes-to-maturity,couponrates,andcreditquality(totally,similarrisk).Commonlyusedforbondsinactively-tradedornotyetBondØAnanalystneedstovaluea3-year,4%semiannualcouponcorporatebond,BondX.ItBondØAnanalystneedstovaluea3-year,4%semiannualcouponcorporatebond,BondX.Itisnotactivelytradedandnotrecentlytransacted.However,therearequotedpricesforfourcorporatebondswithsimilarcredit••••BondA:2-year,3%semiannual,tradingatBondB:2-year,5%semiannual,tradingat$102.25BondC:5-year,2%semiannual,tradingatBondD:5-year,4%semiannual,tradingatBondØStep1:Baseontheavailableinformation,wecalculatetheYTMforeachbondandwegetthefollowingtable:BondØStep1:Baseontheavailableinformation,wecalculatetheYTMforeachbondandwegetthefollowingtable:BondBondØStep2:calculatesBondØStep2:calculatestheaverageyieldforeach(0.03786+0.03821)/2=0.038035(2-year(0.04181+0.04196)/2=0.041885(5-yearØStep3:Calculatesinterpolatedyieldforbond0.038035+(3-2)/(5-2)x(0.041885-0.038035)=ØStep4:usetheinterpolatedyieldtocalculatethepriceofbondN=6,YTM=1.9659,PMT=2,PV=?BondMatrixpricingØAlsousedtoestimatetheBondMatrixpricingØAlsousedtoestimatetherequiredyieldspreadoverthebenchmarkrate.•Benchmarkrate:typicallytheyield-to-maturityongovernmentbondhavingthesame,orclosetothesame,•Theisthedifferencebetweentheyield-maturityonthebondandthebenchmarkØ•••Flatprice:Ø•••Flatprice:pricequoted;fullprice:priceFullprice=flatprice+AI,AI=PMTMatrixprice:estimateYTMbasedonfrequentlytradedcomparablebonds.üUsedforbondsinactively-tradedornotyetØExam掌握AI的计算，fullprice和flatprice了解matrixpricingBondØCalculateandinterpretyieldBondØCalculateandinterpretyieldmeasuresforØCalculatespotratesfromforwardrates,forwardratesfromspotrates,andbondpriceusingforwardrates.BondØYieldBondØYieldmeasurestypicallyare•Forbondsmaturinginmorethanoneyear,typicallyareannualizedandYieldoninstrumentsmaturinginoneyearorlesstypicallyareannualizedbutnotcompounded(simpleinterestBondBondØStreetconventionyield:theIRRoncashflowassumingthepaymentsaremadeonthescheduleddates,andneglectweekendsandholidays.ØTrueyield:theIRRonthecashflowsusingtheactualcalendarofweekendsandholidays.TrueyieldneverhigherthanstreetconventionBondBondØCurrentyield:thesumofthecouponpaymentsreceivedovertheyeardividedbytheflatprice.Example:thecurrentyieldofa2%semiannualcouponbondpricedat95is:2/95=2.11%.ØSimpleyield:thesumofannulcouponpaymentplusstraight-lineamortizationofdiscountorpremium,dividedbytheflatBondBondØYieldtocall:theIRRoncashflowsassumingtheembeddedcalloptionisexercised.Yieldtofirstcall:assumingtheembeddedcalloptionisexercisedatthefirstcalldate.Yieldtosecondcall…ØYieldtoworst:thelowestofthesequenceofyields-to-callandtheyield-to-maturity.BondØSupposethata7-year,8%annualBondØSupposethata7-year,8%annualcouponbondiscallableandpricedat105,the"callschedule“isthatitisfirstcallableat102infouryears,callableat101infive•YieldtoPV=-105,PMT=8,n=7,FV=100;YieldtofirstPV=-105,PMT=8,n=4,FV=102,YieldtosecondPV=-105,PMT=8,n=5,FV=101,••BondØBondØCouponrate=referencerate+/-quotedØQuotedmargin:thespecifiedyieldspreadoverthereferencerate,thatcompensateinvestorforthedifferenceinthecreditriskoftheissuerandthatimpliedbythereferencerate.ØRequiredmargin:theyieldspreadover,orunder,theratesuchthattheFRNispricedatparvalueonarateresetBondBondØIfquotedmargin>requiredmargin,FRNswillbepricedatØIfquotedmargin=requiredmargin,FRNswillbepricedatØIfquotedmargin<requiredmargin,FRNswillbepricedBondØDiscountratesoradd-onratesareusedforquotedBondØDiscountratesoradd-onratesareusedforquotedmoneymarketrates.•Discountratesusuallyuse