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- MIDAS Technical Analysis
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Debt Markets and Analysis : + Website
Bond valuation is the determination of the fair price of a bond. As with any security or capital investment, the theoretical fair value of a bond is the present value of the stream of cash flows it is expected to generate.
Hence, the value of a bond is obtained by discounting the bond's expected cash flows to the present using an appropriate discount rate.
In practice, this discount rate is often determined by reference to similar instruments, provided that such instruments exist. Various related yield-measures are then calculated for the given price.
Where the market price of bond is less than its face value par value , the bond is selling at a discount. Conversely, if the market price of bond is greater than its face value, the bond is selling at a premium.
If the bond includes embedded options , the valuation is more difficult and combines option pricing with discounting. Depending on the type of option, the option price as calculated is either added to or subtracted from the price of the "straight" portion.
See further under Bond option. This total is then the value of the bond. As above, the fair price of a "straight bond" a bond with no embedded options ; see Bond finance Features is usually determined by discounting its expected cash flows at the appropriate discount rate.
The formula commonly applied is discussed initially. Although this present value relationship reflects the theoretical approach to determining the value of a bond, in practice its price is usually determined with reference to other, more liquid instruments.
The two main approaches here, Relative pricing and Arbitrage-free pricing, are discussed next. Finally, where it is important to recognise that future interest rates are uncertain and that the discount rate is not adequately represented by a single fixed number—for example when an option is written on the bond in question —stochastic calculus may be employed. Below is the formula for calculating a bond's price, which uses the basic present value PV formula for a given discount rate:  This formula assumes that a coupon payment has just been made; see below for adjustments on other dates.
Under this approach—an extension, or application, of the above—the bond will be priced relative to a benchmark, usually a government security ; see Relative valuation.
Here, the yield to maturity on the bond is determined based on the bond's Credit rating relative to a government security with similar maturity or duration ; see Credit spread bond. The better the quality of the bond, the smaller the spread between its required return and the YTM of the benchmark. As distinct from the two related approaches above, a bond may be thought of as a "package of cash flows"—coupon or face—with each cash flow viewed as a zero-coupon instrument maturing on the date it will be received.
Thus, rather than using a single discount rate, one should use multiple discount rates, discounting each cash flow at its own rate. Under this approach, the bond price should reflect its " arbitrage -free" price, as any deviation from this price will be exploited and the bond will then quickly reprice to its correct level.
Here, we apply the rational pricing logic relating to "Assets with identical cash flows". In detail: 1 the bond's coupon dates and coupon amounts are known with certainty. Therefore, 2 some multiple or fraction of zero-coupon bonds, each corresponding to the bond's coupon dates, can be specified so as to produce identical cash flows to the bond. Thus 3 the bond price today must be equal to the sum of each of its cash flows discounted at the discount rate implied by the value of the corresponding ZCB.
Were this not the case, 4 the arbitrageur could finance his purchase of whichever of the bond or the sum of the various ZCBs was cheaper, by short selling the other, and meeting his cash flow commitments using the coupons or maturing zeroes as appropriate.
Then 5 his "risk free", arbitrage profit would be the difference between the two values. See under Rational pricing Fixed income securities. When modelling a bond option , or other interest rate derivative IRD , it is important to recognize that future interest rates are uncertain, and therefore, the discount rate s referred to above, under all three cases—i.
In such cases, stochastic calculus is employed. The solution to the PDE i. To actually determine the bond price, the analyst must choose the specific short rate model to be employed. The approaches commonly used are:.
When the bond is not valued precisely on a coupon date, the calculated price, using the methods above, will incorporate accrued interest : i. The price of a bond which includes this accrued interest is known as the " dirty price " or "full price" or "all in price" or "Cash price". The " clean price " is the price excluding any interest that has accrued. Clean prices are generally more stable over time than dirty prices.
This is because the dirty price will drop suddenly when the bond goes "ex interest" and the purchaser is no longer entitled to receive the next coupon payment. In many markets, it is market practice to quote bonds on a clean-price basis. When a purchase is settled, the accrued interest is added to the quoted clean price to arrive at the actual amount to be paid.
Once the price or value has been calculated, various yields relating the price of the bond to its coupons can then be determined. YTM is thus the internal rate of return of an investment in the bond made at the observed price. To achieve a return equal to YTM, i. Coupon yield is also called nominal yield.
The concept of current yield is closely related to other bond concepts, including yield to maturity, and coupon yield. The relationship between yield to maturity and the coupon rate is as follows:. The sensitivity of a bond's market price to interest rate i. Duration is a linear measure of how the price of a bond changes in response to interest rate changes.
It is approximately equal to the percentage change in price for a given change in yield, and may be thought of as the elasticity of the bond's price with respect to discount rates. Convexity is a measure of the "curvature" of price changes. It is needed because the price is not a linear function of the discount rate, but rather a convex function of the discount rate.
Specifically, duration can be formulated as the first derivative of the price with respect to the interest rate, and convexity as the second derivative see: Bond duration closed-form formula ; Bond convexity closed-form formula ; Taylor series. Continuing the above example, for a more accurate estimate of sensitivity, the convexity score would be multiplied by the square of the change in interest rate, and the result added to the value derived by the above linear formula.
In accounting for liabilities , any bond discount or premium must be amortized over the life of the bond. A number of methods may be used for this depending on applicable accounting rules. One possibility is that amortization amount in each period is calculated from the following formula:. From Wikipedia, the free encyclopedia. Fair price of a bond. Derivatives Credit derivative Futures exchange Hybrid security. Foreign exchange Currency Exchange rate. Forwards Options.
Spot market Swaps. Main articles: Clean price and Dirty price. Main articles: Bond duration and Bond convexity. Cox , Jonathan E. Ingersoll and Stephen A. Ross Bond market. Bond Debenture Fixed income. Accrual bond Auction rate security Callable bond Commercial paper Consol Contingent convertible bond Convertible bond Exchangeable bond Extendible bond Fixed rate bond Floating rate note High-yield debt Inflation-indexed bond Inverse floating rate note Perpetual bond Puttable bond Reverse convertible securities Zero-coupon bond.
Asset-backed security Collateralized debt obligation Collateralized mortgage obligation Commercial mortgage-backed security Mortgage-backed security.
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Derivatives Markets and Analysis (eBook, PDF)
Du kanske gillar. Ladda ned. Spara som favorit. Skickas inom vardagar. A practical, informative guide to derivatives in the real world Derivatives is an exposition on investments, guiding you from the basic concepts, strategies, and fundamentals to a more detailed understanding of the advanced strategies and models. As part of Bloomberg Financial's three part series on securities, Derivatives focuses on derivative securities and the functionality of the Bloomberg system with regards to derivatives. You'll develop a tighter grasp of the more subtle complexities involved in the evaluation, selection, and management of derivatives, and gain the practical skillset necessary to apply your knowledge to real-world investment situations using the tools and techniques that dominate the industry.
Management. Bond. R. Stafford Johnson. Johnson. SECOND EDITION. ITION. U to bec management, financial engineering, valuation, and financial instrument analysis, as The Market and Characteristics of Futures on Debt Securities.
Understand today's investment challenges and the role of the Bloomberg systemIn recent years, changes have swept th. English Pages  Year Sharpen your understanding of the financial markets with this incisive volume Equity Markets, Valuation, and Analysis br.
MIDAS Technical Analysis
Bond valuation is the determination of the fair price of a bond. As with any security or capital investment, the theoretical fair value of a bond is the present value of the stream of cash flows it is expected to generate. Hence, the value of a bond is obtained by discounting the bond's expected cash flows to the present using an appropriate discount rate.
Wiley Online Library Probekapitel. Preis inkl. MwSt, zzgl. The authors walk you through the wonderful MIDAS world and explain its variations with copious charts and examples. If you are new to the MIDAS method, I recommend first reading the introductory chapters, then jumping to the very practical, money-making Chapter 8, then applying the principles yourself computer code is provided in the appendices. Armed with 'hands-on' knowledge, you will then access the wealth of information that this book provides in helping you correctly read the markets. Most people writing on the subject just don't understand it and you will be misled.
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Debt Markets and Analysis (Bloomberg Financial series) by R. Stafford Johnson. After you've bought this ebook, you can choose to download either the PDF.
Explore a preview version of Derivatives Markets and Analysis right now. Derivatives is an exposition on investments, guiding you from the basic concepts, strategies, and fundamentals to a more detailed understanding of the advanced strategies and models. As part of Bloomberg Financial's three part series on securities, Derivatives focuses on derivative securities and the functionality of the Bloomberg system with regards to derivatives. You'll develop a tighter grasp of the more subtle complexities involved in the evaluation, selection, and management of derivatives, and gain the practical skillset necessary to apply your knowledge to real-world investment situations using the tools and techniques that dominate the industry. Instructions for using the widespread Bloomberg system are interwoven throughout, allowing you to directly apply the techniques and processes discussed using your own data.
With an OverDrive account, you can save your favorite libraries for at-a-glance information about availability. Find out more about OverDrive accounts. Bloomberg Financial. Stafford Johnson. An accessible guide to the essential elements of debt markets and their analysis Debt Markets and Analysis provides professionals and finance students alike with an exposition on debt that will take them from the basic concepts, strategies, and fundamentals to a more detailed understanding of advanced approaches and models.
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