Interest Rates
Price-Return Curve
To assess the impact of interest rate risk on bonds and other fixed income assets, measures such as Duration, Modified Duration, Dollar Duration, Effective Duration, Convexity, and Portfolio […]
Archive
Category: Financial Markets and Institutions – by A. Saunders, M. Cornett & O. Erhemjamts
Interest Rates
Fisher Effect
Fisher Effect: The higher the inflation expectations, the greater the pressure on the securities market. Fisher Formula:i = (RIR + Expected-IP) + (RIR*Expected (IP)). Intuitively: The level of […]
Interest Rates
Default/Credit Risk Factor
Default Risk: DRP = Ji – Ti Default or credit risk is the risk that the payer will delay or fail to pay the tranche (interest or principal) […]
Interest Rates
Unbiased Expectations Theory
Unbiased Expectations Theory – What are the market’s expectations regarding interest rates? The Unbiased Expectations Theory essentially states that long-term interest rates are determined by the expected short-term […]
Interest Rates
Liquidity & Expectation Hypos
#liquidity risk premium & #unbiased expectations hypothesis. Money can be discussed as a negative NPV asset because it does not yield interest income, while on the other hand, […]
Interest Rates
Maturity Premium
Directly affects the effectiveness of financial assets’ performance periods on interest rate movements. This moment is crucial because, despite the intuition that longer-term bonds are more sensitive to […]
Interest Rates
Market Segmentation Theory
Market Segmentation Theory – This theory reflects the impact of events in different segments of financial markets on the relationship between interest rates and loan maturities. The theory […]