Module 36.1 LOS 36.a: Characteristics of bonds with embedded options
Adding embedded options to a bond allow issuers to manage interest rate risk and improve the initial coupon rate. A …
Module 34.3 LOS 34.f: The Swap Rate Curve
Market participants prefer the swap rate curve as a benchmark interest rate curve rather than a government bond yield curve …
Module 34.6 LOS 34.i: Overview of Fixed Income Duration Concepts
Effective duration measures price sensitivity to small parallel shifts in the yield curve. Key rate duration is the sensitivity of the value …
Module 37.4 LOS 37.d: Option Analogy of Structural Models of Debt and Reduced Form Models
Structural models of credit risk rely on the option pricing theory and analysis of the company’s balance sheet. They help …
Module 36.4 LOS 36.h: Effect of interest rate volatility on OAS
Recall that the OAS is a spread that adjusts for the difference between the modeled value of a bond (binomial …
Module 36.6 LOS 36.k and 36.i: One-sided durations and convexity of option bonds
When bonds come with embedded options, one-sided durations are better at capturing interest rate sensitivity. One-sided duration only captures sensitivity …
Module 31.4, LOS 31.p: Momentum indicators in valuation
Momentum indicators look at fundamental variables like price and EPS in the context of a time series of historical or …
Module 31.4, LOS 31.i: Predicted P/E Ratio
A predicted P/E can be estimated from linear regression of historical P/Es on its fundamental variables, including expected growth and risk. While …
Module 31.4, LOS 31.e: Normalizing EPS
The P/E ratio depends on estimating an appropriate earnings value. An analyst may take several adjustments for their earnings value, …
Module 31.4, LOS 31.k: PEG ratio and its uses
The PEG ratio standardizes different the P/E ratio for stocks with different growth rates. This is effective because one of …