## Module 36.5 LOS 36.i: Calculate and interpret effective duration of a callable or putable bond

We cannot use modified duration and convexity measures on bonds with embedded options as there cash flows change if an …

We cannot use modified duration and convexity measures on bonds with embedded options as there cash flows change if an …

Adding embedded options to a bond allow issuers to manage interest rate risk and improve the initial coupon rate. A …

Market participants prefer the swap rate curve as a benchmark interest rate curve rather than a government bond yield curve …

Effective duration measures price sensitivity to small parallel shifts in the yield curve. Key rate duration is the sensitivity of the value …

Structural models of credit risk rely on the option pricing theory and analysis of the company’s balance sheet. They help …

Recall that the OAS is a spread that adjusts for the difference between the modeled value of a bond (binomial …

When bonds come with embedded options, one-sided durations are better at capturing interest rate sensitivity. One-sided duration only captures sensitivity …

Structural Model Structural models of credit risk are based on issuer balance sheets and option pricing theory. The oft-given analogy …

How to use a binomial interest rate tree to find bond prices One method that we use to value bonds …

Forward Rate Model The forward rate model allows us to derive a future spot rate from the current spot rate …