Premium Essay

Fix Income

In: Business and Management

Submitted By zjy0509
Words 299
Pages 2
1Refer of bond; sovereign bond T
2Late of rating agencies, price increased already happened. T
3Plain vanilla bond, positive conv, isolate issue. T
4Interest rate components, real rate and default. F
5Coverage ratio numerator with EBIT not EBITDA. T
6Holding bond, generate return. Three components. T
(At settlement delivers the bond and receives the futures price Return = coupon + reinvestment income + future’s price)
7Callable bond pay lower yield. F
8PIK bond avoided by most investors. T
9Duration assumes a non-linear. F
(Duration is a measure of interest rate sensitivity. It measures the sensitivity of a bond’s price\yield relationship. It assumes a linear relationship so the % change in price is the same whether interest rates increase or decrease.)
10Durtation parallel shift in the yield curve. T
11Inverted yield curve due to imbalance of s&d. T
12Bond are considered as passive investment. Little or no opportunities for appreciation. F
13All bonds have some degree of risk. Zero coupon bond or note is risk free. F
14Hedging is the act of adding negative correlation to a portfolio. T
(V = S + hF & h= -ΔSΔF)
15Portfolio managers commonly categorize bond with maturity. For int risk expose. T
16A zero coupon or discount note never trade over par. If allowed, 0 or negative YTM. T
17Embedded put, safety exaggerated, can cause distress for issuers. T
18Prepayments are a risk that associated with mbs. Int rate decrease, higher principal, reduce YTM. T
19Cheapest-to-deliver…deliver in a reverse-convertible. F
20Prepayment speed refers to how quickly a bond settles and investors convert shares. T

1Bankruptcy: pre early, middle and late.
2Construction of a CDO, assumption assure: assets can be used to securitize multiple tranches…
3The squeaky wheel gets the grease: creditors separated under seniority, small group tries to be loud.

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