...Developing the Fixed Income Market in Nigeria September 2010 Contents 1. Evolution – Where we are coming from 2. Status Quo – Where we are 3. Constraints – Challenges to be overcome 4. The Future – How to develop the market Evolution of the Fixed income Market in Nigeria ▲ Nigerian Government Registered Stock in 1946 ▲ Federation of Nigerian Development Loan Stock in 1946 ▲ Federal Republic of Nigeria Development Loan Stock in 1963 ▲ Suspended in 1988 ▲ Issuance rejuvenated in 2003 with 1st FGN Series ▲ Commencement of PDMM system in March 2006 ▲ Active secondary market commences in November 2006 ▲ Extension of the curve to 20 years in November 2008 The Current State of the Fixed Income Market in Nigeria ▲ The Fixed Income Market in Nigeria is made up of three major segments: Federal Government of Nigeria Bond, State Government Bond and Corporate Bond market. ▲ The Federal Government Debt Market is the largest and most developed of the segments The FGN Debt segments. Market dominates the fixed income Market in Nigeria. ▲ The amount of outstanding issuance in the Nigerian Debt Market is skewed towards Federal Government paper. The amount of FGN debt outstanding has increased from NGN1, 753 billion as at December 2006 to NGN3, 764 billion as at July 2010. NGN2,408 (63.97%) of the outstanding debt is FGN Bonds. ▲ Th FGN B d auctions are h ld under a Si l D h A i process. All bid are placed through the The Bond i held d Single Dutch Auction bids l d h h h twenty one primary...
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...Fixed Income Trading Fixed Income Trading ACCESS A WORLD OF FIXED INCOME OPPORTUNITIES Explore Our Fixed Income Capabilities Our dedicated team of experts and powerful suite of tools and resources can help you meet the rapidly rising demand for fixed income. In today’s complex and ever-changing financial markets, the increasing demand for fixed income has created a diverse array of products. At Pershing, we can help you identify and access investment opportunities in the fixed income markets. Our combination of comprehensive support from seasoned professionals and a robust suite of tools and resources empowers you to build your business. Whether you are seeking electronic trade execution, access to new issues, additional liquidity, or to expand your product offering, we are ready to help you take your success to the next level. your business without limits 3 > 4 FIXED IN COME TR ADIN G Broaden Your Product Offering The depth and breadth of our fixed income product offering lets you rely on us as your single resource. Market Making Our Fixed Income Trading Desk provides liquidity by making markets in an extensive array of fixed income products. By leveraging powerful open architecture trading technology, we strive to provide you with access to the widest variety of products and points of liquidity as possible. Our seasoned professionals leverage their extensive knowledge of the fixed income markets to strategically position competitivelypriced ...
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...January 2014 CRISIL Economy First Cut IIP: Industrial production slips again Overview: Index of industrial production (IIP) fell by 2.1 per cent in November on a year-on-year basis, even sharper than October’s decline of 1.6 per cent. Despite a pick-up in core infrastructure industries such as mining and electricity, industrial production fell in November as the manufacturing sector contracted by 3.5 per cent compared to a year ago. Industrial growth is likely to remain weak for the rest of 2013-14 due to infrastructure and input constraints, and weak domestic demand. Robust export growth with rising global demand may however, provide some cushion to manufacturing production. Even though the mining ban has been lifted in Karnataka, revival in mining output will be slow as it will take time for firms to obtain relevant clearances and ramp up production. The Cabinet Committee on Investments has also been fast-tracking stalled projects; however, as most of these are infrastructure projects and have long gestation periods, the impact of these measures will not be felt until 2014-15. Core sectors such as mining and electricity rebounded in November from last month’s lows as higher coal production lifted mining output and raised power production. Electricity output grew by 6.3 per cent while mining expanded by 1.0 per cent in November. Mining sector has now contracted for three consecutive years (-2.2 per cent for April-November 2013) while manufacturing growth has completely collapsed...
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...California Debt and Investment Advisory Commission Duration Basics Introduction Duration is a term used by fixed-income investors, financial advisors, and investment advisors. It is an important measure for investors to consider, as bonds with higher durations (given equal credit, inflation and reinvestment risk) may have greater price volatility than bonds with lower durations. It is an important tool in structuring and managing a fixed-income portfolio based on selected investment objectives. Investment theory tells us that the value of a fixed-income investment is the sum of all of its cash flows discounted at an interest rate that reflects the inherent investment risk. In addition, due to the time value of money, it assumes that cash flows returned earlier are worth more than cash flows returned later. In its most basic form, duration measures the weighted average of the present value of the cash flows of a fixed-income investment. All of the components of a bond—price, coupon, maturity, and interest rates—are used in the calculation of its duration. Although a bond’s price is dependent on many variables apart from duration, duration can be used to determine how the bond’s price may react to changes in interest rates. This issue brief will provide the following information: < A basic overview of bond math and the components of a bond that will affect its volatility. < The different types of duration and how they are calculated. < Why duration is an important...
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...Interest Rate Risk Dr HK Pradhan XLRI Jamshedpur Hull Ch 7 Fabozzi chapters on duration & Convexity, Ch-7, Convexity Stochastic Process notes Session Objectives j Valuation of fixed income securities Risks in fixed income securities Traditional measures of risk – (we know PVBP, duration and convexity, M-Square) M Square) VaR based risk measures Interest rate volatility calculations Portfolio risk & Cash flows mapping issues Var for Interest Rate Derivatives Interest rate risk and Bond portfolio management Profile of Interest Rate Markets, Instruments & Institutions Bond Price P 1 y C1 1 1 y C2 2 1 y Ct C3 3 1 y n Cn price Sum of the present values of each cashflows p P n t 1 1 y t M 1 y n yield price < par (discount bond) price = par (par bond) price > par (premium bond) Concept of Accrued Interest p When you buy a bond between coupon dates, you pay the seller: Clean Price plus the Accrued Interest – pro-rated share of the fi coupon: i d h f h first interest d does not compound b d between coupon payment dates. LD Days Accrued Interest Total T from last Coupon between Coupon Date Dates Days ND (Coupon) Dirty Price Clean price Accrued Interest Accrued Interest Face * C T LD * 2 ND LD Bond Valuation Value of a bond is the present value of future cashflows, so...
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...Outline Solutions for End-of-Chapter Questions and Problems 1. What is the difference between book value accounting and market value accounting? How do interest rate changes affect the value of bank assets and liabilities under the two methods? What is marking to market? Book value accounting reports assets and liabilities at the original issue values. Market value accounting reports assets and liabilities at their current market values. Current market values may be different from book values because they reflect current market conditions, such as current interest rates. FIs generally report their balance sheets using book value accounting methods. This is a problem if an asset or liability has to be liquidated immediately. If the asset or liability is held until maturity, then the reporting of book values does not pose a problem. For an FI, a major factor affecting asset and liability values is interest rate changes. If interest rates increase, the value of both loans (assets) and deposits and debt (liabilities) fall. If assets and liabilities are held until maturity, it does not affect the book valuation of the FI. However, if deposits or loans have to be refinanced, then market value accounting presents a better picture of the condition of the FI. The process by which changes in the economic value of assets and liabilities are accounted is called marking to market. The changes can be beneficial as well as detrimental to the total economic health of the FI. 6. Consider three...
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...Bond Valuation By Anuj Joshi Note 1 Bond Valuation Fixed income paying securities. 1. Theoretical price or value of bond depends upon. i. Coupon Payment : Fixed amount of interest to be received after prescribed frequency. ii. Maturity Value [Unless otherwise given is exam, we should take face value] iii. Discount Rate : It should always be market interest rate 2. What is market interest rate Market interest rate is derived from comparable listed bond. The comparison is based on risk and life of the bond. E.g. If we are valuing a bond which is unlisted and have 5 years of life, then we should look for a bond which is similar in risk profile (i.e. same credit rating)and having similar life. The YTM (Yield to Maturity) of listed bond is called market interest rate The YTM of a bond is nothing but IRR of the bond. 3. Value of a bond = PV of Coupon Amount + PV of Maturity Value [Remember CF and discount rate are before tax] Concept Point: i. Coupon rate is a historical rate and should never be used as a discount rate. In exam, if no other information is available, then only we should assume coupon rate of interest as market rate of interest. ii. Remember, Cost of Capital or Discount Rate is a future concept and it represents opportunity cost on the date of valuation. iii. YTM of a similar bond (i.e. current market interest rate) is the appropriate discount rate for bond valuation. How to value a bond which pays interest at a frequency lower than annually (e...
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...Chapter 4 – Bond Price Volatility Extra Questions 1. Be sure you understand all the relationships shown in Exhibit 4-11 2. The price of a bond can be written as either as the sum of series of discounted CFs (Equation 4.1, page 63) or as the sum of the PV of an annuity and the discounted maturity value (Equation 4.9, page 67). Note that the PV of an annuity formula used in Equation 4.9 is derived from the difference between a perpetuity starting at time zero and a perpetuity starting at time n. The difference is an annuity starting at time 0 and ending at time n. Equation 4.3 is the first derivative of price w.r.t. yield (∂P/∂y) using equation 4.1. The numerator of equation 4.10 is first derivative of the price w.r.t. yield using equation 4.9. Consider either equation 4.3 or the numerator of 4.9. Determine only the sign of following second derivative and mixed partial derivatives: * ∂2P/∂y2 * ∂2P/∂y∂C * ∂2P/∂y∂n (a) Does duration increase or decrease as the initial yield increases?(decrease) (b) Does duration increase or decrease as the coupon increases?(decrease) (c) Does duration increase or decrease as the maturity increases?(increase) 3. (This is questions 2 and 4 from the text.) Consider semi-annual bonds A and B. | Bond A | Bond B | Coupon | 8% | 9% | Yield to maturity | 8% | 8% | Maturity (years) | 2 | 5 | Par | $100.00 | $100.00 | Price | $100.00 | $104.055 | Produce an Excel...
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...主编出版：《固定收益证券定价理论》、《财务报表分析技术》、《公司财务》、《衍生产品定 价理论》、《商业银行管理学》多本金融教材，备受金融学习者与从业人员好评。 新浪微博：汤震宇CFA_金程教育 联系方式： 电话：021－33926711 2-156 邮箱：training@gfedu.net 100% Contribution Breeds Professionalism 前导课程大纲 CFA一级框架结构 金 金程服务平台及百题分析报告 务 台 析 计算器使用 财务前导 3-156 100% Contribution Breeds Professionalism CFA 考试知识点及其比重 TOPIC AREA LEVELⅠ LEVELⅡ LEVEL Ⅲ Ethical and Professional Standards (total) 15 10 10 Quantitative Methods 12 5-10 0 Economics 10 5-10 0 Financial St t Fi i l Statement A l i t Analysis 20 15-25 15 25 0 Corporate Finance 8 5-15 0 Investment Tools (total) 50 30 60 30-60 0 Analysis of Equity Investments 10 20-30 5--15 Analysis of Fixed Income Investments 12 5-15 10--20 Analysis of Derivatives 5 5-15 5--15 Analysis of Alternative Investments 3 5-15 5--15 Asset Valuation (total) 30 35-75 35--45 Portfolio Management (total) 5 5-15 45--55 100 100 100 TOTAL 4-156 100% Contribution Breeds Professionalism 知识框架分析——Ethics 知识框架分析——Ethics Code of Ethics Integrity g y Credit ...
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...rescue of a hedge fund called Long-Term Capital Management. The following policy and regulatory issues are raised by the LTCM debacle. First, even when the LTCM know the examples about the possibility of losses in less liquid positions, the LTCM’s risk managers ignored the severity of the jump in credit spreads and the liquidity crisis instead of using flight-to-quality model to fix it. The worse is it still utilizing the same covariance matrix to measure risk and to optimize positions inevitably results in biases in the measurement of risk. Second, the LTCM did not have suitable strategy to deal with the situation that there are other players held similar relative-value bets and that interrelations between them tend to vanish due to the market stress. It did nothing except using the same strategy to take positions that appear to generate “arbitrage” profits based on recent history but also represent bets on extreme events, like selling options. Third, according to the fund’s Value at risk (VAR) and the amount of capital necessary to support its risk portfolio, the LTCM’s strategies are analyzed, and illustrates that LTCM had seriously underestimated its risk due to its over reliance on risk concentration and VAR which even defective and even be dumped by other firms. Fourth, the LTCM is still not clear that the data gathering is not root methodology to predict the future crisis. Furthermore, relative-value traders of LTCM used to avoid risk limits, which it contrast to the other...
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...Pictet-Absolute Return Fixed Income: unlocking the potential of a rapidly-changing bond market Pictet Asset Management May 2014 For professional investors only Overview From 16 to 9. Over the past decade, the number of sovereign borrowers rated triple-A by Standard and Poor's has almost halved. There is probably no clearer testament to the damage caused by the financial crisis. But it is not the only momentous change facing fixed income investors. In another break with the past, policymakers in the developed world no longer worry about the moral hazard of intervening in the capital markets. Driving down real interest rates close to zero has been the policy of choice in the US, UK and Japan, while in the euro zone it has become de rigueur to encourage banks to buy the bonds of those governments with the weakest credit credentials. If dealing with unorthodox monetary and fiscal policies is not challenging enough for fixed income investors, traditional bond benchmarks – and the strategies tied to them – do not help matters. In fact, they often amplify risks. Because these indices are capitalisation- or, perhaps more accurately, liability-weighted, they expose investors to the governments and corporations that issue the most debt. This not only leaves participants vulnerable to the potentially unfavourable shifts in borrower creditworthiness, it also restricts their access to more attractive investment opportunities elsewhere. The bond investor’s plight is further complicated...
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...Understanding Fixed Interest in a Portfolio Fixed interest securities should play a crucial defensive role in a balanced investment portfolio, providing predictable, regular income and acting as a foil against the losses made on equity holdings during times of economic downturn. However, a poorly constructed defensive allocation will fail in meeting those objectives in times of market turmoil, as demonstrated in recent years. Not all assets that have been labelled fixed income are “true to label”, and furthermore, not even all bonds are made equal. Advisers need to be aware that some are inherently much more risky than others, and others are just not fit for purpose if the objective is to create a safe, predictable source of income that also diversifies a portfolio’s equity risk. FIXED INTEREST/BONDS – A DEFINITION Broadly, a bond can be defined as any debt instrument issued by a government/quasi-government entity or company/special purpose vehicle. In effect a bond is a commoditised, tradable loan where an investor provides capital in exchange for a legally enforceable promise by the issuer to pay the investor regular interest over a fixed period of time and principal at maturity. Naturally, the ability to enforce payment will be a function of the solvency of the borrower. Therefore, assessing credit quality is vital in fixed interest investing. High quality issuers generally fund at lower yields whereas higher yields are paid by issuers of lower credit quality due to...
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...the prospectus carefully before investing. Prospectuses are available by calling Dimensional Fund Advisors collect at (512) 306-7400 or at www.dimensional.com. Dimensional funds are distributed by DFA Securities LLC. Dimensional Funds COMPONENT STRATEGIES US Large Company US Large Cap Equity Enhanced US Large Company International Large Cap Emerging Markets US Large Cap Value International Value Emerging Markets Value World ex US Value World ex US Targeted Value US Large Cap Growth International Large Cap Growth US Small Cap US Micro Cap International Small Company Emerging Markets Small Cap US Small Cap Value US Targeted Value International Small Cap Value US Small Cap Growth International Small Cap Growth As of August 31, 2013 CORE EQUITY STRATEGIES US Core Equity 1 US Core Equity 2 US Vector Equity International Core Equity International Vector Equity Emerging Markets Core Equity World ex US Core Equity SPECIALIZED CORE EQUITY STRATEGIES US Sustainability Core 1 International Sustainability Core 1 US Social Core Equity 2 International Social Core Equity Emerging Markets Social Core Equity TAX MANAGEMENT STRATEGIES Tax-Managed US Equity Tax-Advantaged US Core Equity 2 Tax-Managed US Marketwide Value Tax-Advantaged World ex US Core Tax-Managed International Value Tax-Managed US Small Cap Tax-Managed US Targeted Value...
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...recognizing and using the fixed and variable cost. The Hospital Supply, Inc. case is where they manufacture hydraulic hoists and have a normal volume of 3,000 units per month. Using a break-even analysis the determination of the sales volume and prices will reveal what the company will need to profitably sell its product. There are also scenarios given to determine which options to take to maximize profit or at least minimize loss. Exhibit 1 displays the cost per unit for hydraulic hoists and will provide the information needed to determine how Hospital Supply Inc. can maximize its profit in the following various scenarios. Part one is to determine both the break-even volume in units and in sales dollars. First we need to add all the variable costs per unit = $550 + $825 + $420 + $275 = $ 2,070 and fixed costs per unit = $660 + $770 = $1,430. Given information within the problem include: Normal volume = 3,000 units Regular selling price = $4,350 To find total fixed cost = 3,000 units *$1,430/unit = $4,290,000 By taking the regular selling price and subtract the variable cost per unit gives the unit contribution: = price/unit – variable cost/unit = $4,350 - $2,070 = $2,280 Contribution percent = $2,280/$4,350 = 0.524138 - Break-even volume in units = fixed cost/unit contribution = $4,290,000/$2,280 = 1,882 units - Break-even volume in sales = fixed cost/ contribution percent = $4,290,000/$0.524138 = $8,184,867 Problem 2: Market research estimates...
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...International University 2013 VIETNAM FIXED INCOME MARKET Project for Fixed Income Securities course Hàn Khánh Phương Dương Khánh Ngọc Nguyễn Kim Ngân Nguyễn Phúc Trọng Phạm Lương Nữ Hoàng Table of Contents I. INTRODUCTION AND OVERVIEW THE VIETNAM FIXED INCOME MARKET 3 II. TIMELINE 4 III. VIETNAM’S PRIMARY MARKET AND SECONDARY MARKET 5 IV. STATE OF FIXED INCOME MARKET IN VIETNAM 6 I. INTRODUCTION AND OVERVIEW THE VIETNAM FIXED INCOME MARKET The bond market (also known as the credit, or fixed income market) is a financial market where participants can issue new debt, known as the primary market, or buy and sell debt securities, known as the Secondary market, usually in the form of bonds. The primary goal of the bond market is to provide a mechanism for long term funding of public and private expenditures. The "bond market" usually refers to the government bond market, because of its size, liquidity, relative lack of credit risk and, therefore, sensitivity to interest rates. Because of the inverse relationship between bond valuation and interest rates, the bond market is often used to indicate changes in interest rates or the shape of the yield curve. The yield curve is the measure of "cost of funding". The Securities Industry and Financial Markets Association (SIFMA) classify the broader bond market into five specific bond markets. * Corporate * Government & agency. * Municipal * Mortgage...
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