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Credit Risks, Pricing Bonds, Interest Rate Instruments, And The Term Structure Of Interest Rates

In: Derivatives, Risk Management & Value

Author

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  • Mondher Bellalah

    (Université de Cergy-Pontoise, France)

Abstract

The following sections are included:Chapter OutlineIntroductionTime Value of Money and the Mathematics of BondsSingle payment formulasUniform-series present worth factor (USPWF) and the capital recovery factor (CRF)Uniform-series compound-amount factor (USCAF) and the sinking fund factor (SFF)Nominal interest rates and continuous compoundingPricing BondsA coupon-paying bondZero-coupon bondsComputation of the Yield or the Internal Rate of ReturnHow to measure the yieldThe CYThe YTMThe YTCThe potential yield from holding bondsPrice Volatility Measures: Duration and ConvexityDurationDuration of a bond portfolioModified durationPrice volatility measures: ConvexityThe Yield Curve and the Theories of Interest RatesThe shapes of the yield curveTheories of the term structure of interest ratesThe pure expectations theoryThe YTM and the Theories of the Term Structure of Interest RatesComputing the YTMMarket segmentation theory of the term structureSpot Rates and Forward Interest RatesThe theoretical spot rateForward ratesIssuing and Redeeming BondsMortgage-Backed Securities: The Monthly Mortgage Payments for a Level-Payment Fixed-Rate MortgageInterest Rate SwapsThe pricing of interest rate swapsThe swap value as the difference between the prices of two bondsThe valuation of currency swapsComputing the swapSummaryQuestionsReferences

Suggested Citation

  • Mondher Bellalah, 2009. "Credit Risks, Pricing Bonds, Interest Rate Instruments, And The Term Structure Of Interest Rates," World Scientific Book Chapters, in: Derivatives, Risk Management & Value, chapter 5, pages 259-291, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789812838636_0005
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