FixedIncomeRisks

FixedIncomeRisks

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Unformatted text preview: heaper
funding
by
 refinancing).
 •  A
version
of
this
risk
is
the
prepayment
risk
of
 mortgage
backed
securi8es.
 Credit
Risk
 •  Risk
due
to
a
change
in
the
creditworthiness
 of
the
issuer.
 •  Default
risk
 –  Recovery
risk
 •  Migra8on
risk
 •  Spread
risk
(oTen
considered
a
part
of
market
 risk).
 Treasury‐Eurodollar Spread (TED Spread) Source:
Wikipedia
 Yield
Curve
/
Maturity
Risk
 •  The
yield
curve
refers
to
the
current
market
 informa8on
giving
the
yield
to
maturity
for
bonds
 of
different
dura8ons.
 •  It
can
be
used
to
make
assump8ons
about
the
 future
behaviour
of
interest
rates.
 •  Investment
decisions
may
be
made
based
on
a
 par8cular
assump8on
on
the
behaviour
of
the
 yield
curve.
 –  The
obtained
return
will
be
affected
by
devia8ons
of
 actual
interest
rates
that
prevail
in
the
future
from
 those
inferred
from
the
current
yield
curve.

 Infla8on
Risk
 • ...
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This note was uploaded on 01/13/2011 for the course ACTSC 445 taught by Professor Christianelemieux during the Spring '09 term at Waterloo.

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