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Unformatted text preview: -YTM-c Spot If the spot rate term structure is downward sloping=> all spot rates are decreasing across the term-YTM > Spot Problems with YTM Spread YTM is dependent on timing of cash flows. Comparing a defaultable security to a risk-free security with different cash flows impacts YTM What else are we assuming with YTM? Since we know the promised cash flows for a defaultable bond, we can use information about the term structure of risk-free spot rates to discount them. • • • 8...
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This note was uploaded on 09/06/2011 for the course FIN 428 taught by Professor Hood during the Fall '11 term at Iowa State.
- Fall '11