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KIC000040 - "Lcolelc Jar ml on Emit mission Nada which...

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Unformatted text preview: "Lcolelc Jar ml on Emit mission Nada which ST RIPS . The Separate Trading of Registered Interest and Principle of Securities (STRIPS) is a government progmm that facilltates coupon stripping. A band can be delivered to the Treasury for stripping or reconstitution. All securities are eligible for stripping now, including TIPS. 9; The promised individual claim to a coupon payment is called a C-ST RIP and that has a price. - The promised individual claim to the principle is called a .. P»STRIP and that has a price. " Arbitrage and STRIPS Since we can construct a set of cash flows that match the cash flows of a treasury note from STRIPS, a pricing relation should hold Some C-STRIPS and PvSTRlPS appear to be 'rid'i” or “cheap” relative to coupon paying securities or to each other. What are some issues? ”91' — P-STRIPS are not fungible ( interchancgmble — Liquidity and price quotes ‘ . - Always remember tales! Yield Curve vs. Spot Curve WedonotwanttouseYTMforacurve—why? . What we want to know Is what the discount rate is i for a cash flow receive at a particular maturity. swam- We need a zero-coupon bond or a STRIP right? What if we want to use coupon notes or bonds? ., r www~wqmmeu.y. ‘ , , __—‘ _.___-._.._.______._.m.——.—»-.~~ ...
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