Topic 1 - BMGT 343: Investments Prof. Anna A. Obizhaeva...

Info iconThis preview shows pages 1–6. Sign up to view the full content.

View Full Document Right Arrow Icon
1 Fixed Income Anna A.Obizhaeva BMGT 343: Investments Prof. Anna A. Obizhaeva Office: VMH 4428 Phone: (301) 405-7934 Email: obizhaeva@rhsmith.umd.edu Section 0101 T Th 9:30-10:45 am in VMH 1336 Section 0201 T Th 11:00-12:15 pm in VMH 1336 Section 0301 T Th 12:30-1:45 pm in VMH 1336 Office Hours : Thu 3:00-4:00 pm or by appointment Fixed Income Anna A.Obizhaeva Fixed Income Topic 1: Main concepts and definitions
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
2 Fixed Income Anna A.Obizhaeva Recap From Previous Class We learned that the concept of risk is central for finance. Measuring, pricing, and repackaging/reallocating risks are the essence of finance. We also talked about different markets: bonds, equities, f/x, options. These markets are subjects to different types of risks, and there are different analytical and quantitative tools to deal with them. We will start with fixed income securities . Fixed Income Anna A.Obizhaeva Outline for Topic 1 The universe of fixed income securities Main concepts: - Bond Price - Yield to Maturity and Current Yield - Bond Returns Reading: BKM Chapter 14
Background image of page 2
3 Fixed Income Anna A.Obizhaeva 1. Overview of Fixed Income Universe Fixed Income Anna A.Obizhaeva Definition of Fixed Income Securities A fixed income security is a security that promises cash flows of fixed amounts at fixed dates.
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
4 Fixed Income Anna A.Obizhaeva Who Issues Fixed Income Securities? Countries States Corporations Individuals Fixed income securities are closely related to the concepts of debt and loan . Fixed Income Anna A.Obizhaeva Money Market and Bond Market Broadly speaking, the fixed income universe consists of two markets: 1. The money market Treasury Bills Certificates of deposits Loans etc… 2. The bond market Treasury bonds and notes Municipal bonds Corporate bonds Mortgage-backed securities etc…
Background image of page 4
Fixed Income Anna A.Obizhaeva Fixed Income Securities vs. Stocks In the US: Market capitalization is as of 9/2004. Trading volume is the 2004 average. Source: The Bond Market Association, CRSP, NYSE. Fixed income securities are important ! Fixed income Stocks Market Capitalization 23.2 trillion 15.7 trillion (NYSE, Nasdaq, AMEX) Daily Trading Volume 500 billion (Treasury Only) 50 billion (NYSE Only) Fixed Income Anna A.Obizhaeva Fixed Income Terminology A zero-coupon bond promises a single cash flow, face value (or par value), at some future date, maturity . A coupon bond promises a periodic cash flow, coupon , and a face value at maturity. The coupon rate is the ratio of the coupon to the face value. Coupon payments are typically semiannual for US bonds and annual for European bonds. The time to maturity is the length of time until maturity. For simplicity, we assume from now on that bond have a face value
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 6
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 21

Topic 1 - BMGT 343: Investments Prof. Anna A. Obizhaeva...

This preview shows document pages 1 - 6. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online