Unit 7 - Bonds and interest rate risk

Unit 7 Risk Assessment and Interest Rate Risk

Bonds ,[object Object],[object Object]

Bonds ,[object Object],[object Object],[object Object],[object Object]

Bonds ,[object Object],[object Object],[object Object]

Bond Price ,[object Object],[object Object]

Bond Price ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Bond Price ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Forwards and Futures ,[object Object],[object Object],[object Object]

Futures ,[object Object],[object Object],[object Object],[object Object]

Futures ,[object Object],[object Object],[object Object],[object Object],[object Object]

Futures ,[object Object],[object Object],[object Object]

Futures ,[object Object],[object Object],[object Object],Hedge achieved by combining a physical transaction alongside a derivative instrument

Futures ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Hedge achieved by combining a physical transaction alongside a derivative instrument

Interest Rate Futures strategy ,[object Object],[object Object]

Futures strategy ,[object Object],[object Object],[object Object]

Futures strategy ,[object Object],[object Object],[object Object],[object Object]

Interest Rate Swaps ,[object Object],[object Object]

Interest Rate Swaps ,[object Object],[object Object],[object Object],[object Object]

Interest Rate Swaps ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Interest Rate Swaps ,[object Object],[object Object],[object Object],A B Pays bank 6% Pays bank L+1.1% Pays B Libor Pays A 5.06%

Interest Rate Swaps ,[object Object],[object Object],[object Object],A B Pays bank 6% Pays bank L+1.1% Pays B Libor Pays A 5.06% The 2 companies have entered a swap agreement in addition to their individual bank agreements

Interest Rate Swaps ,[object Object],A B Pays bank 6% Pays bank L+1.1% Pays new bank Libor Pays new bank 5.08% Swap bank Pays A 5.03% Pays B Libor Notice the bank makes a profit

Interest Rate Swaps ,[object Object],[object Object],[object Object],[object Object],A B Pays bank 6% Pays bank L+1.1% Pays new bank Libor Pays new bank 5.08% Swap bank Pays A 5.03% Pays B Libor Notice the bank makes a profit

Unit 7 - Bonds and interest rate risk

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Unit 7 - Bonds and interest rate risk