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Span. MGT 4850 Spring 2007 College of Lethbridge. Loan fee Term Structure. http://www.smartmoney.com/onebond/index.cfm?story=yieldcurve. Bootstraping and Forward rates . Non-arbitrage in Loan cost prospects Exchanging the Yield bend Exchanging Spreads. The NOB Spread.
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Span MGT 4850 Spring 2007 University of Lethbridge

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Interest Rate Term Structure http://www.smartmoney.com/onebond/index.cfm?story=yieldcurve

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Bootstraping and Forward rates Non-arbitrage in Interest rate prospects Trading the Yield bend Trading Spreads

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The NOB Spread The NOB spread is "notes over securities" Traders who utilize NOB spreads are estimating on movements in the yield bend If you feel the crevice between long haul rates and here and now rates will limit ( yield bend slant diminishes or smoothes), you could offer T-note fates contracts and purchase T-security fates

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NOB spread ( exchanging the yield bend) slant increments (long haul R expands more than here and now or here and now even declines) purchase notes offer securities

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TED spread (diverse yield bends) The TED spread is the contrast between the cost of the U.S. T-charge fates contract and the eurodollar fates contract, where both fates contracts have a similar conveyance month (T-charge yield<ED yield) If you think the spread will broaden, purchase the spread (purchase T-charge, offer ED)

Slide 7

Trading Spreads

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Definition Measure of the affectability of the cost of a cling to changes in the loan fee at which security is marked down Macauley span measure Basic Duration Calculation

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Using Excel Formula Settlement (buy date) Maturity (security\'s development date) Coupon Yield (to development) Frequency (# coupons every year) Basis (day number) 0 30/360 1 act/genuine 2 act/360 3 act/365 4 Eur 30/360

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Meaning of Duration Weighted Average of the security\'s installments Bond\'s value flexibility concerning its rebate rate Discount figure versatility Price unpredictability

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Babcock\'s Formula Weighted normal of "current yield" and PVIF

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Duration Patterns Maturity

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Duration Patterns Coupon

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