By Barbara Petitt, Jerald Pinto, Wendy L. Pirie

ISBN-10: 1118999495

ISBN-13: 9781118999493

The fundamental advisor to fastened source of revenue portfolio administration, from the specialists at CFA fastened source of revenue research offers authoritative and updated insurance of the way funding pros learn and deal with mounted source of revenue portfolios. With specified details from CFA Institute, this consultant includes accomplished, example-driven displays of all crucial themes within the box to supply worth for self-study, basic reference, and school room use. Readers are first brought to the basic thoughts of mounted source of revenue ahead of carrying on with directly to research of danger, asset-backed securities, time period constitution research, and a common framework for valuation that assumes no previous appropriate heritage. the ultimate component of the booklet comprises 3 readings that construct the data and abilities had to successfully deal with mounted source of revenue portfolios, giving readers a real-world figuring out of the way the strategies mentioned are virtually utilized in client-based eventualities. a part of the CFA Institute funding sequence, this publication offers an intensive exploration of fastened source of revenue research, essentially offered through specialists within the box. Readers achieve severe wisdom of underlying thoughts, and achieve the talents they should translate concept into perform. * comprehend fastened source of revenue securities, markets, and valuation * grasp hazard research and common valuation of mounted source of revenue securities * find out how fastened source of revenue securities are sponsored by way of swimming pools of resources * discover the relationships among bond yields of alternative maturities funding analysts, portfolio managers, person and institutional traders and their advisors, and someone with an curiosity in mounted source of revenue markets will have fun with this entry to the simplest in specialist caliber info. For a deeper knowing of fastened source of revenue portfolio administration practices, fastened source of revenue research is a whole, crucial source.

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The current yield is a measure of income that is analogous to the dividend yield for a common share. The most commonly referenced yield measure is known as the yield to maturity, also called the yield to redemption or redemption yield. The yield to maturity is the internal rate of return on a bond’s expected cash flows—that is, the discount rate that equates the present value of the bond’s expected cash flows until maturity with the bond’s price. The yield to maturity can be considered an estimate of the bond’s expected return; it reflects the annual return that an investor will earn on a bond if this investor purchases the bond today and holds it until maturity.

All bonds, whether they pay a fixed or floating rate of interest, make periodic coupon payments except for zero-coupon bonds. Such bonds do not pay interest, hence their name. Instead, they are issued at a discount to par value and redeemed at par; they are sometimes referred to as pure discount bonds. The interest earned on a zero-coupon bond is implied and equal to the difference between the par value and the purchase price. For example, if the par value is $1,000 and the purchase price is $950, the implied interest is $50.

4. Credit Enhancement Credit enhancement refers to a variety of provisions that can be used to reduce the credit risk of a bond issue and is very often used in securitized bonds. Credit enhancement provides additional collateral, insurance, and/or a third-party guarantee that the issuer will meet its obligations. Thus, it reduces credit risk, which increases the issue’s credit quality and decreases the bond’s yield. There are two primary types of credit enhancement: internal and external. Internal credit enhancement relies on structural features regarding the priority of payment or the value of the collateral.

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Fixed Income Analysis by Barbara Petitt, Jerald Pinto, Wendy L. Pirie

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