Ok. but there can be other solution also like- Pay MSCI Japan value index & recv MSCI Japan growth index, recv S&P Japanese Govt Bond index,recv S&P Japanese Corporate Bond index. Can we write this as alternative solution?
Ok. but there can be other solution also like-
Pay MSCI Japan value index & recv MSCI Japan growth index, recv S&P Japanese Govt Bond index,recv S&P Japanese Corporate Bond index.
MBS/ABS has features similar to Callable Bond. Issuer has the right to call the bond when market interest rate falls to redeem the callable bond & issue fresh bonds at the lower interest rate to save the funding cost. Advantage for issuer. But for investor their is loss as he gets this fund to iRead more
MBS/ABS has features similar to Callable Bond.
Issuer has the right to call the bond when market interest rate falls to redeem the callable bond & issue fresh bonds at the lower interest rate to save the funding cost. Advantage for issuer. But for investor their is loss as he gets this fund to invest at a lower cost.
Similarly, when interest rate falls home owners prepay the loan (think of it as issuer of callable bond) and re finance at reduced rates and Bond holders get the fund to invest at lower rate. Thus in both the above bonds their is Pre-payment risk when interest rate falls in the market.
Interest rate path dependency arises in case of MBS. Its not only the Interest rate but how interest rate has arrived (path) is important. For ex. when Interest rate on home loan was say 8% then it came down to 6% so there will be high prepayment bcz home owners wants to enjoy this fall of 2%. ThenRead more
Interest rate path dependency arises in case of MBS. Its not only the Interest rate but how interest rate has arrived (path) is important. For ex. when Interest rate on home loan was say 8% then it came down to 6% so there will be high prepayment bcz home owners wants to enjoy this fall of 2%. Then again Int rate rose to say 7%, then again it came to say 5.5% (your loan was at 6%) so now there will be no major prepayment as it had happened in the first instance. This is the Interest rate path (Down then Up then Again Down). So MBS is getting impacted not only Int rate but how this has taken place. For ex when int rate came from 8% to 6% in 1st scenario MBS holders will get redemption as prepayment took place. But the same may not happen in 2nd case.
To understand this question first understand the meaning of Market liquidity risk. liquidity risk means security is less liquid or bid/ask spread is higher. Now if any company having lower issue size of debt or debt outstanding(say $100mn) is lower ,bid ask spread will be higher. Also if their is bRead more
To understand this question first understand the meaning of Market liquidity risk.
liquidity risk means security is less liquid or bid/ask spread is higher. Now if any company having lower issue size of debt or debt outstanding(say $100mn) is lower ,bid ask spread will be higher. Also if their is big issue size or high debt outstanding (say $500mn) it will trade frequently and bid -ask spread will be lower and liquidity risk will be low.
When we draw CML it is assumed we are investing in Market Portfolio (all risky assets) therefore unsystematic risk is getting diversified & i should be priced only for systematic risk (i.e Beta). So when we draw CML why we take SD(Total risk) instead of Beta. Also, if i build a portfolio of sayRead more
When we draw CML it is assumed we are investing in Market Portfolio (all risky assets) therefore unsystematic risk is getting diversified & i should be priced only for systematic risk (i.e Beta). So when we draw CML why we take SD(Total risk) instead of Beta.
Also, if i build a portfolio of say 50 stocks, to calculate risk why should i take SD (total risk) , since i have already diversified i should only calculate Systematic risk i.e Beta
I am not 100% satisfied with the answer. I am writing my doubt in detailed manner now- When we draw CML it is assumed we are investing in Market Portfolio (all risky assets) therefore unsystematic risk is getting diversified & i should be priced only for systematic risk (i.e Beta). So when we dRead more
I am not 100% satisfied with the answer. I am writing my doubt in detailed manner now-
When we draw CML it is assumed we are investing in Market Portfolio (all risky assets) therefore unsystematic risk is getting diversified & i should be priced only for systematic risk (i.e Beta). So when we draw CML why we take SD(Total risk) instead of Beta.
Also, if i build a portfolio of say 50 stocks, to calculate risk why should i take SD (total risk) , since i have already diversified i should only calculate Systematic risk i.e Beta
Future Value vs Forward value
But Future price of Futures also lies at expiry of Future period so ideally we should do PV.
But Future price of Futures also lies at expiry of Future period so ideally we should do PV.
See lessEquity Swap – Changing Allocation
Ok. but there can be other solution also like- Pay MSCI Japan value index & recv MSCI Japan growth index, recv S&P Japanese Govt Bond index,recv S&P Japanese Corporate Bond index. Can we write this as alternative solution?
Ok. but there can be other solution also like-
Pay MSCI Japan value index & recv MSCI Japan growth index, recv S&P Japanese Govt Bond index,recv S&P Japanese Corporate Bond index.
Can we write this as alternative solution?
See lessEquity Swap – Changing Allocation
Attaching solution also. Pls clarify
Attaching solution also. Pls clarify
See lessAccrual Tax Drag
But answer given is B.
But answer given is B.
See lessIA AN ABS /MBS A CALLABLE BOND?
MBS/ABS has features similar to Callable Bond. Issuer has the right to call the bond when market interest rate falls to redeem the callable bond & issue fresh bonds at the lower interest rate to save the funding cost. Advantage for issuer. But for investor their is loss as he gets this fund to iRead more
MBS/ABS has features similar to Callable Bond.
Issuer has the right to call the bond when market interest rate falls to redeem the callable bond & issue fresh bonds at the lower interest rate to save the funding cost. Advantage for issuer. But for investor their is loss as he gets this fund to invest at a lower cost.
Similarly, when interest rate falls home owners prepay the loan (think of it as issuer of callable bond) and re finance at reduced rates and Bond holders get the fund to invest at lower rate. Thus in both the above bonds their is Pre-payment risk when interest rate falls in the market.
See lessIntrest rate path dependency
Interest rate path dependency arises in case of MBS. Its not only the Interest rate but how interest rate has arrived (path) is important. For ex. when Interest rate on home loan was say 8% then it came down to 6% so there will be high prepayment bcz home owners wants to enjoy this fall of 2%. ThenRead more
Interest rate path dependency arises in case of MBS. Its not only the Interest rate but how interest rate has arrived (path) is important. For ex. when Interest rate on home loan was say 8% then it came down to 6% so there will be high prepayment bcz home owners wants to enjoy this fall of 2%. Then again Int rate rose to say 7%, then again it came to say 5.5% (your loan was at 6%) so now there will be no major prepayment as it had happened in the first instance. This is the Interest rate path (Down then Up then Again Down). So MBS is getting impacted not only Int rate but how this has taken place. For ex when int rate came from 8% to 6% in 1st scenario MBS holders will get redemption as prepayment took place. But the same may not happen in 2nd case.
See lessFundamentals of Credit Analysis Learning Outcomes
To understand this question first understand the meaning of Market liquidity risk. liquidity risk means security is less liquid or bid/ask spread is higher. Now if any company having lower issue size of debt or debt outstanding(say $100mn) is lower ,bid ask spread will be higher. Also if their is bRead more
To understand this question first understand the meaning of Market liquidity risk.
liquidity risk means security is less liquid or bid/ask spread is higher. Now if any company having lower issue size of debt or debt outstanding(say $100mn) is lower ,bid ask spread will be higher. Also if their is big issue size or high debt outstanding (say $500mn) it will trade frequently and bid -ask spread will be lower and liquidity risk will be low.
See lessInsights of Security Market Line
When we draw CML it is assumed we are investing in Market Portfolio (all risky assets) therefore unsystematic risk is getting diversified & i should be priced only for systematic risk (i.e Beta). So when we draw CML why we take SD(Total risk) instead of Beta. Also, if i build a portfolio of sayRead more
When we draw CML it is assumed we are investing in Market Portfolio (all risky assets) therefore unsystematic risk is getting diversified & i should be priced only for systematic risk (i.e Beta). So when we draw CML why we take SD(Total risk) instead of Beta.
Also, if i build a portfolio of say 50 stocks, to calculate risk why should i take SD (total risk) , since i have already diversified i should only calculate Systematic risk i.e Beta
See lessInsights of Security Market Line
I am not 100% satisfied with the answer. I am writing my doubt in detailed manner now- When we draw CML it is assumed we are investing in Market Portfolio (all risky assets) therefore unsystematic risk is getting diversified & i should be priced only for systematic risk (i.e Beta). So when we dRead more
I am not 100% satisfied with the answer. I am writing my doubt in detailed manner now-
When we draw CML it is assumed we are investing in Market Portfolio (all risky assets) therefore unsystematic risk is getting diversified & i should be priced only for systematic risk (i.e Beta). So when we draw CML why we take SD(Total risk) instead of Beta.
Also, if i build a portfolio of say 50 stocks, to calculate risk why should i take SD (total risk) , since i have already diversified i should only calculate Systematic risk i.e Beta
See less