Lecture Financial markets and institutions - Chapter 8 presents the following content: Bond valuation process; relationships between coupon rate, required return, and bond price; explaining bond price movements; sensitivity of bond prices to interest rate movements; bond investment strategies used by investors; return and risk of international bonds.
Chapter 6 introduces you to interest rates and bond valuation. In this chapter, you will learn: Know the important bond features and bond types, understand bond values and why they fluctuate, understand bond ratings and what they mean, understand the impact of inflation on interest rates, understand the term structure of interest rates and the determinants of bond yields.
Mục tiêu bài học: Hiểu biết về những đặc điểm quan trọng của trái
phiếu và các loại trái phiếu; Hiểu biết về giá trị trái phiếu và lý do của sự thay
đổi của giá trị trái phiếu; Hiểu biết về xếp hạng trái phiếu; Hiểu biết về tác động của lạm phát đối với lãi
suất; Hiểu biết về cấu trúc kỳ hạn của lãi suất (the
term structure of interest rates) và các yếu tố
quyết định lợi tức trái phiếu (bond yields)....
Par or Face Value -
The amount of money that is paid to the bondholders at maturity. For most bonds this amount is $1,000. It also generally represents the amount of money borrowed by the bond issuer.
Coupon Rate -
The coupon rate, which is generally fixed, determines the periodic coupon or interest payments. It is expressed as a percentage of the bond's face value. It also represents the interest cost of the bond to the issuer.
Chapter 6 introduces you to the world of interest rates and bonds. Though bonds are considered to be among the safest investments available, they are not without risk. The primary risk that bond investors face is the risk that market interest rates will fluctuate. Those fluctuations cause bond prices to move, and those movements affect the returns that bond investors earn. Chapter 6 explains why interest rates vary from one bond to another and the factors that cause interest rates to move.
The goal in this chapter is to introduce you to bonds. After studying this chapter you will be able to understand: Important bond features and types of bonds, cond values and yields and why they fluctuate, bond ratings and what they mean, the impact of inflation on interest rates, the term structure of interest rates and the determinants of bond yields.
After studying chapter 4, you should be able to: Distinguish among the various terms used to express value, including liquidation value, going-concern value; value bonds, preferred stocks, and common stocks; calculate the rates of return (or yields) of different types of long-term securities; list and explain a number of observations regarding the behavior of bond prices.
We are now able to apply these concepts to determining the value of different securities. In particular, we are concerned with the valuation of the firm’s long-term securities – bonds, preferred stock, and common stock (though the principles discussed apply to other securities as well).
Bonds are securities that establish a creditor relationship between the purchaser (creditor) and the
issuer (debtor). The issuer receives a certain amount of money in return for the bond, and is
obligated to repay the principal at the end of the lifetime of the bond (maturity). Typically, bonds
also require coupon or interest payments. Since all these payments are determined as part of the
contracts, bonds are also called fixed income securities.
A straight bond is one where the purchaser pays a fixed amount of money to buy the bond.
Chapter 4 - Valuation of long-term securities. After studying chapter 4, you should be able to: Distinguish among the various terms used to express value, including liquidation value, going-concern value; value bonds, preferred stocks, and common stocks; calculate the rates of return (or yields) of different types of long-term securities; list and explain a number of observations regarding the behavior of bond prices.
In IONIC BONDING the valence electrons are completely
transferred from one atom to the other atom.
Ionic bonds occur between metals and nonmetals
when there is a large difference in electronegativity. In COVALENT BONDING the valence electrons are
shared as pairs between the bonded atoms.
Pure covalent bonding only occurs when two nonmetal
atoms of the same kind bind to each other. When two
different nonmetal atoms are bonded or a nonmetal and
a metal are bonded, then the bond is a mixture of covalent
and ionic bonding called polar covalent bonding.
Trái phiếu là loại chứng khoán xác nhận
quyền và lợi ích hợp pháp của người sở
hữu đối với m ột phần vốn nợ của tổ chức
(Điều 6, Luật Chứng Khoán 2007). Đặc điểm:
– Trái phiếu là m ột công cụ nợ
• G ần giống các khoản vay ngân hàng: khoản tiền,
thời hạn, lãi suất, trả lãi, hoàn vốn
– 3 nội dung trên bề m ặt trái phiếu
• M ệnh giá trái phiếu (Face Value)
• Lãi suất cuống phiếu (Lãi suất coupon)
• Thời hạn trái phiếu (Tim e to M aturity)...
Tài liệu môn Thị trường tài chính và các định chế tài chính- Chapters " Bond Valuation and Risk" dành cho các bạn sinh viên, học viên đang theo học ngành kinh tế, chuyên ngành tài chính: tài chính doanh nghiệp, taì chính ngân hàng, tài chính tiền tệ,...
The FSVM is missing a variable reflecting that the forward earnings yield is riskier than
the government bond yield. How should we measure risk in the model? An obvious
choice is to use the spread between corporate bond yields and Treasury bond yields. This
spread measures the market’s assessment of the risk that some corporations might be
forced to default on their bonds. Of course, such events are very unusual, especially for
companies included in the S&P 500.
CHAPTER 7 Bonds and Their Valuation
Key features of bonds Bond valuation Measuring yield Assessing risk
What is a bond?
A long-term debt instrument in which a borrower agrees to make payments of principal and interest, on specific dates, to the holders of the bond.
The market in bond market securities, also known as the fixedincome
market, is incredibly large and diverse, and one that plays
an irreplaceable part in global economic development. The vast
majority of securities in the world today are debt instruments, with outstanding
volume estimated at more than $10 trillion.
Fixed-Income Securities and Derivatives Handbook provides a concise
and accessible description of the main elements of the markets, concentrating
on the instruments used and their applications.
For decades, researchers have been puzzled by three sets of empirical results associated
with the pricing of initial public o¤erings (IPOs). Besides the well-documented
underpricing puzzle and hot-issue market puzzle1, severe long-run underperformance of
IPOs is reported recently by Ritter (1991) and Loughran and Ritter (1995), suggesting
that market ine¢ciency may be even more pervasive than previously recognized. Thus, the
IPO market, albeit small in scale, has become a leading example of anomalies against the
e¢cient market hypothesis (Fama 1998)....
Convertible bonds can be difficult to value, given their hybrid nature of containing elements of both debt and equity.
Further complications arise due to the frequent presence of additional options such as callability and puttability,
and contractual complexities such as trigger prices and “soft call” provisions, in which the ability of the issuing firm
to exercise its option to call is dependent upon the history of its stock price.