Nine Facts about Working on Wall Street
The crashes, the rises, the colorful fund managers, the rags to riches stories and the riches to rags stories make Wall Street one of the most interesting and colorful places in the world to work in....
View ArticleBootstrapping Spot Rate Curve (Zero Curve)
A spot rate curve, also known as a zero curve refers to the yield curve constructed using the spot rates such as Treasury spot rates instead of the yields. A spot rate Treasury curve is more suitable...
View ArticleHow to Price a Bond Using Spot Rates (Zero Curve)
The simplest way to calculate the value of a bond is to take the cash flows of the bond till its maturity and then discount them by a single discount rate. The method is quick but not very accurate...
View ArticleMargin Requirements for Non-centrally Cleared Derivatives – Updated
The Basel Committee on Banking Supervision and the International Organization of Securities Commissions (IOSCO) have today published a second consultative paper which represents a near-final proposal...
View ArticleHow to Make a Million Dollars an Hour
If you liked our article – Nine facts about Working on Wall Street – you will also like this video interview with Les Leopold, author of the book How to Make a Million Dollars an Hour. In the...
View ArticleFAQs on Quantitative Finance
Getting agreement between finance theory and finance practice is important like never before. In the last decade the derivatives business has grown to a staggering size, such that the outstanding...
View ArticleThe Eurozone’s Design Failures: Can they be corrected?
Below is the podcast of the lecture “The Eurozone’s Design Failures: can they be corrected?” by Professor Paul De Grauwe. In the podcast Prof. Paul talks about design failures in Eurozone, such as...
View ArticleSetting Financial Goals: Back to the Future
Everybody needs financial goals. Right? Right. What are yours? It could be to have a nice nest egg by the time you retire, provide for your child’s education, care for your parents in their old age,...
View ArticleBuying a Home: When to say NO?
For most people it’s a dream to own a house. Any house, most people would say that we call our own. No more bickering with the landlord, put nails where you want on the wall, your own private oasis...
View ArticleMutual Funds: A Beginner’s Guide
We all have different financial goals at different points of time. It could be the education of your child, retirement plans or the marriage of your child. We all look at ways of making our money work...
View ArticleSecurities Exams
FINRA, the U.S. Financial Industry Regulatory Authority, NASAA, and National Futures Association (NFA) conduct various financial securities examinations. These examinations classified into two levels,...
View ArticleHow to Value a Bond Using Forward Rates
We have seen that a bond can be valued using spot rates by discounting each cash flow by the spot rate for the maturity. We also saw that forward rates can be derived from spot rates. If so, we...
View ArticleWhat is CIBIL, Credit Score and Why You Should Care?
Banking is a risky business and it is very important for the lenders to make a fact-based informed decision while extending credit to any borrower. In an effort to do so, CIBIL (Credit Information...
View ArticleAn Overview of Behavioral Finance
‘Man is a rational being’ is a hypothesis that has been proved wrong several times over. Each person has their individual rationale in what they do and this is true in the sphere of investing as well....
View ArticleMeasuring Interest Rate Risk: Full Valuation Approach
We know that bond prices are sensitive to interest rate changes. A portfolio of bonds will suffer a loss if the interest rates rise and vice versa. Similarly, a short bond position will make losses...
View ArticleDiscounting of Cash Flows
A zero coupon bond is a fixed income instrument with only one cash flow i.e. the face value of the bond which is paid to the investor at the maturity date. It is a more appropriate instrument for...
View ArticlePrice Yield Relationship for Bonds
For a bond with a cash flow pattern the present value can be calculated using the following formula: Where the numerator denotes the coupon or principal in that period, t is the number of periods, T is...
View ArticleInfinite Series and Its Applications
Bonds consist of fixed coupons and the pricing of the bond involves the use of combinations of infinite series. A typical example would be the sum of terms that increase at an infinite rate. This...
View ArticleTaylor Series Expansion
In financial markets participants would like to measure the effect of changes in the price of the bond due to changes in yield. This enables better risk management of financial assets as the impact of...
View ArticleSensitivity Measures for Fixed Income Investments
The derivatives associated with fixed income instruments have special terminology for them. The negative of the first derivative is called the Dollar Duration (DD). Where is called the modified...
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