Fixed Income

Question 1

Riding de yield curve

Answer 1

Comprar un bono con maturity mayor a tu IH si la curva es upward sloping

Question 2

Z-Spread

Answer 2

Constant bp added to each spot rate

Question 3

I-Spread

Answer 3

bond YTM - equal maturity swap rate

Question 4

G-Spread

Answer 4

Corporate - Gov. Bond

Question 5

TED-Spread

Answer 5

3m USD-Libor menos 3m T-Bill rate, si sube liquidity is dropping

Question 6

Libor - OIS Spread

Answer 6

3m Libor - 3m OIS rate, money market

Question 7

Pure expectations theory

Answer 7

Forward unbiased predictors of future spot rates, da igual maturity (cualquier bono es igual), no affect market participants decision

Question 8

Local expectations theory

Answer 8

E[R] = rf in short-term

Question 9

Liquidity preference theory

Answer 9

Forward upward biased predictor of spots, premium por prestar a LP

Question 10

Segmented market theory

Answer 10

Curva partida en segmentos independientes

Question 11

Preferred Habitat

Answer 11

Preferred yields, but no independence

Question 12

Volatility in short-term rates

Answer 12

Mayor

Question 13

Volatility at higher rates

Answer 13

Mayor

Question 14

Duration of a float coupon

Answer 14

~1

Question 15

Convexity for a call, straight and put bond

Answer 15

+-, low positive, +

Question 16

Min value of convertible bond

Answer 16

Max(Greater conversion value, arb-free straight bond)

Question 17

Share Price < Conversion Price

Answer 17

Actua como bono (afectado por i y cs)

Question 18

Heterogenous Securitized Debt

Answer 18

Loan by Loan

Question 19

Portfolio Based Approach Securitized Debt

Answer 19

Homogenous, granular (many #obligations) and medium-term risk

Question 20

Statistic Approach Securitized Debt

Answer 20

Static asset pool and short-term risk

Question 21

CTD

Answer 21

Menor % at par

Question 22

Cash Settlement

Answer 22

X% de par de tu bono es mayor que CTD

Question 23

Upfront Payment > 0

Answer 23

Buyer pays seller

Question 24

Structural Models of Credit

Answer 24

Inside information (Assets and Debt) con probability distribution (funciona como una opción) and default endogenous

Question 25

Reduced form models

Answer 25

Default is exogenous and explain when (inputs observable) using regression analysis con company and macro factors (assume Debt is publicly)

Question 26

Use of Libor

Answer 26

When private markets > public markets and lacks from liquidity

Question 27

Effective duration

Answer 27

Parallel Shifts (Level)

Question 28

Key rate duration

Answer 28

Shaping change (on specific maturity)

Question 29

Arbitrage free models

Answer 29

CIR y Vasicek, observed market prices, match observed term structure, no busca explicar la curva, menos parametros

Question 30

Equilibrium term structured models

Answer 30

Ho Lee y Kalatay, use fundamental economic variables

Question 31

Value additivity

Answer 31

Ganancia hoy

Question 32

Dominance

Answer 32

Ganancia at maturity

Question 33

Montecarlo Simulation

Answer 33

Same probability distribution , produces avg market value only by chance no fundamental, drift adjusted

Question 34

Aumenta volatilidad en rates

Answer 34

Sube el valor de la opción (baja call, baja OAS) y (Sube put, sube OAS)

Question 35

Capped y Floored

Answer 35

Afecta al cupón, pero no a la tasa de descuento

Question 36

Negative basis trade

Answer 36

CSbond > CScds, compras ambos

Question 37

Restructuring credit event

Answer 37

Change in seniority, currency of payment o reduction of debt service

Question 38

Sucession credit event

Answer 38

Change in corporate structure, modification of the cds

Question 39

Hazard rate

Answer 39

Probability that an event will occur given that it has not already ocurred