Module 2 Flashcards
The most volatile bond of all for a given maturity
Zero coupon bonds
Measures interest rate risk
Duration
Number of years until bond pays its par value
Maturity
The lower the coupon rate
The more volatile the price of the fixed income security
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Percentage change in the price of a bond is equal to the duration times the change in interest rates.
Most bonds pay _________ interest
Semi annual
The most common form of owning zero coupon bonds
US Treasury STRIPS
Commercial paper
Short term, unsecured IOU’s of corporations . Sold at a discount with interest payable at maturity with maturities up to 270 days.
Bankers Acceptance
Time drafts issued at a discount to finance international trade. Maturities generally between 30 and 180 days
3 quant techniques for evaluating performance that relate return to risk
Sharpe index
Treynor index
JENSEN INDEX
Sharpe index
Return on investment to the degree of total risk taken. By itself little use but when comparing funds the one with highest sharpe ratio should be taken
Treynor index
Similar to Sharpe but measures systematic or market risk taken
Jensen index
Alpha
