Diapositive 1 afgap幻灯片1 afgap.pptVIP

? ? ? ? ? ? ? ? Sensitivity of the NAV ? ? ? ? ? ? ? ? The NAV of the 5-year bond paying a 4% yield is the following : ? ? ? ? ? ? ? ? ? ? Year Rate Cash Flow Df ??Rate Discounted Cash Flow ? ? Notional : 1 1,30% 4 0,987 3,9 ? ? 100 2 1,60% 4 0,969 3,9 ? ? Coupon : 3 2,10% 4 0,940 3,8 ? ? 4% 4 2,50% 4 0,906 3,6 ? ? ? 5 2,80% 104 0,871 90,6 ? ? ? ? ? ? Total 105,8 ? ? ? ? ? ? ? ? ? ? Goal. Compute the NAV of the bond after an increase of the yield curve of 0.5%. ? ? ? ? ? ? ? ? ? ? Step 1. Compute the new discount factors. ? ? ? ? ? ? ? ? ? ? ? ? Year Rate Rate +0.5% Cash Flow Df ??Rate+0.5% Discounted Cash Flow ? Notional : 1 1,30% 1,80% 4 0,982 ? ? 100 2 1,60% 2,10% 4 0,959 ? ? Coupon : 3 2,10% 2,60% 4 0,926 ? ? 4% 4 2,50% 3,00% 4 0,888 ? ? ? 5 2,80% 3,30% 104 0,850 ? ? ? ? ? ? ? Total ? ? Exercice The first slides are intended for beginners, in order to enable them to understand the fundamental principles of intermediation in a simple way. The course leader will need to adapt to their audience. If the audiences knowledge level is high, move through these slides quickly. If it is low, spend more time on them. Another, more illustrative approach may be adopted. By asking the following questions, for instance: If you had €10,000 in savings, would you be prepared to lend them to your grocer, who happens to be looking for money to carry out building works? If you needed €10,000 to buy a car, would your butcher be prepared to lend you the money? His business is going very well at the moment and he is flush with cash! The answer is obviously no. And the most natural solution is to go through a bank: People who have savings deposit them with a bank. The bank will then be able to lend those very savings to people who need money. * * * * OLB = Loan Amount * (1 - [principal already repaid]Loan principal already repaid = Amount * ((1 + i) ^ age of the loan) -1 / ((1 + i) ^ maturity) -1From there you can go to Loan Amount * (1 - ((1 + i) ^ age of the loan) -1 /