Bond Valuation 债券定价 - 现代金融市场概论教学课件.ppt

Part1 Bond Valuation What is a bond? Different issuers Different maturities Different styles Bond rating Terminology Bond pricing Zero coupon bond Ordinary coupon bond Examples Converse question Some concepts Yield to maturity Term structure Future spot rate Forward rate What is a bond? Bonds are loans that investors make to corporations and governments. The borrowers get the cash they need while the lenders earn interest. (The Wall Street Journal – Guide to understanding money investing) a. Different issuers – Government (Treasury securities: T-bills, T-notes, T-bonds, Foreign-targeted T-notes), states, cities, counties, and towns (Municipal bonds), corporations (corporate bonds) What is a bond? Different maturities – short term (less than 1 years, e.g. T-bills) vs. long term (T-notes, T-bonds, etc) Different styles – Coupon bonds (most of corporate bonds) vs. zero-coupon bonds (e.g. STRIPS – Separate Trading of Registered Interest and Principal of Securities) → Why are STRIPS popular especially for an agent who can defer tax? What is a bond? d. Bond rating – Hard to evaluate the default risk in a bond Agencies: SP (Standard and Poor’s) and Moody’s Investment grade: At least BBB (SP) or Baa(Moody’s) Junk bonds: At most CC (SP) or Ca (Moody’s) What is a bond? Moody’s Long-Term Rating Definitions - Example Aaa Obligations rated Aaa are judged to be of the highest quality, with minimal credit risk. Aa Obligations rated Aa are judged to be of high quality and are subject to very low credit risk. A Obligations rated A are considered upper-medium grade and are subject to low credit risk. Baa Obligations rated Baa are subject to moderate credit risk. They are considered medium-grade and as such may possess certain speculative characteristics. What is a bond? Ba Obligations rated Ba are judged to have speculative elements and are subject to substantial credit risk. B Obligations rated B are considered speculative and are subject to high credit ri