FINA 475 Lecture Notes - Lecture 1: Reference Rate, Libor, Weighted Arithmetic Mean
13 Sep 2017
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Agency sector: issued by federally related institutions and government sponsored enterprises. Municipal sector: issued by state and local governments. Corporate sector: issued in us by us/foreign corporations. Asset backed sector: backed by a pool of assets a. b. c. Can invest in a pooled vehicle to be exposed to broad bond market or specific sectors. Fixed income securities have become more complex over time and the buy/hold investors have become more active traders. Types of issuer: federal government/agencies, municipal governments, corporations. Term to maturity: date a bond will be redeemed (issuer pays principal) a. b. c. Week 1 page 1 b. c. d. e. f. g. Coupon rate: interest rate, annual payment is the coupon. Floating rate: coupon rate resets periodically (reference rate + quoted margin) Rate at which highest credit quality banks borrow from each other. Inverse floating rate bonds: coupon rate moves opposite from interest rates.
