2646 Words11 Pages

Financial Modelling – Session VII
Email: jcadete@clsbe.lisboa.ucp.pt
Financial Modelling
Joaquim
Joaquim Cadete Cadete
1
How your work is going to be scored?
Svensson Model:
IR Swaps:
CIR Model:
Modeling
Formalization (6)
Functions
Efficiency Gains (3)
Functions
Efficiency Gains (3)
Further Improvements (5)
Efficiency Gains (3)
User’s
Perspective
Your Grade
Financial Modelling
Joaquim Cadete
2
Risk Management: the main concern…
Counterparty risk
Credit risk
Interest rate risk
Capital risk and solvency Funding risk
Risk
Management
Reputational risk Foreign exchange risk
Off-balance sheet risk Operational risk Financial Modelling
Market or*…show more content…*

Internal Rate of Return Net Present Value (NPV) Year 0 -1000 Year 1 300 Year 2 300 19,91% 0,00 € Year 3 300 Year 4 300 Year 5 300 Year 6 300 YTM calculation assumes that coupon payments will be reinvested over time at the same level Future Value Analysis Time Cash-Flows All cash-flows referenced to Year 6. Internal Rate of Return Net Future Value (NFV) Financial Modelling Year 0 -2971,89 Year 1 743,56 Year 2 620,12 Year 3 517,18 Year 4 431,32 Year 5 359,72 Year 6 300,00 19,91% 0,00 € Joaquim Cadete 15 Valuation of debt securities: just a recap Valuation using multiple discount rates: Suppose that the appropriate discount

Internal Rate of Return Net Present Value (NPV) Year 0 -1000 Year 1 300 Year 2 300 19,91% 0,00 € Year 3 300 Year 4 300 Year 5 300 Year 6 300 YTM calculation assumes that coupon payments will be reinvested over time at the same level Future Value Analysis Time Cash-Flows All cash-flows referenced to Year 6. Internal Rate of Return Net Future Value (NFV) Financial Modelling Year 0 -2971,89 Year 1 743,56 Year 2 620,12 Year 3 517,18 Year 4 431,32 Year 5 359,72 Year 6 300,00 19,91% 0,00 € Joaquim Cadete 15 Valuation of debt securities: just a recap Valuation using multiple discount rates: Suppose that the appropriate discount

Related

## Term Structure Of Interest Rates

1302 Words | 6 Pagesrates describes the empirical relationship between the yields on fixed income securities and their term to maturity (Poitras, 2005). The yield curve is the term structure’s graphical representation, plotting the yields of fixed income securities as a “function of their maturity” (Stander 2005, Cochrane, 2005). Yield curves are widely used in pricing and valuation techniques, supporting subjective and objective decision-making processes. Yield curves offer information that assists practitioners in determining

## Corporate Finance Analyst Of The Investment Bank

857 Words | 4 Pagesissuing. The computation is based on the yield to maturity, which measures the return that an investor would expect to receive by holding a bond until maturity. The Yield Curve, also known as term structure of interest rate, is a commonly used financial tool that tracks the relation between the yields and the time to maturity of a bond. Estimating the yield on a non-currently traded bond and identifying mispriced bonds are the purposes of using the yield curve.It could, furthermore, be used to forecast

## Business Analysis : Pearson Publishing

2007 Words | 9 PagesIntroduction Pearson Publishing is a very well established and known publisher which has a lengthy past of Excellency in delivering school resources, curriculum and leading the history of delivering essential curriculum resources to schools and became a market leader in way use of technology. Pearson publication holds 47% shares of the world’s largest publishers of books Penguin random house, as well as also holds 50% share in Economist Group, which is known to be specialised in international business

## Asset Swaps and Swap Spreads: Interest Rate Strategy

21469 Words | 86 PagesStrategy The spread between swaps and bonds can be traded in many different ways. In this note we describe asset swapping methodologies in detail with particular emphasis on calculation of spreads, risks, and tracking of trades. The spread of bond yields to swaps is also commonly used to evaluate richness and cheapness of bonds of differing maturities. In markets where the analytical power of players is ever growing,

## Pricing The Bond Option Of Vasicek And Cir Models

1629 Words | 7 PagesPricing the Bond option in Vasicek and CIR models Name: Huajun Liu Professor: Marco Pereira Course: Math 624 Date: 2016/12/18 1. Abstract This report is aimed to describe how we will use Python to build an application to price risky bond and the European options of the bond in stochastic hazard rate and interest rate models. We are going to simulate the path of interest rate using CIR model and simulate the path of hazard rate using Vasicek model. Then we will get the survival function from simulated

## Basic Idea Of Smoothing : Basic Concepts Of Setting

1113 Words | 5 Pagesof . Smoothing of a data set , involves the approximation of the mean response curve in the regression relationship. The function of interest could be the regression curve itself, certain derivatives of it or functions of derivatives such as extrema or inflection points. In the trivial case in which is a constant, estimation of reduces to the point of location, since an average over the response variables yields an estimate of . In practical studies though it is unlikely that the

## Cost Concepts Of Costs, And Traditional And Modern Theories Of Cost

850 Words | 4 PagesCosts. We study some important concepts of Costs, and traditional and modern theories of Cost. Contents: 1. Introduction 2. Cost concepts 3. The Cost Function 4. Cost-Output Relation 5. The Modern Theory of Costs 6. Economies of Scale and the LAC Curve 7. Elasticity of Cost 8. Elasticity of Productivity Cost concepts: Cost are critical in business choice making. Expense of creation gives the floor to estimating. It helps chiefs to take right choices, for example, what cost to cite, whether to put

## FMIA Assignment Completed Essay

2399 Words | 10 PagesMarket Model and Its Implications 4 Interpretations of Experian PLC Regressions Results 5 Sector Regression Analysis 6 Interpretations of Sector Regressions Results 6 B- Equity Market Risk Premium 7 Calculation of Market Risk Premium 8 Yield Curve 9 Importance of Yield Curve 9 C- Computation of Return of Company and Sector by CAPM 10 D- Comparison of Actual Return with CAPM Results 10 Critical Analysis of Efficient Markets,

## Speech About Coconut

1027 Words | 5 Pagesis essential to monitor its production. The production per land area can be quantified through crop yield. Crop yield is used to determine the efficiency of food production. Basically, it is the amount of produced crop per area of land. Moreover, it is sometimes called as ‘agricultural output’ and conveyed in kilograms/hectare or metric tons/hectare. Essentially, the use of evaluating the crop yield is to determine the

## Essay on FNCE 4820 Fall 2013 Midterm 1 with Answers

1922 Words | 8 Pageschange due to changes in the bond’s yield. (b) Inflation Risk Risk of earning a lower-than-expected real return if inflation exceeds expectations. (c) Liquidity Risk The risk of a large price drop if the bond must be sold quickly or the inability to sell quickly without incurring a large price drop. Note: Liquidity Risk can also refer to the inability of a

### Term Structure Of Interest Rates

1302 Words | 6 Pages### Corporate Finance Analyst Of The Investment Bank

857 Words | 4 Pages### Business Analysis : Pearson Publishing

2007 Words | 9 Pages### Asset Swaps and Swap Spreads: Interest Rate Strategy

21469 Words | 86 Pages### Pricing The Bond Option Of Vasicek And Cir Models

1629 Words | 7 Pages### Basic Idea Of Smoothing : Basic Concepts Of Setting

1113 Words | 5 Pages### Cost Concepts Of Costs, And Traditional And Modern Theories Of Cost

850 Words | 4 Pages### FMIA Assignment Completed Essay

2399 Words | 10 Pages### Speech About Coconut

1027 Words | 5 Pages### Essay on FNCE 4820 Fall 2013 Midterm 1 with Answers

1922 Words | 8 Pages