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Fixed Income (Duration (Modified (Macaulay Duration / (1 + YTM)),…
Fixed Income
Duration
Effective
Modified
Macaulay Duration / (1 + YTM)
Macaulay
Portfolio Duration
Money Duration
Key Rate Duration
Portfolio Duration
4 C's
Character
Covenants
Capacity
Collateral
Convexity
Convexity effect = .5 x convexity x (change in YTM)
2
Approx. effective convexity
Approx. convexity
Ratios for Credit Analysis
Leverage Ratios
Coverage Ratios
Profits and Cash Flows
EBITDA - FFO - FCF before divs - FCF after divs
Credit Risk
Default Risk
Loss Severity
Yield Spread
difference in yield between credit-risky bond and credit-risk-free bond
equal to a liquidity premium + credit spread
Convexity effect = .5 x convexity x (change in YTM)
2
Total Estimated Price Change = duration effect + convexity effect
PVBP - Price Value of a Basis Point
Approximate Modified Duration
Duration Gap - Macaulay Duration - investment horizon
Duration Effect = -effective duration x change in YTM