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Determinants INTEREST RATES RISK STRUCTURE - Coggle Diagram
Determinants INTEREST RATES
RISK STRUCTURE
INFLATION PREMIUM
Treasury Bill Rates (Risk-Free Rate)
FISHER EFFECT
real risk-free rate
expected rate of inflation
nominal interest rate
DEFAULT or CREDIT RISK PREMIUM
LONG-TERM RATINGS
AAA
A
BBB
BB and Below
AA
SHORT-TERM RATINGS
A-1
A-2
B
C/D
A-3
LIQUIDITY RISK PREMIUM
Compensation for the Bond's Lack of Liquidity
Potential Price Discount
SPECIAL CONDITION PREMIUM
Taxabiliy
extra money a bond has to pay you
Positive (Higher Interest Rate)
Negative (Lower Interest Rate)
Callability
possibility of issuer to retire the security before the maturity
Convertibility
Right to turn a bond into a stock
MATURITY PREMIUM
YIELD CURVE