Understand the recent market behavior

Reference no: EM133439571

Question: Apply the standard bond pricing model to understand the recent market behavior amid strong inflation. When you plot graphs, make sure to label them correctly, so they are clearly readable and interpretable.

a) Plot the daily time series of i) target federal funds rate; ii) 3-month U.S. treasury bill rate; iii) 10-year U.S. treasury bond rate from January 2022 to March 2023.

b) What happened to long-term bond yields (ten-year maturity) in this period, and why?

c) Plot the daily time series of i) target federal funds rate; ii) 10-year Aaa corporate bond yields; iii) 10-year Baa corporate bond yields for the same period.

d) Explain the reason for huge balance sheet loss of SVB using the bond pricing model.

Reference no: EM133439571

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