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The zero-volatility spread is a measure of the spread that the investor would realize over the entire Treasury spot rate curve if a mortgage-backed or asset-backed security is held to maturity. Unlike normal spread, zero-volatility spread, is not a spread of one point on the Treasury yield curve. Zero-volatility spread also known as Z-spread and the static spread, is the spread that will make the price of a security equal to the present value of the cash flows from the mortgage-backed and asset-backed security when discounted at the Treasury spot rate plus the spread. In other words, each cash flow is discounted at the appropriate Treasury spot rate plus the Z-spread. A trial and error method is used in determining the
zero-volatility spread. The difference between the zero-volatility spread and the normal spread depends on the maturity or average life of a structured product, i.e., larger the maturity of the security greater is the difference, and shorter the maturity lesser the difference between both the measures. The shape of the curve also determines the magnitude of the difference between both the spreads. The steeper the curve the greater is the difference.
Call provision is the right of the issuer to call back and retire the issued bonds before the maturity date. The issuer may call the bond and retire the bond by paying
Financial Management Initial Disclosures During the process of discussion and negotiation with the client with regard to the financial affairs and the manner of operations of the
There are two important term structure theories related to the shapes of the yield curve. First is the Expectations Theory and the second is Market Segmentations
Q. Briefly explain What is TREM Card? 1. As per National and international regulations, the drivers of vehicles carrying hazardous goods should have the documentation outlining
It is not easy to determine the theoretical value of non-treasury securities. However, we can use the treasury spot rate for the valuation of non-treasury security.
a) TFC = $1,840 (Rent, Salaries, Admin + Power) (b) BEQ = $1,840 / $16 = 115 child places (c) Graph: Title; Axis labels; TR line; TC line and TFC line accurately drawn and la
Filer Manufacturing has 8.9 million shares of common stock outstanding. The current share price is $59, and the book value per share is $4. Filer Manufacturing also has two bond is
The issuers of ALBS are the financial subsidiaries of automobile manufacturers, commercial banks and other independent finance companies and small financial insti
A simple passive strategy involves building a portfolio and holding it through time. The coupons as well as the proceeds of matured bonds are just reinvested in new iss
What are the advantages of “collecting early” and how do companies attempt to do this? Money has time value. The sooner cash is collected, the better. Companies employ regional
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