Terms of maturity date very short term, Financial Management

Assignment Help:

1. (a) A barbell is a approach of maintaining a portfolio of securities concentrated at two extremes in terms of maturity date very short term and very long term.

A positive roll down is a positive return as of a security trading at a discount which reaches its par value near the maturity date. Time decay is the ratio of the price with admiration to a decrease in time to expiration of any asset whose value decreases over time.

(b) A jump to default takes place when an investment grade entity with high rating which has been continuing in subsequent rolls of a credit index without degradation (in credit rating) suddenly defaults.

(c) SG's strategy: Ever since the 7-year equity correlation has tightened the spread has increased against the 5-year and 10-year spreads.

Therefore it is profitable to sell the 7-year equity tranche protection and buy the 5-year and 10-year equity tranche protection barbell. Obviously there is a steepening of the 7-year spread. A jump to default is healthy protected by the 10-year protection.

SG thinks so as to Alstom's 3-5 year curve is steep. This signifies Alstom March 2010 bonds at 6.25% would lead to mark-to-market gains. The 3-year CDS offers the protection against default.


Related Discussions:- Terms of maturity date very short term

Financial and management accounting, the salaries paid in 2004 is rs 500000...

the salaries paid in 2004 is rs 500000 outstanding is rs 20000 salaries paid in advance for 2004 is rs 30000 what is the actual salary expenditure for 2004 which accounting princip

What do you mean by letter of credit, Q. What do you mean by Letter of Cred...

Q. What do you mean by Letter of Credit? A letter of credit is an arrangement whereby a bank helps its customer to obtain credit from its (customer's) suppliers. When a bank op

Display profit diagrams for long stock and for short stock, Question: (...

Question: (a) A stock currently sells for $80 and a put option with an exercise price of $80 currently sells for $2. Find the percentage gain to an investor in the common stock

return on equity, Lee Sun's has sales of $6,000, total assets of $5,000, a...

Lee Sun's has sales of $6,000, total assets of $5,000, and a profit margin of 10 percent. The firm has a total debt ratio of 40 percent. What is the return on equity?

Types of capital budgeting, Types of Capital Budgeting Decisions: A bu...

Types of Capital Budgeting Decisions: A business organization has to quite normal face the problem of capital investment decisions. Capital investment defines as the investmen

Issuer’s considerations, Issuer's Considerations Cash Flows: Issuers ma...

Issuer's Considerations Cash Flows: Issuers may consider the period for which the funds are required and try to spread the borrowings in a way to minimize the costs. Generally,

How is finance related to accounting and economics, How is finance related ...

How is finance related to the disciplines of accounting and economics? Financial management is fundamentally a combination of economics and accounting. First financial managers

Share holder value maximizations , Question based on Share Holder Value Max...

Question based on Share Holder Value Maximizations ? Hatsun Agro Product limited (HAPL) over the last Five years has shown a steady growth in its sales revenue and profits. The

Value of a warrant, Value of a Warrant: The market price of a warrant f...

Value of a Warrant: The market price of a warrant fluctuates between minimum and maximum limits. When the current market price of the stock Ps is greater than the exercise pri

Explain accept-reject criteria, Q. Explain Accept-Reject Criteria? Acce...

Q. Explain Accept-Reject Criteria? Accept-Reject Criteria:- If actual ARR is elevated than the predetermined rate of return .......................Project would be accep

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd