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Debt Valuation
Topic #2
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Context
Complete Markets Bonds
Time Value of Money Bond Valuation
Equity Derivatives Real Estate
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Context
Complete Markets Bonds
Time Value of Money Bond Valuation
Equity Derivatives Real Estate
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Moving cash in time
Compare cash only at the same point in time Future Value
Compounding Present Value
Discounting NPV
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Special Cases
Perpetuity
Annuity
Growing Perpetuity
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Excel functions
PV FV PMT RATE
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Context
Complete Markets Bonds
Time Value of Money Bond Valuation
Equity Derivatives Real Estate
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Bond Terminology
Maturity date Term Face value Coupons and coupon payments Zero-coupon bond Yield to Maturity
Risk-free interest rate Spot rates
Yield curve
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Bond Valuation
Yield to Maturity of a Coupon Bond Price given YTM Time and bond prices Interest rate changes and bond prices
Interest rate sensitivity of bond prices Duration
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Yield Curve and Bond Arbitrage
Zero coupon bonds prices
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Yield Curve and Bond Arbitrage
Zero coupon bonds yields
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Corporate Bonds
Credit risk YTM Risk premium Bond ratings
Credit spread
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Rating is a very precise business