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# Recent content by Fran

1. ### P2.T6.307. Hazard rate (Malz section 7.2)

AIMs: Explain how default risk for a single company can be modeled as a Bernoulli trial. Explain the relationship between exponential and Poisson distributions. Define the hazard rate and use it to define probability functions for default time and conditional default probabilities. Questions...
2. ### P1.T4.316. Tuckman's yield to maturity (YTM)

AIMs: Define, interpret, and apply a bond’s yield-to-maturity (YTM) to bond pricing. Compute a bond's YTM given a bond structure and price. Explain the relationship between spot rates and YTM. Calculate the price of an annuity and a perpetuity. Questions: 316.1. Assume the following 2-year...
3. ### P2.T6.306. Credit spreads and spread '01 (DVCS; Malz section 7.1)

AIMs: Define the different ways of representing spreads. Compare and differentiate between the different spread conventions and compute one spread given others when possible. Define and compute the Spread ‘01. Questions: 306.1. The following curves are applicable to a risky 2-year bond that...
4. ### P1.T4.315. Tuckman's bond spreads

AIMs: Distinguish between gross and net realized returns, and calculate the realized return for a bond over a holding period including reinvestments. Define and interpret the spread of a bond, and explain how a spread is derived from a bond price and a term structure of rates. Questions...

13. ### P2.T7.303. Liquidity and Leverage (Malz)

Questions: 303.1. Your colleague Peter blames the fragility of commercial banks primarily on the fractional-reserve banking system. He argues that fractional-reserve banking exposes a bank to the threat of a general loss of confidence in its ability to pay out depositors. In an extreme...
14. ### P2.T7.302. Liquidity risk: liquidity-adjusted value at risk (VaR) models

Questions 302.1. Malz gives us the following adjustment which estimates a liquidity-adjusted VaR based on the number of trading days (T) required to liquidate a position: Portfolio Manager Sally holds an equity portfolio with a value of \$10.0 million and volatility of 18.0% per annum. She...
15. ### P1.T4.309. Discount factors and law of one price

AIMs: Define discount factor and use a discount function to compute present and future values. Define the “law of one price,” explain it using an arbitrage argument, and describe how it can be applied to bond pricing. Questions: 309.1. The table below gives coupon rates and mid-market...