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restrictions, 263f
Chicago Mercantile
series, 156
Exchange, 35
triangle, 147f
Class A/B/C securities, 140
types, 226“227
Clean prices, 37
Cash flow-weighted average.
calculation. See Forward clean
See Yield
price calculation
Cash settlement, 33
Cleanup tranche, 141
Cash-and-carry trade, 123
CLO. See Collateralized loan
Cash/future combinations, 118
obligation
Cash-out value, 19
Close out, usage, 212
Cash-settled equity futures,
CMOs. See Collateralized
47“51
mortgage obligations
CBO. See Collateralized bond
CMT. See Constant Maturity
obligation
Treasury
CBOT. See Chicago Board of
Collateral. See General collateral
Trade




TLFeBOOK
275
Index



Convertible-equity conversion
Collateralization, 89“91, 107.
See also Overcollaterali- price, 145“146
zation Convertibles, creation, 145f
capital, impact, 89“97 Convexity, 172“182
Collateralized bond obligation calculation, 180t
(CBO), 105 risk, 197
Collateralized debt obligation strategies, 169, 193f
(CDO), 105“107. See also Corporate securities, tax-adjusted
Nonsynthetic CDO; total returns, 244t, 245t
Synthetic CDO Corporate settlement, 33
Collateralized loan obligation Correlation coefficient, 183“186
(CLO), 105“106. See also decrease, 187
Synthetic CLOs generation, 182fn
Collateralized MBS, 135 Cost of carry. See Carry
Collateralized mortgage
Counterparty risk, 77, 80
obligations (CMOs),
Country-level default scenario, 88
164“165, 261
Coupon cash flow, reinvestment,
College savings accounts (529
22, 223, 229fn
plans), 242
Coupon payments, 19, 173
Communaut© Financière
date, 131
Africaine (CFA), 257
Coupon reinvestment
Companies, geographical
risk, 224
diversification, 87
uncertainty, 25
Compounding frequency, 19
Coupon-bearing bonds, 25,
Constant Maturity Treasury
96, 117
(CMT) swap, 102“103
form, 90
Constant Prepayment Rate
price, 26fn
(CPR), 138
spot purchase, 227
Consumer Price Index (CPI), 12
Coupon-bearing security, 18, 22
Contract-eligible bond, 46
Coupon-bearing Treasury, 21,
Conversion factor, 45
36, 176
Convertible bond,
5“year, price cone, 230f
transformation
12“month, 229
scenarios, 146f
bond, 42
Convertible preferred stock,
cash flows, 18fn
145“146




TLFeBOOK
276 INDEX


Credit absorbing vehicle, 101
Coupon-bearing Treasury
Credit card receivables, 262
(continued)
Credit derivatives, 75, 97“108
reinvestment patterns,
issuer-specific types, 101
requirements,
profiles, 107t
21fn, 22fn
valuation, 99
one-year, 230
Credit risks, 25, 75“89, 165, 190
Covenants, 250“253
allocation methodology,
types, 251t
216“217
CPI. See Consumer Price Index
comparison, 225
CPR. See Constant Prepayment
decrease, 226
Rate
double-A, 78
Credit, 73
protection. See Downside
call option, 257
credit risk protection
cone, 200, 201f
quantification, 203
considerations, 158
security types, conceptual
conversion factors, 260
linking, 94f
default swap, 104
Credit-enhanced bond, creation,
dynamics. See Intramouth
147f, 148f
credit dynamics
Credit-enhancing strategies, 267f
incremental risk, 223
Credit-free securities, 79
instrument. See Spot
Credit-linked note, 101, 105
interrelationships, 216“217
schematic, 101f
near-term outlook, 103
Credit-related appreciation, 149
quality, uncertainty, 22, 25
Credit-related events, 99
rating, 74t, 79
Credit-related risks, layering, 93f
insurance, 75
Credit-sensitive bond, 100
restrictions, 263f
Credit-sensitive instrument. See
review, 75
Nonderivative credit-
shocks, 79
sensitive instrument
spread, 79
Credit-sensitive products,
increase, 100
demand, 103
option, 100
Credit-sensitive securities, 103
trades, 166
Creditworthiness, evaluation, 76
watch, 75
Crossover credits, 166
yield spreads, 60f




TLFeBOOK
277
Index



experiences, 74
CTD. See Cheapest-to-deliver
probability, 202“203
Cumulative preferred convertible
rates, 99t
stock, mapping
scenario, 5. See also Country-
process, 267f
level default scenario
Cumulative protection, 82
swap. See Credit
Currencies. See National
Deflation, 8
currency; Nonnational
Delegated underwriting and
currency; Planet currency
servicing security
acceptance. See Local
(DUS), 142
currency; Sponsor currency
Delivery. See Accept delivery;
controls, 87
Make delivery
free flow, 85
definition, 118
futures, opportunities, 51
options, 46, 115“120,
management, 158
120fn
price cone, 233f
value, 121f
rating. See Foreign currency
process. See Chicago Board
rating; Local currency
of Trade
summary, 64
taking, 77
swap, 249
Delta. See Implied delta;
Currency-enhanced
Synthetic option
securities, 129
hedge, 126
D movement, 210“211
price sensitivities, 198f
Debt, 4. See also Bad debt;
usage, 197, 210
Distressed debt; Longer-
Delta-adjusted amount. See
dated debt; Shorter-
Notional amount
dated debt
Delta-neutral strategy, 126
continuum, 268f
Depreciation, 8
cushion, 95
Derivatives, 7. See also Credit
management, 85
derivatives
Decapitalization, 250
Dirty prices, 37, 115, 174. See
Deep in-the-money, 144
also U.S. Treasury note
Deep out-of-the-money, 144
calculation. See Forward
Default
dirty price calculation
definition, 75




TLFeBOOK
278 INDEX


Duration, 172“182. See also
Discount
Macaulay™s duration;
currency, 49
Modified duration; Portfolio
notes, 245
calculation. See U.S. Treasury

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