<<

. 57
( 60 .)



>>

process, 27
bill; U.S. Treasury STRIPS
rate, 26fn, 36
relationship. See Carry
Discrete callables, 131“133
Duration-neutral positions, 245
Distressed company, 5
DUS. See Delegated underwriting
Distressed debt, 24
and servicing security
Distressed securities, 151
Distressed/default situations,
E
248“249
Dividend-paying philosophy, 29 Economic cycles, 100
Dividends, 4 Economic hedge, 235
formula, expected growth, 30 Economic weakness, 103
payment, 47, 124 Efficiency. See Market
yield, 48 Embedded calls, 148, 257
DJIA. See Dow Jones Industrial Embedded optionality, 136
Index Embedded puts, 148
Dollar roll, 144 Embedded short options, 130
Dollar-euro exchange rate, 49 Emerging markets, 88, 151
Domestic bond markets, Employee Retirement Income
Treasuries segments, 79 Security Act (ERISA), 262
Double-A. See Credit risks underwriters, exemption
Double-B company, 201 eligibility, 263t
Double-B corporate bond, 224f Entities, triple-A ratings, 87
Dow Jones Industrial Index Equities, 227f
(DJIA), 162 bonds, similarities/differences,
Dow Jones Utility Index, 162 7t, 98t
Downside credit risk buybacks, 250
protection, 149 cash flows, 30f
Downside protection, 146 diversification, 227
Downside support, 148 futures. See Cash-settled
Drift equity futures
definition, 75, 98“99 index futures, 47
experiences, 74, 98 life cycle blend, 155
Due diligence, 5 market, preferred stock, 129




TLFeBOOK
279
Index



Expected expenses, 220
price cone, 232f
calculation, 221
price risk, 182“204
Expected losses, 220
returns, 232
calculation, 221
statistical methods, 205
Expected return, 220
summary, 64
Extramarket forces, 256
ERISA. See Employee Retirement
Extramarket incentive, 57
Income Security Act
Euribor rate, 80
F
Euro
creation, 204“205 Face amount, 20
market, 49 Fallen angel, 201
zone members, 254 Fannie Mae. See Federal National
Eurodollar-denominated Mortgage Association
securities, 205 FASITs, 262
Eurodollars, 80 Fat-tail distributions, 68
futures, 192, 205 Federal budgets, market control,
instruments, 192 238“239
rate, 49 Federal Financial Institutions
spot, 192 Examination Council
European Central Bank, 85 (FFIEC), 261
European Community, 105 Federal Home Loan Bank
European option, 145 (FHLB), 243, 245“246
Eurorates, 49“50 Federal Home Loan Mortgage
differential, 50 Corporation (FHLMC),
Euroyen yield, 80 129“130, 242
Event-driven situations, 152 pass-thrus, 136fn
Events. See Credit-related events Federal National Mortgage
Exchange, 35. See also Chicago Association (FNMA),
Mercantile Exchange rate, 8. 129“130, 239, 242
See also Dollar-euro pass-thrus, 136fn
exchange rate; Forward product, 246fn
exchange rates FFIEC. See Federal Financial
transaction, 77 Institutions Examination
Exchange-traded contracts, 260 Council
Exchange-traded option, 214 FHLB. See Federal Home Loan
Exercise right, 129 Bank




TLFeBOOK
280 INDEX


Forward duration value. See
FHLMC. See Federal Home Loan
Securities
Mortgage Corporation
Forward exchange rates, 9
Financial engineering, 113
Forward formulas, 53t
appendix, 161“170
Forward leaps, 40
Financial fundamentals, 5
Forward points, 50t
Financial guarantee
Forward price, 214
schematic, 104f
strike price, contrast, 208
Financial products, investing
Forward rates, 44t
profile, 158“159
Forward settlement, 33
Financial Times Stock Exchange
Forward spread (FS), 61f,
(FTSE), 162
133, 134f
Financing
calculation. See Non-Treasury
agreed-upon rate, 36
security
rate, 36, 194
interrelationships, 61f
risk, 189
Forward transaction, 124f. See
short-term rate, 39
also Offsetting forward
Fixed income
transaction
arbitrage, 151
Forward yields, spot yields
marketplace, 163
(convergence), 191f
products, outperformance, 205
Forward-dated option, 199
securities, 101, 205
Forward-forward arrangement,
price change, effect, 181
196
Fixed-coupon par bond, 104
Forward/future profile,
Fixed-rate product, 137
206“207
Flat price, 37fn
Forwards
FNMA. See Federal National
cash flow ownership,
Mortgage Association
relationship, 40f
Foreign currency rating, 83“85
futures, contrast, 34
Forward agreement, 194
interrelationships, 56f
payoff profile, 208
markets, 79
Forward clean price
option, building-block
calculation, 38
approach, 56
Forward contracts,
summary, 51“63
holders, 229fn
undervaluation, 57
Forward dirty price
yield value, 44
calculation, 38




TLFeBOOK
281
Index



Freddie Mac. See Federal Home Going long, 34
Loan Mortgage Corporation Gold standard, 7
Frequency, 19. See also Goods
Compounding frequency cost, subsidies, 11“12
FS. See Forward spread supply/demand, 11
FTSE. See Financial Times Stock trade bans, 12
Exchange Government National Mortgage
Fund management themes, 154t Association (GNMA),
Fund strategies, 169t 136, 138
Funding sources, 247 pass-thrus, 136fn
Futures, 34“45. See also Bonds; Group of Seven (G-7), 67, 88
Equity index futures Group of Ten (G-10), 186
cheap trading, 120 Growth funds, 154
contract. See Standard & Growth-type index, 154
Poor™s 500
physical settlement, 47 H
unwinding, 35
Hedge. See Delta; Economic
contrast. See Forwards
hedge
opportunities. See Currencies
funds, 150, 151, 221
summary, 51“63
Hedging. See Market neutral
undervaluation, 57
Held for portfolio, 259
usage, 125f
Hicks method, usage, 178
Historical volatility, 66“68
G
formula, annualizing term, 67
G-7. See Group of Seven
usage, 69
G-10. See Group of Ten
Holding companies, 252
Gamma, relation, 199f
Home mortgages, purchase, 130
Gap management, 157
GC. See General collateral
I
General collateral (GC), 196
Idiosyncratic risk, 219
Ginnie Mae. See Government
IMF. See International Monetary
National Mortgage
Fund
Association
Implied delta, 211
Global reserve currencies, 205
definition, 212
GNMA. See Government
Implied forward credit outlook,
National Mortgage
backed-out, 202
Association




TLFeBOOK
282 INDEX


parity, 8“9
Implied repo rate, 123
models, 232
Implied securities lending
policy, homogeneity, 254
rate, 123
swap, 101“102
Implied value, 7
schematic, 103f
value, calculation, 69
Interest rate-sensitive series,
Implied volatility, 66“70, 232
linkage/quantification,
Income. See Ordinary income
182“183
Income fund, 155
Internal strategic planning, 82
types, 151
International fund, 157
Income-oriented funds, 155
International Monetary Fund
Incremental returns, 165
(IMF) loans, 188
Incremental yield, 132

<<

. 57
( 60 .)



>>