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Split maturity rating, 76

usage, 185

Sponsor currency, acceptance,

zero value, 70â€“72

186

Standard error, 219

Spot

State-supported bailouts, 256

cash flow, 227â€“229

Strike price, 53, 71, 197, 202.

credit instrument, 202

See also At-the-money

interrelationships, 56f

contrast. See Forward price

option, building-block

objective, 211

approach, 56 STRIPS. See Separately Traded

position, 215 Registered Interest and

price, 15 Principal Securities

transactions, 77fn Subsidiaries, triple-A rating, 93

yields, 25 Swaps. See Constant Maturity

convergence. See Forward Treasury; Currencies;

yields Interest rate; Variance

TLFeBOOK

291

Index

Term structure, 22

dealers, 80â€“81

Theta

markets, 80â€“81

price sensitivities, 198f

spread, 80

usage, 197

yields, 238â€“239

Third-party insurance,

Synthetic balance sheet structure,

obtaining, 91

schematic, 106f

Timing option, 118

Synthetic call option, 212

Total return-oriented portfolio

Synthetic CDO, 105

manager, 156

Synthetic CLOs, 254

Total returns

Synthetic long forward, creation,

analysis, 176

149f

basis points, 163

Synthetic option

calculation, 173t. See also

creation, 209â€“211, 214

Tax-adjusted total returns

delta, 211â€“213

components, comparison, 233t

profile, 213f

funds portfolio managers, 153

repo financing, 211

investing, 153

Systematic risk, 219. See also

relationship, 121f

Nonsystematic risk;

Trade date, 33, 76â€“77, 115fn

Unsystematic risk

pay-in-full, 58

nonsystematic risk,

Trading

contrast, 219t

records, 214

T rich/cheap, 28

Treasury versus Eurodollar

T plus 3, 16

(TED) spread, 205â€“206

Tariffs, 12

Triple-B entity, 249

Tax law, industry-specific

True worth, 16

categories, 246

Trust preferred securities (TruPs),

Tax-adjusted total returns,

262

calculations, 243

TVA. See Tennessee Valley

Tax-free funds, 155â€“156

Authority

Taylor series expansion, usage,

Two-noncall-one, 131

173

TED. See Treasury versus

U

Eurodollar

Tennessee Valley Authority Uncertainty

(TVA), 242, 243 conceptual mapping, 222f

TLFeBOOK

292 INDEX

U.S. Treasury note

Uncertainty (continued)

cash flow profile, 31fn

degree, 226

dirty price, 175

increase, 235

U.S. Treasury obligations, 84

label. See Probability

U.S. Treasury rates, 102

layers. See Bonds

U.S. Treasury STRIPS, 175â€“176

Uncollateralized loan, 90

30â€“year, 172

Unsystematic risk, 219

duration, calculation, 173â€“174

Unwinding. See Futures

yield, 178

U.S. bond index, 182

U.S. Treasury zero-coupon

U.S. Department of Labor

bonds, 149

(DOL), 262

U.S. dollar-denominated

V

issues, 248

U.S. federal agency bonds, Value

taxable status, 243t funds, 153

U.S. Treasury bill investing, 157

3â€“month, 51 uncertainty, 202

cash flows, 17fn Value at Risk (VaR), 261

6â€“month, 42, 223f Variance

purchase, 236 payoff profiles, 126f

12â€“month-maturity, 229 swap, 128

duration, calculation, 173 Vega

finding, 195 price sensitivities, 198f

futures, 193 usage, 197

investment, 41 Volatility, 53, 66. See also At-the-

spot yield, 191 money; Historical volatility;

total return, 224 Implied volatility

yield, 26 calculations, 54fn

U.S. Treasury bonds, 84 increase, 200, 215

coupon cash flows, 23fn outlook, 215

predisposition, 31 payoff profiles, 126f

rallying markets, 102 price value calculation, 54

two-year, 42, 191 reference, 128

yield curve, 27 relationship. See Option-

U.S. Treasury coupon-bearing adjusted spread

securities, 225 rolling series, 68fn

TLFeBOOK

293

Index

dynamic, 163

spread. See Zero volatility

inversion, 234

spread

differences. See Nominal yield

strategy

enhancement, 156â€“157

creation, 125f

increase, 103

execution, 192

references, 25

swap, 127â€“128

relationship, 143f. See also

value, 125, 229

Price

zero return, 193

spread, 24, 40, 79, 246fn. See

zero value, 55, 188

also Credit

W calculation. See Nominal

yield

Weighted average discounted

value. See Forwards

recovery rates, 95t

Yield of benchmark (YB), 28

Weightings, linkage, 186

Yield of nonbenchmark (YNB),

What-if scenarios, 244

28

Wilshire, 162

Yield-to-maturity, 25, 37

Worst-case scenarios, 257

YNB. See Yield of nonbenchmark

Worth. See True worth

Z

Y

Z tranches, 141

YB. See Yield of benchmark

Zero coupon security, price

Yield. See Incremental yield; Spot

dynamics, 230

cash flow-weighted average,

Zero volatility (ZV) spread, 59

19fn

Zero-coupon bonds. See U.S.

curve, 26. See also U.S.

Treasury zero-coupon bonds

Treasury bonds

TLFeBOOK

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