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Standard deviation
Split maturity rating, 76
usage, 185
Sponsor currency, acceptance,
zero value, 70“72
186
Standard error, 219
Spot
State-supported bailouts, 256
cash flow, 227“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




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Index



Term structure, 22
dealers, 80“81
Theta
markets, 80“81
price sensitivities, 198f
spread, 80
usage, 197
yields, 238“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, 209“211, 214
Tax-adjusted total returns
delta, 211“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, 76“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, 205“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, 155“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




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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, 175“176
Uncollateralized loan, 90
30“year, 172
Unsystematic risk, 219
duration, calculation, 173“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
3“month, 51 uncertainty, 202
cash flows, 17fn Value at Risk (VaR), 261
6“month, 42, 223f Variance
purchase, 236 payoff profiles, 126f
12“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




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Index



dynamic, 163
spread. See Zero volatility
inversion, 234
spread
differences. See Nominal yield
strategy
enhancement, 156“157
creation, 125f
increase, 103
execution, 192
references, 25
swap, 127“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




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