PPT-Interest Rate Basis Curve Construction and Bootstrapping Guide

Michael Taylor FinPricing httpsfinpricingcomcurveVolListhtml Basis Curve The term structure of an interest rate basis curve is defined as the relationship between the basis zero rate and its maturity Basis curves are used as the forecast curves for pricing interest rate products The increase in basis spreads has resulted in large impacts on nonstandard instruments. Extension Class Presentation. Ruth Tarrant. Consumption functions. 45⁰ line. C = a + . bY. Consumption (C). Income (Y). Yo. a = y-intercept = autonomous consumption (i.e. the level of consumption when income is zero). Ayesha Ali. www.lancaster.ac.uk/postgrad/alia10/econ102.html. a.ali11@lancaster.ac.uk. o. ffice hours: 8:00AM – 8:50AM . tuesdays. LUMS C85. Today’s Outline. Week 21 worksheet – Fiscal Policy & Monetary Policy:. The Effective Annual . Rate (EAR). Indicates the total amount of interest that will be earned at the end of one year. The EAR considers . the effect of compounding. Also referred to as the effective annual yield (EAY) or annual percentage yield (APY). (Chapter 6). The cost of money. The price, or cost, of debt capital is the interest rate.. The price, or cost, of equity capital is the required return. The required return investors expect is composed of compensation in the form of dividends and capital gains.. Ask Yourself. Short run or long run?. Supply side or demand side?. US Recession in 2001. Case study on page 313. A fall in aggregate demand (planned expenditure). Decline in stock market → reduced wealth . Shane Murphy. www.lancaster.ac.uk/postgrad/murphys4/econ15. s.murphy5@lancaster.ac.uk. Today’s Outline. Week 21 worksheet – Fiscal Policy & Monetary Policy:. This weeks material is very math-heavy. Make sure you also revise . of macroeconomics. Aggregate demand. and business cycles. Aggregate supply. and “economic growth”. The Great Divide. Classical macro:. - Full employment. - Flexible wages and prices. - Perfect competition and rational expectations. Extension Class Presentation. Ruth Tarrant. Consumption functions. 45⁰ line. C = a + . bY. Consumption (C). Income (Y). Yo. a = y-intercept = autonomous consumption (i.e. the level of consumption when income is zero). Interest Rate Hedges. 1 June, depositing in 5 months. So buy December. . = 19. On 1 June we buy 19 December contracts. On 1 November we will sell. Price 96.60. Basis risk 60 ticks. By 1 November basis risk will fall by 5/7, leaving 17. Instructor: Dr. Leng Ling. Topic: Term Structure Analysis. 2. Learning objectives. Define term structure of interest rates and yield curve.. Explain the purpose of theories of the term structure. Describe the expectations theory and discuss its implications.. AD & AS Barnett UHS AP ECON Introduction Over the long run, real GDP grows about 3% per year on average. In the short run, GDP fluctuates around its trend. Recessions : periods of falling real incomes ECONA 202. 1. The origin of the IS-LM model. The IS-LM model was developed in 1937 by Nobel laureate Sir John Hicks, who intended to interpret the ideas of Keynes in the book, The General Theory of Employment, Interest, and Money, by graphs.. What is the money demand curve?. How does the liquidity preference model determines the interest rate in the short run?. The Demand for Money. M1 consists of currency in circulation (cash), plus checkable bank deposits, plus traveler’s checks. ®. Matthew Flynn, PhD, Data Science - Head of Machine Learning. Introduction. This presentation walks through retrieving current interest rate data from www.FederalReserve.gov, then explores the dramatic drop in short-term rates after the 2009 recession.