Search results “Expectation theory of bonds”

An overview of expectations theory of the term structure of interest rates.
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General Recommendations for Finance Reading
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Fundamentals of Investments: http://amzn.to/2r9gCXC
The Intelligent Investor: http://amzn.to/2sGY6rt
A Random Walk Down Wall Street: http://amzn.to/2r9qX5N

Views: 18764
Jonathan Kalodimos, PhD

Example: Suppose that a one year bullet bond has an interest rate of 3.5 percent per year and a two year bullet bond has an interest rate of 4 percent per year. Both bonds are risk free and are quoted on an annual compounding basis. What do we expect the interest rate to be on a one year bullet bond in one year?
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General Recommendations for Finance Reading
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Fundamentals of Investments: http://amzn.to/2r9gCXC
The Intelligent Investor: http://amzn.to/2sGY6rt
A Random Walk Down Wall Street: http://amzn.to/2r9qX5N

Views: 6767
Jonathan Kalodimos, PhD

Example: Suppose that a two year bullet bond has an interest rate of 3 percent per year and a three year bullet bond has an interest rate of 5 percent per year. Both bonds are risk free and are quoted on an annual compounding basis. What do we expect the interest rate to be on a one year bullet bond in two years?
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General Recommendations for Finance Reading
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Fundamentals of Investments: http://amzn.to/2r9gCXC
The Intelligent Investor: http://amzn.to/2sGY6rt
A Random Walk Down Wall Street: http://amzn.to/2r9qX5N

Views: 4698
Jonathan Kalodimos, PhD

Pure expectations says the long spot rates predict future spot rates (i.e., the forward rate is an unbiased predictor of future spot rates). "Liquidity Preference" adds a RISK PREMIUM: investors in longer maturities demand compensation for maturity risk (e.g., uncertainty, greater duration/interest rate risk). "Preferred habitat" adds the technical factor of supply/demand.

Views: 33294
Bionic Turtle

If you like the video please like & share the video & do subscribe to this channel for more video. Thank you for watching the video.

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TheKnowledge By Saurabh Kumar Jain, MBA

More videos at http://facpub.stjohns.edu/~moyr/videoonyoutube.htm

Views: 24369
Ronald Moy

Why bond prices move inversely to changes in interest rate. Created by Sal Khan.
Watch the next lesson:
https://www.khanacademy.org/economics-finance-domain/core-finance/stock-and-bonds/bonds-tutorial/v/treasury-bond-prices-and-yields?utm_source=YT&utm_medium=Desc&utm_campaign=financeandcapitalmarkets
Missed the previous lesson? Watch here: https://www.khanacademy.org/economics-finance-domain/core-finance/stock-and-bonds/bonds-tutorial/v/introduction-to-the-yield-curve?utm_source=YT&utm_medium=Desc&utm_campaign=financeandcapitalmarkets
Finance and capital markets on Khan Academy: Both corporations and governments can borrow money by selling bonds. This tutorial explains how this works and how bond prices relate to interest rates. In general, understanding this not only helps you with your own investing, but gives you a lens on the entire global economy.
About Khan Academy: Khan Academy offers practice exercises, instructional videos, and a personalized learning dashboard that empower learners to study at their own pace in and outside of the classroom. We tackle math, science, computer programming, history, art history, economics, and more. Our math missions guide learners from kindergarten to calculus using state-of-the-art, adaptive technology that identifies strengths and learning gaps. We've also partnered with institutions like NASA, The Museum of Modern Art, The California Academy of Sciences, and MIT to offer specialized content.
For free. For everyone. Forever. #YouCanLearnAnything
Subscribe to Khan Academy’s Finance and Capital Markets channel: https://www.youtube.com/channel/UCQ1Rt02HirUvBK2D2-ZO_2g?sub_confirmation=1
Subscribe to Khan Academy: https://www.youtube.com/subscription_center?add_user=khanacademy

Views: 554321
Khan Academy

You read about it a lot in the business pages, and it sounds super complicated. But the yield curve is dead easy to read. Especially if you've every played chutes and ladders (or, snakes and ladders in the UK). Paddy Hirsch explains.
Subscribe to our channel!
https://youtube.com/user/marketplacevideos

Views: 61181
Marketplace APM

More videos at http://facpub.stjohns.edu/~moyr/videoonyoutube.htm

Views: 35843
Ronald Moy

Training on Modern Theories of Term Structure by Vamsidhar Ambatipudi

Views: 699
Vamsidhar Ambatipudi

Asset Pricing with Prof. John H. Cochrane
PART II. Module 6. Bonds
More course details: https://faculty.chicagobooth.edu/john.cochrane/teaching/asset_pricing.htm

Views: 1723
UChicago Online

This video explain the term structure of interest rates (the yield curve). The expectations hypothesis, segmented markets hypothesis, and the liquidity premium theory are covered.
Thanks for watching!

Views: 8823
Bentley University EC391

This CFA Level I video covers concepts related to:
• Federal Reserve's Interest Rate Policy Tools
• U.S Treasury Yield Curve
• Yield Curve Shapes
• Term Structure Theories
• Treasury Spot Rates
• Yield Spreads Measures
For more updated CFA videos, Please visit www.arifirfanullah.com.

Views: 29308
IFT

Asset Pricing with Prof. John H. Cochrane
PART II. Module 6. Bonds
More course details: https://faculty.chicagobooth.edu/john.cochrane/teaching/asset_pricing.htm

Views: 1148
UChicago Online

A brief introduction to the Pure Expectations Theory

Views: 18135
Friendly Finance with Chandra S. Bhatnagar

Fiscal Policy - Bonds and Yield Curves - An understanding of why bonds and yield curves are important for an economy and for a government when enacting fiscal policy

Views: 12699
EconplusDal

A discussion of the expectations theory and some example problems.

Views: 28
1sportingclays

Video created by Shane Musai
Source of the Question is anonymous

Views: 4597
Shane Musai

Annual Interest Varying with Debt Maturity. Created by Sal Khan.
Watch the next lesson:
https://www.khanacademy.org/economics-finance-domain/core-finance/stock-and-bonds/corp-bankruptcy-tutorial/v/chapter-7-bankruptcy-liquidation?utm_source=YT&utm_medium=Desc&utm_campaign=financeandcapitalmarkets
Missed the previous lesson? Watch here: https://www.khanacademy.org/economics-finance-domain/core-finance/stock-and-bonds/bonds-tutorial/v/annual-interest-varying-with-debt-maturity?utm_source=YT&utm_medium=Desc&utm_campaign=financeandcapitalmarkets
Finance and capital markets on Khan Academy: Both corporations and governments can borrow money by selling bonds. This tutorial explains how this works and how bond prices relate to interest rates. In general, understanding this not only helps you with your own investing, but gives you a lens on the entire global economy.
About Khan Academy: Khan Academy offers practice exercises, instructional videos, and a personalized learning dashboard that empower learners to study at their own pace in and outside of the classroom. We tackle math, science, computer programming, history, art history, economics, and more. Our math missions guide learners from kindergarten to calculus using state-of-the-art, adaptive technology that identifies strengths and learning gaps. We've also partnered with institutions like NASA, The Museum of Modern Art, The California Academy of Sciences, and MIT to offer specialized content.
For free. For everyone. Forever. #YouCanLearnAnything
Subscribe to Khan Academy’s Finance and Capital Markets channel: https://www.youtube.com/channel/UCQ1Rt02HirUvBK2D2-ZO_2g?sub_confirmation=1
Subscribe to Khan Academy: https://www.youtube.com/subscription_center?add_user=khanacademy

Views: 146169
Khan Academy

Difference Between Long Term And Short Term Interest Rate
[7/26]
by openlectures
Now let's try and differentiate the two concepts lest we confuse them. Short run interest rate always tends towards the long run interest rate in longer periods.
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Views: 8031
openlectures sg

This is a supplement to my finance courses at Oregon State University.

Views: 477
Jonathan Kalodimos, PhD

Consider the following spot interest rates for maturities of one, two, three, and four years.
Year | Rate
1 | 4%
2 | 5%
3 | 6%
4 | 7%
What is the price of a four year, 4 percent coupon bond with a face value of $100? Assume the bond pays an annual coupon.
What are our expectations of the yield for a one year bond that starts in one, two, and three years, i.e., what are the forward rates?
Suppose the inflation expectations are a constant 2 percent, what are the expected real interest rates for each one year period in the future?
Suppose that immediately after purchasing the bond that market expectations of the inflation rate decrease to a constant one percent. What are our new nominal forward rates? Assume expectations of real interest rates have not changed.
In one year, what do we expect the new term structure of interest rates to be?
In one year, what do we expect the price of the bond to be based on the new term structure of interest rates?
What do we expect the holding period return to be if you sell it immediately after receiving the first year’s coupon?
Note: There is a typo in calculating the holding period return. The correct formula is (92.22 - 90.17 + 4)/90.17 = 6.7%
Note: A pdf of the solution is available from here: https://goo.gl/MeMDkv

Views: 2379
Jonathan Kalodimos, PhD

Advanced yield curve calculations based on the unbiased expectations theory. Example uses Solver on Excel and the BAII calculator.

Views: 1700
David Johnk

We solve for a expected rate on a future bond using Excel goal seek and the unbiased expectations theory. Here's the link to the Excel file I used for this video: https://bit.ly/2RzypFT
#JohnkFinance #FinanceOnExcel

Views: 23
David Johnk

Liquidity Premium Theory, Unbiased Expectations Theory problem solved on Excel

Views: 1999
David Johnk

Subject: Business Economics
Paper: Macroeconomic Analysis and Policy

Views: 401
Vidya-mitra

Hump shaped yield curve and liquidity premium theory

Views: 2697
Rob Munger

Undergrduate lecture in financial markets and institutions

Views: 6644
Pat Obi

Undergrduate lecture in financial markets and institutions

Views: 2418
Pat Obi

Views: 1092
Sapphasak Chatchawan

This is an excerpt from the IFT Level II lecture on Fixed Income. Here we cover 'Traditional Theories of the Term Structure of Interest Rates'
For more videos, notes, practice questions, mock exams and more visit: https://www.ift.world/
Visit us on Facebook: https://www.facebook.com/Pass.with.IFT/

Views: 2430
IFT

More videos at http://facpub.stjohns.edu/~moyr/videoonyoutube.htm

Views: 20321
Ronald Moy

Members :: Treasury Consulting LLP Pleased to Present Video Titled - " Influences on Fixed Income Yield Curves !! ". Video would be covering all 3 factors like Markets Expectation Theory , Bond Risk Premiums , Convexity Bias.
You are most welcome to connect with us at 91-9899242978 (Handheld) , [email protected] , [email protected] , Skype ID ~ Rahul5327 , Twitter @ Rahumagan8 or our website - www.treasuryconsulting.in

Views: 982
Foreign Exchange Maverick Thinkers

Here is the link https://www.buytestseries.com/OnlineCourse/Commerce/CA-FINAL--CS-PROFESSIONAL

Views: 117
BuyTestSeries

A Yield Curve Theory I
Yield Curve (Risk Free Rates/Interest Rates) Term Structure of Interest Rate Theory Lecture

Views: 214
Lawrence Souza

CEC/UGC: Economics, Commerce and Finance (EMRC,Gujarat University,Ahmedabad)

Views: 334
Ch-07 Economics, Commerce and Finance

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In this lesson, students learned how to read a yield curve. When looking at the yield curve, it has two major components - yield and term. The yield is found on the y axis and it represents the amount of interest that we'll be paid for owning a particular bond. The term is found on the x axis and it represents the duration we would hold the bond at the specified yield.
Although reading a yield curve is fairly straight forward, many people fail to recognize its importance in determining the direction of the economy. As you saw in the video, the yield curve is flat or slightly inverted when a financial market is at its peak. Slightly before and after a market collapses, you would find the yield curve slope in a positive direction.
When we move into Course 2, Unit 3, it'll be important to continue looking at the yield curve as we determine a metric for our "zero risk" investment - the 10 year federal note.

Views: 170698
Preston Pysh

The theoretical spot rate curve is different than the par yield curve. Here is how to bootstrap the spot rate. For more financial risk videos, visit our website! http://www.bionicturtle.com

Views: 88557
Bionic Turtle

Welcome to the Investors Trading Academy talking glossary of financial terms and events.
Our word of the day is “Yield Curve”
Shorthand for comparisons of the interest rate on government bonds of different maturity. If investors think it is riskier to buy a bond with 15 years until it matures than a bond with five years of life, they will demand a higher interest rate or yield on the longer-dated bond. If so, the yield curve will slope upwards from left the shorter maturities to right. It is normal for the yield curve to be positive upward sloping, left to right simply because investors normally demand compensation for the added risk of holding longer-term securities. Historically, a downward-sloping or inverted yield curve has been an indicator of recession on the horizon, or, at least, that investors expect the central bank to cut short-term interest rates in the near future. A flat yield curve means that investors are indifferent to maturity risk, but this is unusual. When the yield curve as a whole move higher, it means that investors are more worried that inflation will rise for the foreseeable future and therefore that higher interest rates will be needed. When the whole curve moves lower, it means that investors have a rosier inflationary outlook.
Even if the direction of a yield curve is unchanged, useful information can be gleaned from changes in the spreads between yields on bonds of different maturities and on different sorts of bonds with the same maturity such as government bonds versus corporate bonds, or thinly traded bonds versus highly liquid bonds.
By Barry Norman, Investors Trading Academy - ITA

Views: 4918
Investor Trading Academy

Financial Theory (ECON 251)
According to the rational expectations hypothesis, traders know the probabilities of future events, and value uncertain future payoffs by discounting their expected value at the riskless rate of interest. Under this hypothesis the best predictor of a firm's valuation in the future is its stock price today. In one famous test of this hypothesis, it was found that detailed weather forecasts could not be used to improve on contemporaneous orange prices as a predictor of future orange prices, but that orange prices could improve contemporaneous weather forecasts. Under the rational expectations hypothesis you can infer more about the odds of corporate or sovereign bonds defaulting by looking at their prices than by reading about the financial condition of their issuers.
00:00 - Chapter 1. The Rational Expectations Hypothesis
12:18 - Chapter 2. Dependence on Prices in a Certain World
24:42 - Chapter 3. Implications of Uncertain Discount Rates and Hyperbolic Discounting
46:53 - Chapter 4. Uncertainties of Default
On the other hand, when discount rates rather than payoffs are uncertain, today's one year rate grossly overestimates the long run annualized rate. If today's one year interest rate is 4%, and if the one year interest rate follows a geometric random walk, then the value today of one dollar in T years is described in the long run by the hyperbolic function 1/ √T, which is much larger than the exponential function 1/(1.04)T, no matter what the constant K. Hyperbolic discounting is the term used to describe the tendency of animals and humans to value the distant future much more than would be implied by (exponentially) discounting at a constant rate such as 4%. Hyperbolic discounting can justify expenses taken today to improve the environment in 500 years that could not be justified under exponential discounting.
Complete course materials are available at the Open Yale Courses website: http://open.yale.edu/courses
This course was recorded in Fall 2009.

Views: 28329
YaleCourses

http://www.tutorialoutlet.com/all-miscellaneous/busn-602-the-unbiased-expectations-theory-of-the-term-structure-of-interest-rates-holds-what-is-the-1-year-interest-rate-expected-one-year-from-now/
FOR MORE CLASSES VISIT
tutorialoutletdotcom
• Suppose we observe the following rates: 1R1 = 9%, 1R2 = 11%. If the unbiased expectations theory of
the term structure of interest rates holds, what is the 1-year interest rate expected one year from now,
E(2r1)? (Do not round intermediate calculations and round your answer to the nearest whole
percent.)
% Interest rate 2-) You note the following yield curve in The Wall Street Journal. According to the unbiased expectations
theory, what is the 1-year forward rate for the period beginning one year from today, 2f1? (Round your
answer to 2 decimal places.)
Maturity
One day
One year
Two years
Three years Yield

Views: 167
Featherstone Littlewood754329816

Training on Traditional Theories of Term Structure of Interest rates by Vamsidhar Ambatipudi

Views: 366
Vamsidhar Ambatipudi

Financial Markets (ECON 252)
The markets for debt, both public and private far exceed the entire stock market in value and importance. The U.S. Treasury issues debt of various maturities through auctions, which are open only to authorized buyers. Corporations issue debt with investment banks as intermediaries. The interest rates are not set by the Treasury, the corporations or the investment bankers, but are determined by the market, reflecting economic forces about which there are a number of theories. The real and nominal rates and the coupons of a bond determine its price in the market. The term structure, which is the plot of yield-to-maturity against time-to-maturity indicates the value of time for points in the future. Forward rates are the future spot rates that can be calculated using today's bond prices. Finally, indexed bonds, which are indexed to inflation, offer the safest asset of all and their price reveals a fundamental economic indicator, the real interest rate.
00:00 - Chapter 1. Introduction
04:25 - Chapter 2. The Discount and Investment Rates
19:12 - Chapter 3. The Bid-Ask Spread and Murdoch's Wall Street Journal
29:17 - Chapter 4. Defining Bonds and the Pricing Formula
39:38 - Chapter 5. Derivation of the Term Structure of Interest Rates
52:34 - Chapter 6. Lord John Hicks's Forward Rates: Derivation and Calculations
01:06:09 - Chapter 7. Inflation and Interest Rates
Complete course materials are available at the Open Yale Courses website: http://open.yale.edu/courses
This course was recorded in Spring 2008.

Views: 51093
YaleCourses

In this lecture we describe the inverted yield curve and how it differs from the normal yield curve.
Before we get to that, we explain the strategy of 'riding the yield curve' and then why the inverted yield curve is such a dangerous thing when riding the yield curve.
We explain why the inverted yield curve usually occurs, and why this makes it a good leading economic indicator for predicting near-term recessions.
Along the way, we also introduce Zero-Coupon bonds, which are bonds with a single principal maturity payment without any intervening coupon-interest payments.
Previous lecture: http://www.youtube.com/watch?v=j1Fq_1pg7xE
Next lecture: http://www.youtube.com/watch?v=BW4J2HAd4VI
For financial education from London to Singapore and beyond, please contact MithrilMoney via the following website:
http://mithrilmoney.com/
This MithrilMoney lecture was delivered by Andy Duncan, CQF.
Please read our disclaimer:
http://mithrilmoney.com/disclaimer/

Views: 33416
MithrilMoney

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