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most of the time an investor buys a bond between coupon payments in such transaction the buyer must compensate the seller of
as we know zero-coupon bonds are issued without any periodic coupon payments the investor gets the interest and the principal on a
stock exchange of hong kongsecurities trading in hong kong started in 1866 however the first formal stock market the association of stockbrokers in
tokyo stock exchangein the 1870s a securities system was introduced in japan and public bond negotiations began this resulted in a demand for public
london stock exchange lsethe origin of the london stock exchange goes back to the coffee houses of 17th century london where people willing to invest
frankfurt stock exchangethe roots of the frankfurt stock exchange may be traced back to the period of medieval fairs as early as the middle of the
illustration let us assume that vishal mehta amp co from illustration 1 is using the following discounting rates in place
we have seen computation of present value using single discount rate but the right way to value a cash flow of a bond is to use multiple
illustration discount bond 5 yr bond with 10 coupon expected rate yield at 12premium bond
empirical measurement of liquidity the number of days a particular share is being traded reflects the liquidity of the market if it is traded
functions of a stock exchangethe stock exchange is a market place where investors trade in securities it is a competitive market involving large
relationship between bond price and time if interest rates are constantthe bond price changes as the bond moves closer to its maturity if
participants in the secondary marketthe players in the secondary capital market includeindividual investors publiccompaniesmutual fundsfinancial
illustration vishal mehta amp co mumbai issued 7 5-year bond on 31st december 2006 the par value of a bond is rs 100 this bond pays
secondary marketthe secondary market is also referred to as the stock market where dealings in shares are taken up it helps the shareholders to find
players in the primary marketsome important players in the primary market aremerchant bankerswhen a company approaches the public for funds merchant
primary marketin an economy at a given point of time there will be peopleentities called savers the surplus units whose current income exceeds their
capital marketthe term capital market is used to denote all the activities of the primary and secondary markets it can also refer to the market for
after estimating the cash flows the next step is to determine the appropriate interest rate that should be used to discount the cash
the first step in valuation process is to estimate the cash flows that are expected to be received in the future in debt securities there
public boursesthe origin of this type of bourses can be found in the legislative work of napoleon these type of bourses are regulated by the
a manager must be able to quantify as to what will result from an adverse change in interest rates to control interest rate riskdifferent
quasi-instrumentsthese instruments are considered as debt instruments for a time-frame and are converted into equity at the option of the investor or
duration is good measure while estimating the percentage price change for a small change in interest rates but the estimation becomes
we can measure the portfolio duration by calculating the weighted average of the duration of the bonds in the portfolio the proportion of