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Chapter 8 The Risk Structure of Interest Rates: Defaults, Prepayments, Taxes, and Other Rate-Determining Factors
  Learning Objectives   ,[object Object],[object Object],[object Object]
  Learning Objectives   ,[object Object]
Introduction ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
Marketability ,[object Object],[object Object],[object Object]
Liquidity ,[object Object],[object Object],[object Object]
Default Risk and Interest Rates ,[object Object],[object Object],[object Object],[object Object]
Default Risk and Interest Rates
Default Risk and Interest Rates ,[object Object],[object Object],[object Object],[object Object],[object Object]
Default Risk and Interest Rates ,[object Object],[object Object],[object Object]
Default Risk and Interest Rates Bond-Rating Categories
Default Risk and Interest Rates The Behavior of Interest Rates Source: Monetary Trends, Federal Reserve Bank of St. Louis, Dec 2003
Default Risk and Interest Rates Market Yield * Corporate bond ratings are from Moody’s Investors Service.  ** 2004 interest rates are averages for January. Source: Board of Governors of the Federal Reserve System
Default Risk and Interest Rates ,[object Object],[object Object],[object Object],Factors Influencing Default Risk Premiums
Default Risk and Interest Rates ,[object Object],[object Object],[object Object]
Default Risk and Interest Rates ,[object Object],[object Object],[object Object]
Default Risk and Interest Rates ,[object Object],[object Object]
Default Risk and Interest Rates ,[object Object],[object Object],[object Object],[object Object]
New Ways of Dealing with Default Risk:  Credit Derivatives ,[object Object],[object Object],[object Object]
New Ways of Dealing with Default Risk:  Credit Derivatives
Call Privileges and Call Risk ,[object Object],[object Object]
Call Privileges and Call Risk ,[object Object],n = the number of periods until maturity k = the time period in which the security is called, k < n C = call price i = the interest rate the call price is reinvested at h = holding period yield
Call Privileges and Call Risk ,[object Object],[object Object],[object Object]
Call Privileges and Call Risk ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
Call Privileges and Call Risk ,[object Object],[object Object],[object Object]
Prepayment Risk and the Yields on  Loan-Backed Securities ,[object Object],[object Object]
Prepayment Risk and the Yields on  Loan-Backed Securities ,[object Object]
Prepayment Risk and the Yields on  Loan-Backed Securities ,[object Object],[object Object]
Taxation of Returns on Financial Assets ,[object Object],[object Object]
Taxation of Returns on Financial Assets ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
Taxation of Returns on Financial Assets ,[object Object],[object Object],[object Object]
Taxation of Returns on Financial Assets ,[object Object],[object Object],[object Object],[object Object],[object Object]
Taxation of Returns on Financial Assets Recent Marginal Federal Income Tax Rates
Convertible Securities ,[object Object],[object Object],[object Object]
Convertible Securities ,[object Object],[object Object],[object Object]
The Structure of Interest Rates ,[object Object],[object Object]
The Structure of Interest Rates
Markets on the Net ,[object Object],[object Object],[object Object],[object Object],[object Object]
Markets on the Net ,[object Object],[object Object],[object Object],[object Object]
Chapter Review ,[object Object],[object Object],[object Object]
Chapter Review ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
Chapter Review ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
Chapter Review ,[object Object],[object Object],[object Object],[object Object],[object Object]
Chapter Review ,[object Object],[object Object],[object Object],[object Object]

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Ch08

  • 1.  
  • 2. Chapter 8 The Risk Structure of Interest Rates: Defaults, Prepayments, Taxes, and Other Rate-Determining Factors
  • 3.
  • 4.
  • 5.
  • 6.
  • 7.
  • 8.
  • 9. Default Risk and Interest Rates
  • 10.
  • 11.
  • 12. Default Risk and Interest Rates Bond-Rating Categories
  • 13. Default Risk and Interest Rates The Behavior of Interest Rates Source: Monetary Trends, Federal Reserve Bank of St. Louis, Dec 2003
  • 14. Default Risk and Interest Rates Market Yield * Corporate bond ratings are from Moody’s Investors Service. ** 2004 interest rates are averages for January. Source: Board of Governors of the Federal Reserve System
  • 15.
  • 16.
  • 17.
  • 18.
  • 19.
  • 20.
  • 21. New Ways of Dealing with Default Risk: Credit Derivatives
  • 22.
  • 23.
  • 24.
  • 25.
  • 26.
  • 27.
  • 28.
  • 29.
  • 30.
  • 31.
  • 32.
  • 33.
  • 34. Taxation of Returns on Financial Assets Recent Marginal Federal Income Tax Rates
  • 35.
  • 36.
  • 37.
  • 38. The Structure of Interest Rates
  • 39.
  • 40.
  • 41.
  • 42.
  • 43.
  • 44.
  • 45.