FIS_LN2 Flashcards
1
Q
discount factor
A
value of $1 at t obtained at future time T
2
Q
The longer the time to maturity?
A
the lower the discount factor
3
Q
discount curve
A
plot of the discount factor against the time to maturity
4
Q
zero coupon bond
A
bond that pays its face value at maturity and no intermediate cashflows from coupons or repayments prior
5
Q
zero
A
zero coupon bond with normalized face value $1
6
Q
what does the implicit interst rate for [t,T] depend on given the discount factor?
A
the compounding frequency
7
Q
compounding: annually compounded interest rate 1 solves
A
Dt,1T= 1/(1+rt,T(1))^(T-t)
8
Q
compounding: semi-annually compounded interest rate 2 solves
A
Dt,1T= 1/(1+(rt,T(2)/2)^2*(T-t)
9
Q
A
