W2P3 - Bond Prices and Arbitrage Flashcards
1
Q
Explain the relationship between bond prices and interest rates
A
Bond prices and interest rates are inversely related.
2
Q
Which two concepts of arbitrage are covered?
A
yield arbitrage and triangular arbitrage
3
Q
What does yield arbitrage ensure?
A
Yield arbitrage ensures that two bonds with the same risk
will deliver the same yield i.e return.
4
Q
What does triangular arbitrage ensure?
A
Triangular arbitrage ensures that
nominal exchange rates are consistent.
