Week 2 Flashcards
1
Q
What are the main risk drivers of Bonds?
A
Intrest rate risk, Credit risk and liquidity risk
2
Q
What does interest rate models (term structure model) establish?
A
The relationship between YTM (yield-to-maturity) and the time to maturity of the bond
3
Q
What a person needs to do to compute the value of a security which is dependant on the Term sturcutre?
A
specify the dynamic of the interest rate process and apply arbitrage restrictions
4
Q
What is a stochastic process?
A
Collection of random variables tha evolve over time and space
5
Q
Uncertanity is modeled as?
A
Stochastic process
6
Q
What are the Poisson process and Borwnian motion fundementals of?
A
Continuous time stochastic procces
7
Q
What continuous time mean?
A
Future moments depends on present moments
8
Q
A
9
Q
A
