- Explain/Caculate: spot rate, yield-to-maturity(YTM), par rate, swap rate, forward rate
- swap rate calculation:
$$
c = q \times \frac{1-d(n)}{\sum_{i=0}^n d(i)}
$$
- related spread: swap spread(swap - Treasury rate), I-spread(spread with swap rate), Z-spread(spread with spot rates, assume no interest volatility), TED spread, LIBOR-OIS spread: all for measure credit risks
- if future realized spot rate is lower than forward rates today, bond is? (undervalued)
- the relationship between spot curve, par-curve and coupon bond curve: when interest rate go downwards, par>spot; upwards, spot > par, coupon always in the middle
- What is the YTM/Effective Duration for a callable/putable bond comparing to a normal bond?
- callable bond is bond plus a short call -> higher yield, putable bond is a bond plus a long put ->lower yield
- both bonds has lower effective duration (callable bond can have negative duration)
- interest rate volatility will change the YTM(OAS spread) accordingly