Securities Investment 101

In this lecture we explain what a convertible bond is, why they are issued, who issues them, how generally speculative they are, and what the terms are about used to describe them. These terms include conversion ratio, conversion value, conversion percentage, conversion premium, and so on.

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In this final one of our bond duration and convexity lectures, we apply the lessons learned in the previous lecture to start calculating convexity and using it to make more accurate price predictions for bond price changes, whenever interest rates change.

The full YouTube playlist of Securities Investment 101 lecture videos can be found by clicking here.

Please read our disclaimer.

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Calculating Duration, Lecture 021, Securities Investment 101

November 25, 2013

Before we delve deeper into the mysteries of duration and convexity, now is a good opportunity to actually calculate duration, at least in its form as an average weighted cashflow period, known as Macaulay’s Duration. We do this both the long way, from first principles, and by using Excel’s built-in ‘DURATION’ command. Previous video, Securities […]

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Introducing Yield To Maturity, Lecture 012, Securities Investment 101

June 11, 2013

In this introductory lecture, we explain the conceptual framework behind ‘Yield To Maturity’ and why it is conceptually different from ‘Flat Yield’. In the next two lectures, we will further explore the ideas put forward in this lecture, and both price a bond, given a yield to maturity input, and calculate a yield to maturity, […]

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The Flat Yield of a Bond, Lecture 011, Securities Investment 101

June 10, 2013

In this lecture we examine the simplest bond yield measurement, the ‘Flat Yield’, which is a measure of the periodic income of a bond divided by its initial price. The long-term redemption and capital return values of a bond are irrelevant when considering the flat yield of a bond, which is also known as the […]

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The Time Value of Money, Lecture 010, Securities Investment 101

June 8, 2013

To help understand how bonds and many financial products are priced, we need to understand the ‘Time Value of Money’. We discuss the underlying axiom of human action behaviour and motivation which lies under this mechanism, and then explain how present values and future values of money are related, and how to calculate one from […]

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Credit Ratings, Lecture 009, Securities Investment 101

June 4, 2013

In this lecture we discuss credit ratings and credit rating agencies, particularly as they relate to bond sales, credit risk, and default risk. We explain what credit risk is and what the ratings actually mean in terms of the risk of an organisation failing to meet its bond payment obligations. Along the way, we briefly […]

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The Four Main Features of a Bond, Lecture 008, Securities Investment 101

June 1, 2013

In this lecture we discuss the four main features of a bond, which are the face value, the maturity or redemption date, the coupon rate, and the issuer name and associated risk rating. Many subsidiary topics pop up along the way, including lots of jargon terms used to describe bonds, the difference of the nature […]

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Free Float Stock, Lecture 007, Securities Investment 101

May 30, 2013

In this lecture we describe what is meant by ‘free float’ stock, how it is defined, why it is a useful measure, and where it is used by index construction companies and exchanges for different purposes. We explain why free float capitalisation is different from total market capitalisation and which three groups are placed into […]

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Construction of Stock Indexes, Lecture 006, Securities Investment 101

May 29, 2013

In this lecture we create two different indexes from the same initial company information. The first index is a price-weighted index, which rises, due to the disproportionate effect of large share price changes in small companies. The second index is a market-capitalisation-weighted index, which falls, due to the disproportionate effect of share price falls in […]

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