Training

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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Introducing Duration, Lecture 020, Securities Investment 101

November 22, 2013

In the first of a series of videos, we begin to delve into the complex subjects of bond duration and bond convexity. This first lecture begins to introduce the topic of duration and why we need it to anticipate bond price changes after expected (or unexpected) changes in required market interest rates. Previous video, Money […]

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Generating a Yield Curve with the Nelson-Siegel-Svensson Method, Excel Library

June 28, 2013

In this Excel Library video, we take a limited amount of bond yield information, and then extrapolate and interpolate from this a good-fitting yield curve which covers all the ‘potential’ rates in-between. We do this using the Nelson-Siegel-Svensson method, via the Excel data tool, Solver, and minimise residual error squares to create a believable yield […]

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The Yield Curve, Lecture 015, Securities Investment 101

June 17, 2013

In this lecture, we introduce the yield curve, which lies at the base of most cashflow trading. We explain liquidity preference theory, which determines the typical ‘standard’ shape of the yield curve, and how risk and reward, measured by credit risk and opportunity risk, create the standard yield curve. It must be noted, however, that […]

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Calculating Yield To Maturity from a Bond Price, Lecture 014, Securities Investment 101

June 14, 2013

We examine the theory behind how to calculate a required interest rate yield to maturity from a given bond price, then use three different methods in Excel to achieve the calculation. The methods used in Excel are the use of a scroller tied to an interest rate field, the built-in RATE() function, and the GoalSeek […]

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Pricing a Bond with Yield To Maturity, Lecture 013, Securities Investment 101

June 14, 2013

In this lecture, we price the same standard bond given three different ratings agency ratings, which has given us three different required overall yields to get from the bond, given the changing levels of risk. After explaining the theory of present valuing the different fixed cashflows, we then use an Excel spreadsheet to calculate 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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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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