Economics 434: The Theory of Financial Markets

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Presentation transcript:

Economics 434: The Theory of Financial Markets Professor Burton Fall 2016 November 15, 2016

We have already covered default free securities Fixed Income Markets We have already covered default free securities US Treasury Market Now, we move to defaultable securities Now, two “risks” Duration (risk of value of future payments) Credit Quality November 15, 2016

Money Markets Yield Maturity Treasury Yield Curve November 15, 2016

Money Markets Yield Maturity 2 to 3 Years November 15, 2016

The Yield Curve Yield Credit Spreads (between treasuries and high yield (junk) Credit Spread (between treasuries and corporate bonds) Maturity November 15, 2016

Increase in credit spread The Yield Curve Yield Increase in credit spread Maturity November 15, 2016

November 15, 2016

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