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Economics 434: The Theory of Financial Markets

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Presentation on theme: "Economics 434: The Theory of Financial Markets"— Presentation transcript:

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

2 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

3 Money Markets Yield Maturity Treasury Yield Curve November 15, 2016

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

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

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

7 November 15, 2016

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