1. © K. Cuthbertson and D. Nitzsche Figures for Chapter 9 BOND MARKET STRATEGIES (Investments : Spot and Derivatives Markets)

2. © K. Cuthbertson and D. Nitzsche Figure 9.1 : Duration and price changes Price Yield Actual price fall is less than that given by duration Actual price rise exceeds that given by duration P0P0 y-y- y0y0 y+y+

3. © K. Cuthbertson and D. Nitzsche Figure 9.2 : Cash flow matching L T-2 L T-1 LTLT (2) Bond A L T-2 - C A L T-1 - C A L T +M A (3) Bond B L T-2 - C A - C B C B + M B

4. © K. Cuthbertson and D. Nitzsche Figure 9.3 : Substitution swap Yield Time to maturity Yield curve QQ : Go long A, short B Wait for A and B to move back to yield curve, QQ Even if curve shifts to ZZ you still win with B Q Z Q Z A B