The Yield Curve, Bond Yield, and Spot Rates
This chapter examines a number of issues relevant to participants in the fixed-income markets. The analysis presented is based on government-bond trading and is confined to generic bonds that are default-free, with no consideration given to factors that apply to corporate bonds, asset- and mortgage-backed bonds, convertibles, or other nonvanilla securities, or to issues such as credit risk and prepayment risk. Nevertheless, the principles adduced are pertinent to all relative-value fixed-income analysis.

Practical Uses of Redemption Yield and Duration

The drawbacks of duration and gross redemption yield (henceforth referred to simply as yield) for bond analysis are well documented. That ...

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