Chapter 11
Fundamentals of Fixed Income Markets
11.1 CHAPTER SUMMARY
This chapter provides a quick overview of some of the “nitty-gritty” details of government (i.e., risk-free) bond markets. It begins with a description of bonds in Section 11.2. In Section 11.3, a relationship between the price of a bond and the yield of a bond is provided for a variety of “rate conventions.” The discount factor concept is also introduced in Section 11.3. Section 11.4 develops some bond pricing equations. Section 11.5 discusses how bonds are auctioned and traded in Canada. Returning to nitty-gritty details, Section 11.6 describes the so-called “clean” and “dirty” bond prices and the ever-popular “day count convention.”
11.2 What Are Bonds?
Like loans, bonds ...
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