Fixed-income securities

fixed-income securities

Since fixed-income securities such corporate bonds have varying patterns of cash flows and expiration dates, what techniques can we use for identifying price volatility? Define and explain the techniques including related concepts that you would be using in your inputs. Giving examples, as usual, would help to get your perspective across with greater clarity.

Why is the debt of the federal government considered to be the safest of all possible investments? Is that still the case, given the previous downgrading by Standard & Poor’s? Why?

 

……………………………Answer preview……………………….

Price volatility in a market can be identified by the following techniques.

First technique is the historical mean

            This is where one extrapolates historical data on price to forecast price volatility in the market. The following formula is employed in forecasting of price volatility using the historical mean technique (Sinclair 2010).

t ˆ T; T ‡1; . . . ; T ‡½ ¡ 1

Moving average technique…………………………………………

APA

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