obligation

Bonds are securities representing a fraction of a loan issued by a company or a community. Long by certificates held by lenders, they are now in France, and represented by a dematerialized book entry.The practice of reimbursement by lot was affected. The fungibility of bonds has increased liquidity and develop techniques for pension and securities lending. In contrast, in case of failure of the depository institution, the lender may be treated as a mere creditor, without a clear individualisation of property titles.The ever greater Treasury led to standardize government bonds to attract international investors. At the same time, the types of obligations have increased and adapted itself to the needs as well as financial regulations, taxation and accounting Uses.But it was not enough: the needs of businesses, intermediaries and institutions led to the creation of markets in interest rates, on which "exchange contracts disconnected bonds, regardless of the liquidity of the latter. And the 1990s saw the development of indexed bonds indices, often attached to the categoryof "structured products -.obligationsMichel Piermay63KeywordsConventional bonds to fixed rateAt the origin of the concept today oday imprecise value fixed income, these are lgations debt likely to report an interest pent few years. They pose a risk capital to the subscriber are sold before maturity, which required the development of a number of assessment criteria.1. 1. YieldsThere are many definitions of performance. Ignoring those who have more than historical interest, it is possible to make combinations,1.1.1. The current yieldThe starting point is the nominal yield (or interest rate norninal), that is to say, the interest paid to 100 F nominal capital. The current yield from the stock price at any given time, it is equal to the quotient of the next coupon interest with this award. Most often, it is a price excluding accrued interest. These notions are identical to those found for the shares, do not include the additional information provided by the obligation, namely its repayment on a date and at a price contract.1.1.2. The yield to maturityIt is, in fact, the internal rate of return obtained by a owner of all the shares not yet amortized, keeping them until maturity. This rate takes into account all the flows of interest and repayment receivable in exchange for the price of the bond, including accrued interest and possibly fees.For carrying a small number of securities, if the damping is done by lot, it is an expectation based on the probability of repayment for each draw. It is possible to generalize the notion of rate actuarial present value of each stream at a different rate siiivant maturity. These rates are calculated on a statistical or analytical sample of bonds. This is called pure rate (or spot, ~).1.1.3. Yield a priori and observed performanceThe actuarial rate can be considered, if the flow of interest and repayment received during the life of the bond are reinvested at the same rate until maturity, which toggles between the initial value Earned Value at the end of the life of the obligation.However, the movement of interest rates over time and the existence of a structure of interest rates based on the duration of the placement makes this unrealistic assumption of constant investment rate. It is possible to make other assumptions lead to reinvestment They acquired another value at maturity, compared with the original amount, give a different capitalization rate.The investor, once reached the end of the life of the loan. can observe the actual flows taking into account the reinvestment of monies collected; tiey to perform the same calculation giving the rate of performance obtained.This approach can be generalized if the securities are sold at a certain price before the maturity of the loan.1.2. Risksa ~T.nin r, and vrinrnio nii ~ cPiit Ptait year IWSE RIS (777P of.! JF? Child of. 1 '(IT1 ~ r1.2.1. The risk of signingThe issuer of a bond may, admittedly rarely, not be able to repay the loan or pay on the due date,, expected interest. The portfolio manager may act as bond insurer and dividing its risk cover on average the additional expected return in exchange.This traditional method is limited: the failure of a transmitter in fact leads the market to charge a supplement of higher yielding other issuers in the same class. 11 follows a decline of their courses. The risk therefore has a signature element linked to the market value of securities in their lives. The rating of the issuers should consider not only the risk of default, but also the behavior of stocktitles'.1.2.2. Liquidity riskResale of an obligation is not always guaranteed. The title may not be listed and the listing does not guarantee that the market will absorb a large volume of titles.The theoretical value of a bond is most often calculated by assuming that the securities are held to maturity. Actual value will depend on supply and demand in a market. A liquid and efficient market allows for the recovery of the two concepts. Otherwise, alternative solutions can be found: the futures market will separate the management of interest rate risk of the possibility of selling the securities. Market repurchase, securities lending and money markets provide a short-term liquidity relay.1.2.3. Rate riskThe updating mechanism introduces a unique relationship between price and yield to maturity. Rate fluctuations therefore induce linen fluctuations in risk, similar to the notion of risk for most studied actions. This concept emphasizes the aspect of the daily bond management. She does not care which way up some funds and some distant horizon: the limit, he may find himself obliged to give certain, except default, the amount due on the day you want.Traditionally, higher yields were attached to the obligadons longer, more sensitive to interest rate fluctuations and changes in the price which is more risky.It should be noted that the rate to be used depends on the characteristics of the obligation if the rate of a bond fluctuates less long than a shorter bond, the bond price will long be more regular than short duty.The notion of interest rate risk is given in terms of bond portfolio• ons by the difference between the expected cash flows of assets and liabilities.Analysis tools to take their entire obligation with dimensionalysis portfolios.