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  • Valuing a Fixed Rate Bond-Derivative Pricing in Python
    Debt instruments are an important part of the capital market.  In this post, we are going to provide an example of pricing a fixed-rate bond. A fixed rate bond is a long term debt paper that carries a predetermined interest rate. The interest rate is known as coupon rate and interest is payable at specified dates before bond maturity. Due to the fixed coupon, the market value of a fixed-rate bond is susceptible to fluctuations in interest rates, and therefore has a significant amount of interest rate risk. That being said, the fixed-rate bond, although a conservative investment, is highly susceptible to a loss in value due to inflation. The fixed-rate bond’s long maturity schedule and predetermined coupon rate offers an investor a solidified return, while leaving the individual exposed to a rise in the consumer price index and overall decrease in their purchasing power. The coupon rate attached to the fixed-rate bond is payable at specified dates before the bond reaches maturity; the coupon rate and the fixed-payments are delivered periodically to the investor at a percentage rate of the bond’s face value. Due to a fixed-rate bond’s lengthy maturity date, these payments are typically small and as stated before are not tied into interest rates. Read more We are going to price a hypothetical bond as at October 31, 2018. We first build a zero coupon curve.  Picture below shows the market rates as at the valuation date. [caption id="attachment_595" align="aligncenter" width="628"] US swap curve as at Oct 31 2018[/caption] We utilize the deposit rates (leftmost column) to construct the zero curve up to 12-month maturity. We then use this zero curve to price the following hypothetical fixed rate bond: Currency: USD Maturity: 1 year Payment frequency: semi-annual Coupon rate: 3% We use Python [1] to build a bond pricer. Picture below shows the result returned by the Python program. The price is $99.94 (per $100 notional). [sociallocker id=496]https://drive.google.com/open?id=1XazVXvosbOOwEaoNG0eW5e3CiNblQqrS[/sociallocker]   References [1]  Quantlib Python Cookbook, Balaraman and Ballabio, Leanpub, 2017 Originally Published Here: Valuing a Fixed Rate Bond-Derivative Pricing in Python Read more Derivative Valuation
  • Cramer Remix: Don't take your cue on all of retail from Macy's
    The fear gauge, also known as the CBOE Volatility Index or the VIX, tracks S&P 500 option prices to measure near-term expectations of volatility, or the ...Read more Derivative Valuation
  • Theresa May's Brexit Plan Easily Defeated in Parliament
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  • A look at the global fintech landscape and how countries are embracing digital disruption in financial services
    This is a preview of the “Global Fintech Landscape” premium research report from Business Insider Intelligence, Business Insider's premium research service. To learn more about Business Insider Intelligence,  click here. Since sprouting in the US and UK around 10 years ago, fintech has spread globally. Now, after years of proliferation, countries around the world are starting to see their fintech industries mature. Additionally, we continue to see the emergence of new hotbeds for fintech. This indicates that the space is still far from being fully developed, and that there are many new ways in which startups and their technologies continue to change financial services. The fact that many new players are emerging in the space also suggests that attention is shifting away from the main countries where fintech is prevalent, and that investors are seeing the potential of newer, conventionally untapped markets. The spread of fintech can be largely seen in the emergence of fintech hubs — cities where startups, talent, and funding congregate — which are proliferating globally in tandem with ongoing disruption in financial services. These hubs are all vying to become established fintech centers in their own right, and want to contribute to the broader financial services ecosystem of the future. Their success depends on a variety of factors, including access to funding and talent, as well as the approach of relevant regulators. In this report, Business Insider Intelligence compiles various fintech snapshots, which together show the global proliferation of fintech, and illustrate where fintech is starting to mature and where it is just breaking onto the scene. Each snapshot provides an overview of the fintech industry in a particular country, and details what is contributing to or hindering its further development. We also include notable fintechs in each geography, and discuss what the opportunities or challenges are for that particular domestic industry. Here are some of the key takeaways from the report: Besides the US and UK, there are plenty of other countries developing strong fintech hubs. Australia, Switzerland, and China, which are profiled in this report, have managed to leverage their stable financial centers of Sydney, Zurich, and Shanghai, respectively, to spur fintech development and attract funding. There are also a number of emerging fintech markets, including Brazil, Israel, and Canada, that are likely to play a big part in the global fintech ecosystem in the future. These countries have nascent but rapidly developing fintech hubs, as well as supportive regulatory environments, that could help them cement strong positions in the broader fintech scene. Many more fintech hubs will likely morph into big fintech players. This could push investors to increasingly wake up to the opportunities in new markets, leading fintech funding to become more diversified in the future, particularly outside of the UK and US.  In full, the report: Outlines how the fintech industry has changed over the past 10 years. Details which cities are the most likely to succeed as fintech hubs at present and going forward. Highlights notable fintech startups in each of these markets. Discusses the potential opportunities and challenges these countries are facing today and in the future. Interested in getting the full report? Here are two ways to access it: Purchase & download the full report from our research store. >>Purchase & Download Now Subscribe to a Premium pass to Business Insider Intelligence and gain immediate access to this report and over 100 other expertly researched reports. As an added bonus, you'll also gain access to all future reports and daily newsletters to ensure you stay ahead of the curve and benefit personally and professionally. >> Learn More Now The choice is yours. But however you decide to acquire this report, you've given yourself a powerful advantage in your understanding of the fast-moving world of Fintech. SEE ALSO: Latest fintech industry trends, technologies and research from our ecosystem report Join the conversation about this story » Read more Derivative Valuation
  • Derivative Valuation-How to Price a Convertible Bond
  • Merton Credit Risk Model, a Case Study
    In a previous post entitled Credit Risk Management Using Merton Model we provided a brief theoretical description of the Merton structural credit risk model. Note that, The Merton model is an analysis model – named after economist Robert C. Merton – used to assess the credit risk of a company's debt. Analysts and investors utilize the Merton model to understand how capable a company is at meeting financial obligations, servicing its debt, and weighing the general possibility that it will go into credit default…Loan officers and stocks analysts utilize the Merton model to analyze a corporation's risk of credit default. This model allows for easier valuation of the company and also helps analysts determine if the company will be able to retain solvency by analyzing maturity dates and debt totals. Read more In this installment, we are going to present a case study based upon the Merton credit risk model. [caption id="attachment_588" align="aligncenter" width="628"] Junior Gold Miners ETF as at Nov 28 2018. Source: stockcharts.com[/caption] Our Client is a junior gold miner.  They are looking to raise additional capital in order to finance the production of gold. The client currently has an outstanding liability in the form of future discount for the payment of deliverable gold.  According to a contingency clause, the Buyer can exercise a certain amount of cash into a secured obligation. This conversion will increase the leverage of the Company, thus leading to higher credit risks. We determined the increase in the credit risks by using the Merton structural credit model.  We estimated that if the Buyer exercises the cash conversion clause, the credit spread of the Client will increase by approximately 20%. We thus helped the Client better negotiate the deal with their counterparty. Post Source Here: Merton Credit Risk Model, a Case Study Read more Derivative Valuation
  • Andreessen Horowitz-backed startup PagerDuty has confidentially filed for an IPO but because of the shutdown no one can review its prospectus
    PagerDuty, an IT incident response startup, has reportedly filed confidentially for an IPO. PagerDuty was last valued at $1.3 billion in funding round backed by Silicon Valley VCs like Andreessen Horowitz and Accel. Despite filing the paperwork, PagerDuty isn't likely to get comments from the SEC anytime soon since the Securities and Exchange Commission is closed with the rest of the federal government. The hot developer-focused startup PagerDuty has confidentially filed for an IPO, Bloomberg reported Tuesday. PagerDuty was last valued at $1.3 billion in its $90 million Series D, which closed in September. It's backed by big Silicon Valley venture capital firms including Andreessen Horowitz, Accel, and Bessemer Venture Partners. Morgan Stanley will lead the IPO, according to Bloomberg. PagerDuty helps companies quickly respond to IT incidents and alerts the best people to respond to any given incident, giving information about what happened and providing analysis. It's a vital tool in a DevOps workflow, where incidents have to be resolved quickly so the pace can continue. DevOps got a vital boost in 2018 after Microsoft acquired the venture-backed GitHub for $7.5 billion in June. PagerDuty CEO Jennifer Tejada leveraged investor excitement into a unicorn funding round at the end of last year, representing an impressive step up from its $650 million valuation a year earlier, in 2017.  While filing with the SEC puts PagerDuty in a good place for an early 2019 IPO, the company faces a major roadblock heading into its IPO. So long as the SEC and federal governement remain closed, IPO-ready companies aren't getting feedback on the paperwork they file, leaving most IPOs on hold.  PagerDuty did not immediately return a request for comment.  Read more: 2019 was supposed to be a banner year for IPOs, but now it's turning into a 's---show' SEE ALSO: 2019 was supposed to be a banner year for IPOs, but now it's turning into a 's---show' Join the conversation about this story » NOW WATCH: An exercise scientist reveals exactly how long you need to work out to get in great shape Read more Derivative Valuation
  • Cramer's charts suggest lower <b>volatility</b>, higher stock prices in coming months
    Cramer's charts suggest lower volatility, higher stock prices in coming ... The fear gauge, also known as the CBOE Volatility Index or the VIX, tracks ...Read more Derivative Valuation
  • U.S. Banks Are `Fantastically Well-Positioned,' Latitude CIO Says
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  • How Much Would You Pay?: Cramer's 'Mad Money' Recap (Tuesday 1/15/19)
    ... latest read on the CBOE Volatility Index, known better by its ticker, the VIX. ... This new chapter for the VIX was seen in the fourth-quarter meltdown.Read more Derivative Valuation
  • Latest fintech industry trends, technologies and research from our ecosystem report
    This is a preview of a research report from Business Insider Intelligence,  Business Insider's premium research service. To learn more about Business Insider Intelligence, click here. In recent years, we've seen a ballooning of activity in fintech — an expansive term applied to technology-driven disruptions in financial services. And 2018 has been no different, with fintechs' staggering influence on the market evidenced by record funding levels for the industry — by Q3 2018, overall funding was already up 82% from 2017’s total figure, according to CB Insights. Additionally, this year marked a watershed moment for the industry, with the once clear distinction between fintechs and financial services proper now blurred significantly. Virtually every incumbent financial institution (FI) is now looking inward and engaging in an innovation drive, spurred on by competition from fintechs. As such, incumbents are now actively investing in, acquiring, and collaborating with their fintech rivals. In this report, Business Insider Intelligence details recent developments in fintech funding and regulation that are defining the environment these startups operate in. We also examine the business model changes being employed among different categories of fintechs as they strive to embed themselves further in mainstream finance and prove sustainability. Finally, we consider which elements of the fintech industry are rapidly rubbing off on incumbent financial services providers, and what the future of fintech will look like. The companies mentioned in this report are: Funding Circle, GreenSky, Transferwise, Ant Financial, Nubank, Cellulant, Oscar Health, Stripe, One97, UiPath, LianLian Pay, Wacai.com, Gusto, Toast, PingPong, Flywire, Deposit Solutions, Root, Robinhood, Atom, N26, Revolut, OneConnect, PolicyBazaar, WeCash, Zurich, OneDegree, Dinghy, Vouch Insurance, Laka, Cleo, Ernit, Monzo, Moneybox, Bud, Tandem, Starling, Varo Money, Square, ING, Chase, AmEx, Amazon, Monese, Betterment, Tiller Investments, West Hill Capital, Square, Ameritrade, JPMorgan, eToro, Lendy, OnDeck, Ripple, Quorom, Chain, Coinbase, Fidelity, Samsung Pay, Google Pay, Apple Pay, Bank of America, TransferGo, Klarna, Western Union, Veriff, Royal Bank of Scotland, Royal Bank of Canada, Facebook, ThreatMetrix, Relx, Entersekt, BNP Paribas, Deutsche Bank, Gemalto, Lloyd's of London, Kingdom Trust, Aviva, Symbility LINK, eTrade, Allianz, AXA, Broadridge, TD Bank, First Republic Bank, BBVA Compass, Capital One, Silicon Valley Bank, Credit Suisse, Ally, Goldman Sachs. Here are some of the key takeaways from the report: Fintech funding has already reached new highs globally in 2018, with overall funding hitting $32.6 billion at the end of Q3. Some new regions, including South America and Africa, are emerging on the fintech scene. We've seen considerable scaling in older corners of the fintech ecosystem, including among neobanks and alt lenders. Some fintechs, including a number of insurtechs, have dipped into new markets to escape heightened competition. Emergent areas like blockchain and distributed ledger technology (DLT), as well as digital identity, are gaining traction. Many incumbents are undertaking business transformations that aim to reimagine everything from products and services to front-end systems and back-end processes.  In full, the report: Details the funding and regulatory landscape in the US, Europe, and Asia. Gives an overview into a number of fintech segments and how they've changed over the past year. Discusses how incumbents are reacting to fintechs in order to stay relevant in the changing financial services sector. Evaluates what the future of fintech will look like and what trends to look out for in the coming year. Subscribe to a Premium pass to Business Insider Intelligence and gain immediate access to: This report and more than 250 other expertly researched reports Access to all future reports and daily newsletters Forecasts of new and emerging technologies in your industry And more! Learn More Purchase & download the full report from our research store   SEE ALSO: How the largest US financial institutions rank on offering the mobile banking features customers value most Join the conversation about this story » Read more Derivative Valuation
  • Beyond Bitcoin: Here are some of the new use cases for distributed ledger technology
    This is a preview of a research report from Business Insider Intelligence, Business Insider's premium research service. To learn more about Business Insider Intelligence, click here. Of the many technologies reshaping the world economy, distributed ledger technologies (DLTs) are among the most hyped. DLTs are most often associated with cryptocurrencies like Bitcoin, but such coverage sidelines the broader use cases of DLTs, even though they stand to make a far bigger impact on the broader the financial services (FS) industry. DLT's value lies in its ability to centralize record-keeping, while cutting out the need for authorization by an overseeing party, instead allowing a record to be confirmed by multiple parties with access to the database. This means DLTs have the potential to streamline financial institutions' (FIs) operations, boost data security, improve customer relationships, and drastically cut costs. But many FIs have struggled to implement DLTs and reap the rewards, because of organizational obstacles, but also because of issues rooted in the technology itself. There are a few players working to make the technology more usable for FIs, and progress is now being made. In a new report, Business Insider Intelligence takes a look at what DLTs are and why they hold so much promise for FS, the sectors in which DLTs are gaining the most traction and why, and the efforts underway to remove the obstacles preventing wider DLT adoption in finance. It also examines the few FIs close to unleashing their DLT projects, and how DLTs might transform the nature of FS if adoption truly takes off.  Here are some of the key takeaways from the report: DLTs are proving attractive to FIs because of their ability to act as a single source of truth, distribute information securely, cut out middlemen, improve transaction times, and cut redundancy and costs. DLTs like blockchain and smart contracts stand to save the FS industry up to $50 billion a year through improved operational efficiencies, reduced human error, and better regulatory compliance.  The technology is being explored actively across FS, with trade finance, insurance, and capital markets proving especially active. Overall adoption is still low because of organizational and technical hurdles, but these are now being eliminated, promising to boost implementation. A few FIs have pulled ahead of the curve and are very close to taking their DLT projects live, if they haven't already. These players can serve as useful case studies for other institutions in getting their DLT solutions live. In full, the report: Looks at what DLTs are, and why the FS industry is working hard to make use of them.  Gives an overview of the financial segments which are seeing the most DLT activity, and what they stand to gain. Outlines efforts being made to make DLT more approachable and usable for the FS industry. Examines use cases in which FIs have managed to take their pilots live, and what they can teach their peers.  Subscribe to an All-Access pass to Business Insider Intelligence and gain immediate access to: This report and more than 250 other expertly researched reports Access to all future reports and daily newsletters Forecasts of new and emerging technologies in your industry And more! Learn More Purchase & download the full report from our research store Join the conversation about this story » Read more Derivative Valuation


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