YIELD TO MATURITY BOND: INTEREST RATE, INFLATION AND BOND RATING – EMPIRICAL RESEARCH ON BANKING SECTOR

Banking on Deposits: Maturity Transformation without Interest Rate Risk

We show that in stark contrast to conventional wisdom, maturity transformation does not expose banks to significant interest rate risk. Aggregate net interest margins have been near-constant over 1955–2013, despite substantial maturity mismatch and wide variation in interest rates. We argue that this is due to banks’ market power in deposit markets. Market power allows banks to pay deposit rate...

The Impact of Bond Rating Changes on Corporate Bond Prices

I examine the corporate bond market reaction to bond rating changes using newly available corporate bond transaction data from the over-the-counter (OTC) market. I document significant price responses to both downgrades and upgrades in the in two-day period surrounding announcements. Since numerous studies find no evidence of a stock price reaction do upgrades, my findings adds to the literatur...

Treasury yields and corporate bond yield spreads: An empirical analysis

This paper empirically examines the relation between the Treasury term structure and spreads of investment grade corporate bond yields over Treasuries. I nd that noncallable bond yield spreads fall when the level of the Treasury term structure rises. The extent of this decline depends on the initial credit quality of the bond; the decline is small for Aaarated bonds and large for Baa-rated bond...

Interest Rate Uncertainty and the Value of Bond Call Protection

Technical Notes - Interest Rate Volatility and Bond Prices

Managing interest rate risk requires measuring it first. Duration analysis has become an important tool, allowing portfolio managers to measure the sensitivitv of their portfolios to changes in 'the level of interest rates. But duration analysis has a number of serious drawbacks. Standard duration analysis, for instance, allows for only parallel shifts in the term structure. Thus portfolio mana...