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2

No, 9th character is computed using deterministic algorithm described here: http://en.wikipedia.org/wiki/CUSIP#Check_digit_pseudocode.


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while it is true that $$\lim_{T\to\infty} Z(t, T) = \lim_{T\to\infty} e^{-r(T-t)} = 0$$ this is when $r$ is independent of time to maturity, a flat and constant yield curve. In practice, we use yield curves which vary depending on what day they are estimated and what maturity the ZCB is. If in fact $r(t, T)$ depends on today and the maturity then the ...


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This is something that banks don't do very well (in my opinion), but we can look to the insurance industry for help. Insurance liabilities often span decades, and the regulation has come up with something called the Ultimate Forward Rate (or UFR). It's currently a hotly debated topic with the advent of Solvency II (insurance regulation) coming into effect ...


2

If the bond's DV01 is 0.05, then the DV01 of 1000 of this bond will be $0.05\times 1000 = 50$. By contrast, if the modified or effective duration of the bond is 0.05, then the modified duration of 1000 of this bond is still 0.05.


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The above gives you the value of the option in the convertible bond. Next step, look at the price of an exchange-traded option to see what the embedded convertible bond option is worth. That can tell you if the convertible bond is over or under priced - compare the market value of the option to the implied price of the option (scaling prices to the same ...



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