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14 votes
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How exactly are corporate bonds priced at issue

I am not an investment banker, but usually the procedure is something like this: (0) The IB knows the yield of existing bonds with the same maturity and credit rating, so it is not too difficult for ...
Alex C's user avatar
  • 9,382
10 votes

Criteria to assess the possibility of corporate bankruptcies in U.S. equity exchange markets

Since the stock is listed on NASDAQ, you have access to fairly standard 10Q and 10K financial statements. So you can apply the analysis pioneered by Ed Altman in his Z-score paper - compare this ...
Dimitri Vulis's user avatar
9 votes
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Criteria to assess the possibility of corporate bankruptcies in U.S. equity exchange markets

I have been told: Bankruptcy is very controversial Google Scholar Researchers. You might track companies ratios (e.g., debt to equity ratio, ...
Emma's user avatar
  • 460
6 votes
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Why somebody buy the defaulted loans?

(1) Often there is some collateral behind the loan (a building, etc.) which with enough effort and time can be sold to recover at least SOME of the value of the loan. However this is not necessarily ...
nbbo2's user avatar
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5 votes
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Debt seniority and probability of default

A CDS contract has a "reference entity" (obligor, bond issuer) and a "reference obligation" (the specific bond that needs to default, rather than a tier). Read https://www.isda.org/...
Dimitri Vulis's user avatar
4 votes
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How does the Collateral in Collateralized Loan Obligations (CLOs) Work?

The loans are placed in a vehicle company (“special purpose vehicle” or SPV). This company issues various tranches of debt and purchases the loans from the marketplace. There is no specific posting ...
dm63's user avatar
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4 votes
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Understanding Loans with a Dynamic Principal

In real life, notional amounts can get even more complicated than that. Generally, most libraries refer to non-constant notional as "amortizing notional". I will just list the use cases, to ...
Dimitri Vulis's user avatar
4 votes

How exactly are corporate bonds priced at issue

In addition to @AlexC answer there are 2 additional key points. 1) if the issue is oversubscribed the IB / syndicate team will choose the allocation to each client usually based on their relative ...
Attack68's user avatar
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3 votes
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How to get started with ABS?

To answer your questions in order: MBS and ABS are usually not considered retail-friendly products because of the complexity of their risk factor exposures (spread, prepayment, credit, interest-rates,...
Sharad's user avatar
  • 1,211
3 votes

How does the Collateral in Collateralized Loan Obligations (CLOs) Work?

How it works has been described clearly by dm63. I commend that answer. I would like to add a few words about "collateral", what does it refer to? Obviously the buyers of the debt tranches ...
nbbo2's user avatar
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2 votes

can a country replace its debt with a low interest loan?

Suppose Country XYZ can borrow at 5% in XYZ currency and Japan can borrow 1% in JPY. Theoretically, Japan could borrow JPY at 1%, lend it at 1.5% to Country XYZ, and hedge the currency risk using a ...
cpage's user avatar
  • 64
2 votes

Objective measure of highly leveraged firms using Debt-to-EBITDA ratio

It is mainly subjective, depends on country and sector. E.g. when I worked in private equity in a distressed fund a highly levered company was a company with a net-debt to EBITDA ratio > 7.0. Those ...
phdstudent's user avatar
  • 8,381
2 votes

Calculating a firm's cost of debt using bond issues

I'm no expert of WACC or company finance, etc. But from a pure bond pricing/trading perspective, bond price embodies at least two risks: interest rate credit (i.e., the company defaults) If a bond ...
Lipton's user avatar
  • 194
2 votes
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Why is there a need for Libor in the UK

Libor is a term rate (eg 3 month libor is the rate at which banks would lend to each other for 3 months). Fed funds (or Sonia in the UK) is an overnight rate. That's the difference.
dm63's user avatar
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2 votes
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Why do not include loan payments in NPV?

I think the fundamental misunderstanding you have is that you think that Cash Flows from Financing Activities includes interest payments. It does not. In only includes principal repayments. Cash Flows ...
Ronak Vora's user avatar
2 votes

Understanding Loans with a Dynamic Principal

Credit card debt, mortgage debt and other retail loan debt, can come with a prepayment risk. In traditional bond terminology this is a callable bond (although the whole loan may not be called at once)....
Attack68's user avatar
  • 10.5k
1 vote

Determining fair interest rate for an unsecured loan with a non-refund clause

This is my interpretation of the situation. Suppose that we are dealing with one existing Founder, who establised the company with 100 shares at 1 SEK each. Then he loans 100,000 SEK to the new ...
Attack68's user avatar
  • 10.5k
1 vote

Does a bond pay a coupon at maturity?

Zero coupon bonds do not pay coupon. Instead zero coupon bonds pay the face value at maturity. We buy at a discount and at maturity, it pays the face value. All other fixed income bonds, pay coupon ...
nsivakr's user avatar
  • 119
1 vote

How to write a javascript formula for the time to clear debt on a credit card calculator?

I typed this toy example in Python before you confirmed you need Javascript but, to be honest, it's fairly banal to port it to any other language. It's just a toy example, which needs to be tidied up ...
Pythonista anonymous's user avatar
1 vote

Why do not include loan payments in NPV?

Henrique, following your logic, in your original table you should then include a positive cash flow from debt +150, then in this case your results "pre-debt" and "post-debt" would ...
Igor's user avatar
  • 11
1 vote

Why do not include loan payments in NPV?

The interest payment in incorporated in the "cost of capital" or discount factor part of the NPV equation. In other words, If you had to borrow money at 8%, then the net present value is calculated by ...
D Stanley's user avatar
  • 1,441
1 vote

Why somebody buy the defaulted loans?

A bank might not have the expertise in recovering defaulted loans. it might be more efficient to sell the claim to someone who specializes in recovery and knows how to doit better. There was a nice ...
Dimitri Vulis's user avatar
1 vote

Why is there a need for Libor in the UK

The reason banks are asked rather than the rate being observed is that transactions do not take place for all of those maturities, at least not with enough banks to make it accurate at any given time. ...
Alex Taha's user avatar

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