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Tags
#bonds #finance #yield-to-maturity #z-spread
Question
Given a single series of nominal cash flows (like a riskless bond). If these payments are discounted to net present value with a static treasury yield curve the sum of their values will tend to [overestimate or underestimate?] the market price of the priced instrument. The parallel shift, which, if applied to the yield curve makes the NPV of the anticipated receipts equal to the market price is the Yield curve spread (aka Z-spread).
Answer
overestimate

Tags
#bonds #finance #yield-to-maturity #z-spread
Question
Given a single series of nominal cash flows (like a riskless bond). If these payments are discounted to net present value with a static treasury yield curve the sum of their values will tend to [overestimate or underestimate?] the market price of the priced instrument. The parallel shift, which, if applied to the yield curve makes the NPV of the anticipated receipts equal to the market price is the Yield curve spread (aka Z-spread).
Answer
?

Tags
#bonds #finance #yield-to-maturity #z-spread
Question
Given a single series of nominal cash flows (like a riskless bond). If these payments are discounted to net present value with a static treasury yield curve the sum of their values will tend to [overestimate or underestimate?] the market price of the priced instrument. The parallel shift, which, if applied to the yield curve makes the NPV of the anticipated receipts equal to the market price is the Yield curve spread (aka Z-spread).
Answer
overestimate
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Given a single series of nominal cash flows (like a riskless bond). If these payments are discounted to net present value with a static treasury yield curve the sum of their values will tend to overestimate the market price of the priced instrument. The parallel shift, which, if applied to the yield curve makes the NPV of the anticipated receipts equal to the market price is the Yield curve

Original toplevel document

Z-spread - Wikipedia, the free encyclopedia
age-backed securities, a model of typical repayment rates tends to be given; for example, the PSA formula for a particular Fannie Mae MBS might equate a particular group of mortgages to an 8 year amortizing bond with a 5% mortality per annum. <span>This gives a single series of nominal cash flows (like a riskless bond). If these payments are discounted to net present value with a static treasury yield curve the sum of their values will tend to overestimate the market price of the MBS. The parallel shift, which, if applied to the yield curve makes the NPV of the anticipated receipts equal to the market price is the Yield curve spread. The Z-spread of a bond is the number of basis points one needs to add to the Treasury spot rates yield curve, so that the NPV of the bond cash flows (using the adjusted yield curve) equa

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