Why do I want extra yield for holding a perpetual that is priced near par? I try to explain the rationale in this article, published in the November 2007 edition of Canadian Moneysaver.
Look for the research link!
Research : Convexity
6 comments Research : Convexity
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[…] Readers will be familiar with my article on convexity, in which I estimate that a 15bp yield pickup is required to make holding a near-par instrument […]
[…] … the yield spread between the discount issues and the near-par ones is not quite the 15bp I have previously suggested as a rule of thumb, but it’s close enough for horse-shoes. Note that TD.PR.Q, despite its […]
[…] Note that “Curve Price” is a static calculation – it assumes that the yield curve will not change in the future. Convexity effects decrease the value of near-par-by-curve-price issues […]
[…] Note that “Curve Price” is a static calculation – it assumes that the yield curve will not change in the future. Convexity effects decrease the value of near-par-by-curve-price issues […]
[…] my article on convexity if you don’t have a clue what I’m blathering […]
[…] not only do we have the slope of the yields being in the wrong direction (see my articles on Convexity and Perpetual Hockey Sticks) but … doesn’t the spread seem a little … er … […]