7. Future, Forwards & Zeros

The Frugal Finance online courses cover a range of topics related to financial analysis, focusing on real-world uses and real-world scenarios.

In the first set of lessons, you’ll learn about zero-coupon bonds, understanding how to calculate their present value and yield. These lessons emphasize the importance of accurate discount rates in valuing money market instruments. In addition, you’ll look at procedures for calculating bond yield-to-maturity, critical for financial analysis.

Moving on, the course looks into the relationship between yield to maturity and spot rates, explaining how to root out spot rates from yields and their importance in bond pricing. Real-world examples help solidify understanding, preparing you to learn advanced valuation procedures.

Bootstrap Method

The Bootstrap Method is introduced for determining Treasury zero rates, providing step-by-step guidance on calculating zero rates for various Treasury bonds based on their prices and coupon structures. Using examples, you’ll learn competence in extracting zero rates for different maturity periods and understanding their real-world uses.

Compounding Procedures

Compounding procedures are explored, including continuous and normal compounding procedures. You’ll learn how to derive forward interest rates from zero rates and their effects in predicting future interest rate trends.

Forward Rate Agreements (FRAs)

Forward Rate Agreements (FRAs) are covered comprehensively, from their fundamentals to valuation principles and real-world uses in financial markets. You’ll understand how to calculate forward rates and assess the costs and benefits associated with FRAs.

Bond duration

Bond duration is explained in detail, along with its real-world uses in financial analysis. You’ll look at how changes in yield affect bond prices and conduct sensitivity analysis using duration measures.

Forward and Futures Pricing

Forward and futures pricing for various assets, including currencies and commodities, are discussed, along with tactics for identifying arbitrage opportunities. These lessons provide details into pricing dynamics and risk management tactics in futures markets.

Overall, the Frugal Finance courses offer an all-inclusive understanding of financial analysis ideas with real-world examples and real-world uses, preparing students to navigate complex financial scenarios effectively.