00:02
To find a mispriced bond, we can compare the bond's yield to maturity to the yields to other bonds with a similar risk characteristic.
00:10
To find a mispriced bond, we can compare the bond's yield to maturity i .e ytm to the yields of other bonds with a similar task characteristic.
00:30
So if a bond has a higher ytm than other bonds with a similar task characteristic, then it is likely to be underpriced.
00:38
If a bond has higher ytm then it is likely to be underpriced.
00:51
Then it is likely to be underpriced.
00:55
Conversely, if a bond has a lower ytm than the other bonds with a similar risk characteristic, then it is likely to be overpriced.
01:06
Lower ytm, overpriced.
01:12
So to arbitrage bond 4, we can use strips with a face value of 50.
01:18
So strips are a zero coupon bonds that represent individual payments from a bond to arbitrage bond 4.
01:30
We can use strips with a face value of 50.
01:46
So the strips are zero coupon bonds that represent individual payments.
01:52
For example, a 5 year strip with a face value of 50 would represent a dollar 50 payment that is made at the end of the 5th year of a 5 year bond...