Effective Yield

From Open Risk Manual

Definition

Effective Yield.


Issues and Challenges

The difference between this and Native yield is as per note: Native yield relates to price quotation context; Effective Yild is in relation to portfolio analytics. Recall: every analytic formula relates to the set of cash flows, so there are assumptions underlying each of these, For example the assumption that Y is constant, which it isn't (because there is a curve, which may be convex not linear (is that right?). So you can compare rate or return between what I see and what the market has out there. In the US market: a Y which is calculated using Monto Carlo method simulation. relationship facts to add: Relation to method / formula (e.g. Monte Carlo), and the method used to determine the actual figure for the MC method. eff Y for single instrument: E Y for bonds without calls and stuff. Variation in this: whether we look at a whole set of bonds YTM quoted by Bmb would be the YTM quoted according to whatever the market is - = the NAtive Yield. SO: Publicly quoted more: choose another adjective.

Disclaimer

This entry annotates a FIBO Ontology Class. FIBO is a trademark and the FIBO Ontology is copyright of the EDM Council, released under the MIT Open Source License. There is no guarantee that the content of this page will remain aligned with, or correctly interprets, the concepts covered by the FIBO ontology.