What is Average Maturity? Average maturity is a way to figure out how long it takes, on average, for the money you invested in bonds to be paid back to you. When you buy a bond, you are lending money to a company or government, and they promise to pay you back with interest over […]
Macaulay Duration is the weighted average maturity of the cash flow from the bond. When Interest rate rise, the price of the bond falls, then the question arise, is that any matrix that we can use to evaluate a bond? See how sensitive it is going to be the price of that bond and given
Potential Risk Class Matrix (PRC Matrix)measures the maximum risk of debt mutual fund. This came in to force on December 01, 2021 by markets regulator SEBI, requiring all fund houses to disclose to investors of the maximum risk a debt mutual fund can take. There are basically two different types of risks associated with debt
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Target Maturity Funds are type of debt fund, invests in bonds of defined maturity, have gained in popularity as a higher return safe investment. While traditional investment avenues offer stable returns, they do not readjust with the changing interest rate scenarios on a real time basis. This is where target maturity funds can be a
Pass Through Certificates (PTCs) are issued by banks as a safeguard against risks. Simply put, the banks, through PTCs, transfer some of their long-term mortgaged assets (receivables) on to other investors like NBFCs and Mutual Funds. Why do they do this? They do this because they want to share some of their risks with other
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Understanding why one moves into long term debt funds when interest rates begin to fall. Everyone knows that prices rise when there is increase in demand and fall with the fall in demand. The same is applicable to Bonds with long durations. Let’s revisit the basics of Bond price and Interest relationship: When Interest rates
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Why do bond yields go up, when bond prices go down? You might have come across a rule which states that When bond prices go down, bond yields go up & vice versa Let’s understand this rule. You will agree that when a seller of a goods sells at a lower cost, he makes a
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LiquiLoans is a Profitable RBI Regulated Peer-to-Peer (P2P) NBFC founded in 2018. LiquiLoans is one of the only P2P platforms in India which provides investors an access to India’s Prime Retail Borrowers i.e., Safest Borrowers. LiquiLoans is founded by Mr. Gautam Adukia and Mr. Achal Mittal who have previously co-founded a successful rental platform Rentomojo
A debt spiral is when one falls deeper and deeper into debt, despite staying current on payments. It can happen when there is high-interest debt, or if there is sudden need of more debt or one loses income. In a debt spiral, a person is so deep in debt, he needs to borrow even more
Let’s say I am a stockiest of winter clothes. In anticipation of a severe winter, I have stocked clothes in excess. My biggest concern is whether I will be able to sell all these before the onset of summer. If summer steps in earlier than expected, then I will have to lower the price to
