investment-education

Loan amortization is the process of repaying a debt through scheduled payments that cover both principal and interest. Learn the payment formula, how amortization schedules work, and why early payments are mostly interest.

Comprehensive guide to interest rate risk — how duration, convexity, and key rate duration measure bond price sensitivity, with hedging strategies including immunization and interest rate swaps.

Learn how interest rate swaps work including plain vanilla swap structure, swap rate formula, step-by-step pricing example, hedging applications, and comparison with FRAs.

Complete guide to credit risk measurement — probability of default (PD), loss given default (LGD), the expected loss formula, credit rating mappings, and practical estimation methods.

Learn the difference between clean price and dirty price in bond markets. This guide covers the accrued interest formula, day count conventions, and how to calculate the settlement price for bonds traded between coupon dates.

Complete guide to forward rate agreements (FRAs) — what they are, how FRA notation works, how to price an FRA from spot rates, how settlement is calculated, and how FRAs compare to interest rate futures and swaps.

Learn the difference between spot rates and forward rates, how to calculate forward rates from spot rates, and how bootstrapping extracts zero-coupon yields from the par curve.

Bond convexity measures the curvature of the price-yield relationship, capturing what duration misses. Learn the convexity formula, see how duration and convexity work together for accurate price estimates, and understand the difference between positive and negative convexity.

Complete guide to bond duration — Macaulay, Modified, and Effective duration formulas with worked examples, interpretation guidelines, and practical applications for measuring interest rate risk.

Learn how to calculate bond prices and yield to maturity (YTM) with step-by-step formulas and examples for annual and semi-annual coupon bonds.