Fixed Income Calculations

Overview

• Forecasting Cash Flows and Accruals : A very basic type of analysis in fixed income is forecasting cash flows. This analysis takes the details of a fixed income instrument or set of instruments and then calculates what the cash flows will be from that instrument based on its contract details. Addditional analytics such as the effects of default can be overlayed on forecasted cash flows.
• Present Value : Present Value (likewise, Future Value) calculations are a calculation that takes a series of cash flows that occur at different times and returns a single number , the value of those cash flows at a given time. Present value is used to calculate the price of a fixed series of cash flows. (that is, the value today) If the cash flows are not fixed (i.e. random in some way), the techniques used to price such instruments adds some complexity, but usually uses a variation of present value.
• Yield and Internal Rate of Return : an alternative measure of value to the present value, similar in nature to a return calculation
• Fixed Income Pricing : delves into the complexities of using the above tools to price a fixed income instrument.