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Deutsche Bank's Fixed Income Research Group is looking for yield curve trades to pitch to clients as well as for their proprietary trading desk. The group has data on recent bond trades and a proprietary term structure model, which they can use to develop trading ideas.

Two members of Deutsche Bank's Fixed Income Research Group are discussing how to advise clients on bond vs. equity asset allocation. A critical aspect to this asset allocation decision is the equity risk premium. Discusses a unique way developed by the bank for understanding the implications of the risk premium.

In 2002, Swiss Re, the world's second--largest insurance company, is considering securitizing parts of its risk portfolio in the capital markets. This would be a first for the company that, until then, had never transferred risk off its balance sheet. Peter Giessmann, head of the Retrocession Group, is considering catastrophe bonds as a way of transferring risk. "Cat bonds" are securities whose payments depend on the probability of a catastrophe occurring, such as an earthquake or hurricane. This case outlines the traditional reinsurance market and securitization efforts that have taken place in the past and then focuses on Swiss Re's decision as a sell-side participant in the cat bond market.

In 2001, Bank Leu, a Swiss private bank, is considering creating the world's first public fund for catastrophe bonds. Cat bonds are securities whose payments depend on the probability of a catastrophe occurring, such as an earthquake or hurricane. Cat bonds are traditionally issued by large insurance or reinsurance companies. This case outlines the traditional reinsurance market and securitization efforts that have taken place in the past and focuses on Bank Leu's decision as a buy-side participant in the cat bond market.

Spreadsheet Supplement for case 205008

This case explores two measures of price sensitivity: duration and convexity. These measures are normally used to gauge how sensitive a bond's price is to a change in interest-rate levels. However, as concepts, both duration and convexity have wider application: duration and convexity take into account any change for any risk factor affecting the price of any financial instrument.

All securities can be evaluated based on certain common characteristics: value, rate of return, risk, maturity, and so forth. This case examines how bonds are valued and how their rates of return are computed. It begins with basic definitions and features of fixed-income instruments and proceeds to basic bond mathematics. An overview of the U.S. Treasury market is provided, as well as some national markets for other important domestic government bonds.

In 2003, TechnoServe, a U.S.-based, international, nonprofit organization, was deciding how to structure the capital investments required for Tanzanian business groups to acquire coffee bean central pulperies. This case explores the challenges of capital budgeting and financing for small firms in an emerging market.

In 1997, the U.S. Treasury was deciding whether to proceed with a proposal to issue inflation-indexed bonds. This case explores the challenges facing innovation in the financial markets as the Treasury tries to determine whether to introduce Treasury Inflation-Protection Securities.

In 1997, the U.S. Treasury was deciding whether to proceed with a proposal to issue inflation-indexed bonds. This case explores the challenges facing innovation in the financial markets as the Treasury tries to determine whether to introduce Treasury Inflation-Protection Securities.

Profiling nonsystematic risk for a bond investor, the case describes lottery bond issues by the Swedish National Debt Office (SNDO). Swedish lottery bonds are a specific type of financial fixed income instrument for Swedish retail investors. The distinctive feature of lottery bonds is that, unlike traditional institutional bonds, the normally guaranteed interest--the coupon--here only is paid as "wins" to bondholders selected in drawings. The case takes place in March 2003, when Anders Holmlund, head of analysis, is reviewing the proposal for the next lottery bond issue. While reviewing the features of the bond issue, he also considers the larger picture: What are the benefits to the Debt Office of issuing lottery bonds, especially in view of a recently launched Internet-based sales system that allows retail investors to take part in government bond auctions?