FIN 352 (1) - Essay Example
One of the major OBS activities is the issuance of guarantees. This may be called by a bank to take place at a future time, and the dedication to lend at a forthcoming time if the borrower wishes. This may prompt the result of a contingent risk which may be out of the control of the financial institution.
A duration of a zero-coupon bond is a bond that does not pay any interest in its maturity life. That is; its maturity is equivalent to maturity because hundred percent of its present value is made by the payment of the nominal value at maturity (Lee & Alice 316). The relationship that exists between duration and maturity in bonds is that the longer a bond takes to mature, the greater is its duration or volatility. Duration changes each time a bond makes a coupon installment. After some time, it abbreviates as the bond nears maturity. Elsewhere, the relationship between duration and yield is that the higher a bond yields as it nears maturity, the lesser is its duration.
