Fixed Income Markets - Detailed Educational Notes | MODULE D: FINANCIAL PRODUCTS AND SERVICES
Fixed Income Markets: Debt / Bond Markets Government Securities Government securities (G-Secs) are debt instruments issued by the central or state governments to finance their fiscal deficit. They carry low risk and often serve as benchmarks for other debt instruments. Common examples include Treasury Bills, Dated Securities, and State Development Loans. Bond Valuation and Theorems Bond valuation involves determining the fair price of a bond based on the present value of its future cash flows. This depends on the coupon rate, maturity period, and prevailing market interest rates. Mathematical Example: Consider a bond with: Face Value (F) = ₹1,000 Coupon Rate (C) = 8% annually Time to Maturity (T) = 5 years Market Interest Rate (r) = 7% The bond price (P) is given by: P = (C × F) × [(1 - (1 + ...