I read it somewhere in the books, but now couldn’t find it. Can anyone help to define/contrast the terms? Thanks
you don’t need to contrast the terms since it’s not an either/or comparable thing. def’n: cyclical - increase in new issues actually narrows spreads because they validate existing prices, which is counterintuitive since more of something should lower the price of it. secular - new issues are dominated by intermediate bullet corporates implications: -embedded options trade at a premium (because they are scared b/c most new issues are simple bullets -longer durations pay premium -credit-based derivatives used more it’s los 30b, pg. 166 of schweser, not sure cfai text
lol, first implication should read “…scarce, b/c…”
CFAI Book 4, Pages 67-68
The question is: Are you scarce or scared…?
definitely scared
Although longer durations premium case makes sense, in CFAI text, it says “Shorter maturities also cut the aggregate sensitivity to interest-rate risk”…do you think both statements explain the same phenomenon?