par value of stock / converstion ratio = number of shares to convertability

Market value of stock/ convertability ratio = parity price

or "and interest"

principal X rate X(time in days from last interest payment/360 day)s = accrued interest

Such bonds trade "flat" or without accrued intrest

without accrued interest

such a trade can take no Less than 6 days and no more than 60 days

Called T-Bills

Bond Equivalent yeild= (Appreciation/purchase price)(365/days to maturity)

ie one year bond purchased at 9,200 800/9200=8.7%

Discount yeild= ((par-purchase price)(365))/days to maturity

Purchase Price = (par)-((Discount yeild) X (days to maturity))/365

ie Due 6/30 2002/07

Mortgage Backed Securities 

than other pooled certificates

due to prepay

PSA is Public Securites Association - It puts out a modle of expected payment rate based on historical data - that includes prepayment estimates.

Divided into Tranches

Tranche is the french word for Slice

and so on, until each maturity is paid off.

used to reduce effects of prepayment - speads the risk that underlying mortgages will be paid off sooner than expected. Usually by creating a type of sinking fund(special Tranche) to absorb prepayments

Planned Amortiztion Classes

Example - an 18 million PAC tranch could have 10mil in principal and two 4mil companion tranches

Targeted Amortization Classes