Fixed income: Carry roll down (FRM T4-31)

Financial Risk Manager (FRM, Topic 4: Valuation and Risk Models, Fixed Income, Bruce Tuckman Chapter 3, Returns, Spreads and Yields). The Carry-Roll-Down is the price change in the bond due exclusively to the passage of time. It is only one component of a bond's total profit and loss (P&L). The bond's total P&L equals Price Appreciation plus Cash Carry (i.e., coupon). Price Appreciation equals Carry-Roll-Down plus Price Change due to Shift in Rates (market risk) plus Price Change due to spread narrowing/widening (credit risk). Discuss this video here in our FRM forum: trtl.bz/2WkA3AA
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[@siyuancheng9575]

Bionic is always the best

[@wyh194]

Very clearly explained , thanks !

[@gowthamhuliyar]

Thank you!

[@ashleyburger5986]

I think you mentioned using either forward or spot rates for discounting will get you the same result...im trying to understand this. I understand the link between spot, forwards and yields but seem to get muddled with which to use to discount cashflows to value the cashflows.

[@albertosantangelo6872]

he's used forward rates to discount cash-flows and get prices, but you would get the same price using spot rates to discount cash-flows, as long as you recover the curve of spot rates from the curve of forwards using the no-arbitrage formula that links the two type of rates

[@Mawesome111]

GOAT!

[@prasadkamath1205]

thank you so much for this. really nice. Do you have the excel by any chance?

[@hnxssss]

your "carry roll down" should be roll down and that coupon should be the carry

[@Best2024_job]

make it simpler