Equity / Fixed Income Formulas

Margin Call Price

P0 (1-IM)/(1-MM)

Price-weighted Index

sum stock prices/ # of stocks after adjust

Market Cap Index

base year index (current year MV/base year MV)

Equal Weighted return

sum return %/# of stocks

ROE

NI/ avg BVt → BV volatile or industry convention

NI/ BV t-1 → BV Stable over years

Operating Profit/ Contribution Margin

[Q x (P - VC)] - FC

P-VC

Degree of Operating Leverage

% change operating profit/ % change sales

high DOL = high FC

Degree of financial leverage

% change NI / % change operating income

high DFL = high Debt leverage

FCFE form of DDM

FCFE/(1+k)^t

Sustainable Growth Rate

(1-DPR) x ROE

RR x ROE

Enterprise Value

EV = MV + MV debt - cash & short term debt

amount to acquire the company

Current Yield

Coupon/Price

YTM

IRR

Purchase Price

MV of collateral /IM

Haircut

MV- PP/MV or

1-1/IM

Variation Margin

[Adjusted Price x IM] - MV of collateral

Accrued Interest

Coupon payment (Days since last/ Days between)

Full Price

PV @ last coupon (1+r/n)^Days/Days

Flat Price

Full - AI

Simple Yield

Coupon + amortn/price

Callable Bond Value

Straight Bond Value - Call option

AOY

HPY * (365/days to maturity)

DY

D * (360/days to maturity)

Duration Gap

Macaulay Duration - Investment horizon

negative = reinvestment

positive = price risk

Macaulay of a Perpetuity

(1+r)/r

ModDur

MacDur/(1+ytm/n)

Approx ModDur

(V_ -V+)/2(v0)(ytm)

MoneyDur

ModDur*Full price*holding

Convexity of CF

t(1+1)/(1+r)²

Approx Convexity

V_ + V+ -2V0/V0(ytm)²

% Full price

-annual moddur (ytm) + 0.5annual convexity(ytm)²

LGD%

EE*(1-RR)

Credit Spread

Prob of Default * LGD%

Retained Cash Flows to net debt

(CFO - dividends)/(debt - cash&mark sec)

Debt service coverage ratio

net operating income/debt service

net OP income = rental income - operating expenses - noncash replacements

Loan to value LTV

current mortgage amount/collateral