Finance Folk: How the hell do you calculate yield to maturity on TIPS?

[halik]

Is there even such a thing at nominal YTM on TIPS? Since inflation is not known ahead of time, i'm really clueless as to how to do the math at all...

 

[JohnCU]

...huh?

 

[KLin]

yield...on tips? 😕

 

[Epic Fail]

You can't since you have unknown cash flows from a floating rate.

 

[halik]

Originally posted by: Epic Fail
You can't since you have unknown cash flows from a floating rate.

Yeah,
I suppose you can do the IRR/YTM in real terms, but that won't really tell you anything anyway.

... methinks my finance prof fucked up.

 

[LegendKiller]

You'd have to be able to use some sort of forward curve.

 

[dbk]

Originally posted by: halik

Originally posted by: Epic Fail
You can't since you have unknown cash flows from a floating rate.

Yeah,
I suppose you can do the IRR/YTM in real terms, but that won't really tell you anything anyway.

... methinks my finance prof fucked up.

your prof asked for nominal ytm on tips?

 

[Nerva]

dont you need to assume inflation rates? i am not that strong with fixed income stuff.

do you have access to bbg? you may be able to find a TIPS, and just do an yield analysis, look at the inputs to try and figure it out

 

[Nerva]

Originally posted by: halik

Originally posted by: Epic Fail
You can't since you have unknown cash flows from a floating rate.

Yeah,
I suppose you can do the IRR/YTM in real terms, but that won't really tell you anything anyway.

... methinks my finance prof fucked up.

not necessarily, if you have 7 year tips, you can argue that the cash flows can be forecasted.

 

[Special K]

Originally posted by: KLin
yield...on tips? 😕

TIPS = treasury inflation protected securities

 

[halik]

Originally posted by: dbk

Originally posted by: halik

Originally posted by: Epic Fail
You can't since you have unknown cash flows from a floating rate.

Yeah,
I suppose you can do the IRR/YTM in real terms, but that won't really tell you anything anyway.

... methinks my finance prof fucked up.

your prof asked for nominal ytm on tips?

He asked for YTM on bills, bonds and tips

 

[halik]

Originally posted by: Hadrian
dont you need to assume inflation rates? i am not that strong with fixed income stuff.

do you have access to bbg? you may be able to find a TIPS, and just do an yield analysis, look at the inputs to try and figure it out

I mean yeah I can pull it off of bloomberg, but that won't give me any credit as far as solving the math...

 

[Nerva]

Originally posted by: halik

Originally posted by: Hadrian
dont you need to assume inflation rates? i am not that strong with fixed income stuff.

do you have access to bbg? you may be able to find a TIPS, and just do an yield analysis, look at the inputs to try and figure it out

I mean yeah I can pull it off of bloomberg, but that won't give me any credit as far as solving the math...

ytm for bill and bonds are easy as long as you have a market rate to be used as reference. i am afraid i just dont know TIPS