Simple margin

Figure 6.6 shows the simple margins TPA-PX and PET-PX over the same time period, all based on contract prices. The degree of variation in margins is clearly less... 

A positive simple margin indicates that the floater has a higher return than that of the indicator chosen. 

Another way to calculate the yield return is the discounted margin. It differs from the simple margin because the first one amortizes the bond s premium or discount at a constantly compounded rate. The main disadvantage of this method is that it requires estimation of the reference rate over the bond s life. Assuming a bond paying semi-annual coupons, the discounted margin is given by (10.5) ... 

The adjusted simple margin for BP is 60.02 basis points and is derived from the adjusted price of 100.12. The other one is known as adjusted total margin... 

There are several yield spread measures or margins that are routinely used to evaluate floaters. The four margins commonly used are spread for life, adjusted simple margin, adjusted total margin, and discount margin. To illustrate these measures, we will assume a floater that has a coupon formula equal to 3-month LIBOR plus 45 basis points and delivers cash flows quarterly. 

Once the adjusted price is determined, the adjusted simple margin is computed using the formula below ... 

To compnte the adjnsted simple margin for onr floater, we use the following information ... 

Plugging this information into the equation for the adjusted simple margin we find that it is 55.458 basis points as shown below ... 

The adjusted total margin (also called total adjusted margin) adds one more refinement to the adjusted simple margin. Specifically, the adjusted total margin is the adjusted simple margin plus the interest earned by... 

A positive simple margin signifies that the FRNs yield is higher than that of a comparable money market security. 

The simple margin formula may be adjusted to take into account changes in the reference index rate since the last reset date. This is done by replacing the price in (131) with an adjusted price, defined using either (13.2a) or (13.2b) which assume semiannual coupons. 

According to the model, the net benefits of increasing the makeup-gas purity form 89% to 100% were on the order of 2 million per year. But how much would it cost to make available the extra hydrogen needed Using a simple marginal cost of hydrogen is not the way to answer this. 

At certain times, the simple margin formula is adjusted to take into account any change in the reference rate since the last coupon reset date. This is done by defining an adjusted price, which is either ... 

Inserting these results into (1.25) we have the following simple margin ... 

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