Citicorp Senior Analytics Consultant Interview Questions and Answers

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Structured finance involves creating complex financial instruments by pooling assets and selling them to investors.

• Structured finance is a way to create customized financial products by pooling assets like mortgages, loans, or bonds.

• These assets are then divided into tranches with different levels of risk and return, and sold to investors.

• Parties involved in structured finance include originators, underwriters, rating ...read more

Bond prices and yields have an inverse relationship.

• When bond prices go up, yields go down and vice versa.

• This is because the yield is the return an investor receives on their investment, while the bond price is the amount they pay for the bond.

• For example, if a bond has a face value of $1000 and a yield of 5%, the investor would receive $50 per year in interest. If the bond price goes up to $1100, the yield would decr...read more

Bond price is calculated based on the present value of future cash flows.

• Bond price is affected by interest rates, credit rating, and time to maturity.

• The present value of future cash flows is calculated using a discount rate.

• Bond prices move inversely to interest rates.

• For example, if a bond has a face value of $1000, a coupon rate of 5%, and a maturity of 10 years, the bond price would be calculated as the present va...read more

Embedded options are features in financial instruments that allow the holder to take certain actions at specific times.

• Embedded options are commonly found in bonds, mortgages, and other debt instruments.

• They can include call options, put options, and convertible options.

• Call options allow the holder to buy the underlying asset at a specific price, while put options allow the holder to sell the underlying asset at a spe...read more

Special purpose vehicles (SPVs) are entities created to isolate financial risk and facilitate complex financial transactions.

• SPVs are commonly used in structured finance to securitize assets such as mortgages, auto loans, and credit card debt.

• They are designed to protect investors by separating the assets and liabilities of the SPV from those of the parent company.

• SPVs can issue bonds or other securities backed by the ...read more

DFC is a valuation method that estimates the intrinsic value of a stock based on future cash flows. Dividend discount model values a stock based on its future dividend payments.

• DFC involves projecting future cash flows and discounting them back to their present value

• Dividend discount model values a stock based on the present value of its future dividend payments

• Both methods are used to determine the intrinsic value of ...read more