LTCM Co-Founder Haghani: How Negative Rates Impact Long-Term Bonds

What is the main conclusion about the expected value of long-term cash flows in the bond market?

• High expected values always lead to high prices.

• High expected values do not necessarily result in high prices.

• Expected values are irrelevant to bond pricing.

• Expected values guarantee market mispricing.

How does the concept of convexity affect long-duration bonds?

• It causes bond prices to curve dramatically.

• It stabilizes bond prices.

• It has no effect on bond prices.

• It makes bond prices linear.

What is the 'perpetuity paradox' in bond investment?

• The idea that perpetuities have no value.

• The belief that perpetuities are risk-free.

• The assumption that perpetuities are always overpriced.

• The notion that convexity and utility are crucial.

What should passive investors consider when investing in long-term bonds?

• The long-term expected returns.

• Only the current market price.

• The short-term interest rates.

• The historical performance of bonds.

Why are negative yielding instruments compared to lottery tickets?

• They are illegal in most markets.

• They offer low probability but potentially high returns.

• They are guaranteed to lose value.

• They have a high probability of success.