Choudhry Bond and Money Markets

Strategy, Trading, Analysis
1. Auflage 2003
ISBN: 978-0-08-057493-6
Verlag: Elsevier Science & Techn.
Format: PDF
Kopierschutz: 1 - PDF Watermark

E-Book, Englisch, 1152 Seiten, Web PDF

The Bond and Money Markets is an invaluable reference to all aspects of fixed income markets and instruments. It is highly regarded as an introduction and an advanced text for professionals and graduate students.
Features comprehensive coverage of:
* Government and Corporate bonds, Eurobonds, callable bonds, convertibles
* Asset-backed bonds including mortgages and CDOs
* Derivative instruments including futures, swaps, options, structured products
* Interest-rate risk, duration analysis, convexity, and the convexity bias
* The money markets, repo markets, basis trading, and asset/liability management
* Term structure models, estimating and interpreting the yield curve
* Portfolio management and strategies,total return framework, constructing bond indices
* A stand alone reference book on interest rate swaps, the money markets, financial market mathematics, interest-rate futures and technical analysis
* Includes introductory coverage of very specialised topics (for which one previously required several texts) such as VaR, Asset & liability management and credit derivatives
* Combines accessible style with advanced level topics

Moorad Choudhry is Chief Executive Officer, Habib Bank Zurich PLC in London, and Visiting Professor at the Department of Mathematical Sciences, Brunel University. Previously he was Head of Treasury of the Corporate Banking Division, Royal Bank of Scotland. Prior to joining RBS, he was a bond trader and structured finance repo trader at KBC Financial Products, ABN Amro Hoare Govett Limited and Hambros Bank Limited. He has a PhD from Birkbeck, University of London and an MBA from Henley Business School. Moorad lives in Surrey, England.

Autoren/Hrsg.

Choudhry, Moorad

Inhaltsverzeichnis

1;Contents;7
2;Foreword;19
3;Preface;21
3.1;Organisation of the book;25
3.2;Study materials;26
3.3;Acknowledgements;26
4;Part I Introduction to the Bond Markets;29
4.1;1. The Debt Capital Markets;31
4.1.1;1.1 Description;32
4.1.2;1.2 Bond issuers;33
4.1.3;1.3 Capital market participants;34
4.1.4;1.4 World bond markets;36
4.1.5;1.5 Overview of the main bond markets;38
4.1.6;1.6 Financial engineering in the bond markets;40
4.1.7;Appendices 1;41
4.1.8;Selected bibliography and references 1;43
4.1.9;Questions and exercises 1;44
4.2;2. Financial Markets Arithmetic;45
4.2.1;2.1 Simple and compound interest;45
4.2.2;2.2 The time value of money;48
4.2.3;2.3 Multiple cash flows;52
4.2.4;2.5 Interpolation and extrapolation;59
4.2.5;2.6 Measuring the rate of return;60
4.2.6;2.7 Indices;62
4.2.7;Appendices 2;65
4.2.8;References 2;67
4.2.9;Questions and exercises 2;67
4.3;3. Traditional Bond Pricing;69
4.3.1;3.1 Pricing a conventional bond;69
4.3.2;3.2 Pricing zero-coupon bonds;73
4.3.3;3.3 Clean and dirty bond prices;74
4.3.4;3.4 Bond price and yield relationship;76
4.3.5;Selected bibliography and references 3;79
4.3.6;Questions and exercises 3;79
4.4;4. Bond Yield Measurement;81
4.4.1;4.1 Current yield;82
4.4.2;4.2 Simple yield to maturity;83
4.4.3;4.3 Yield to maturity;84
4.4.4;4.4 Yield on a zero-coupon bond;88
4.4.5;4.5 Modifying bond yields;89
4.4.6;4.6 Converting bond yields;90
4.4.7;4.7 Assumptions of the redemption yield calculation;92
4.4.8;4.8 Holding-period yield;93
4.4.9;4.9 Bonds with embedded options;93
4.4.10;4.10 Index-linked bonds;99
4.4.11;4.11 Yields on floating-rate bonds;103
4.4.12;4.12 Measuring yield for a bond portfolio;104
4.4.13;4.13 The price/yield relationship;108
4.4.14;4.14 Summary;108
4.4.15;Appendices 4;110
4.4.16;Selected bibliography and references 4;112
4.4.17;Questions and exercises 4;112
4.5;5. Review of Bond Market Instruments;114
4.5.1;5.1 Floating Rate Notes;114
4.5.2;5.2 Inverse/Reverse floating-rate bonds;117
4.5.3;5.3 Asset-backed bonds;118
4.5.4;5.4 PIBS;121
4.5.5;5.5 Callable bonds;122
4.5.6;5.6 Index-linked bonds;126
4.5.7;Appendices 5;128
4.5.8;Selected bibliography and references 5;128
4.5.9;Questions and exercises 5;129
4.6;6. The Yield Curve;130
4.6.1;6.1 Using the yield curve;130
4.6.2;6.2 Yield-to-maturity yield curve;131
4.6.3;6.3 The coupon yield curve;132
4.6.4;6.4 The par yield curve;132
4.6.5;6.5 The zero-coupon (or spot) yield curve;133
4.6.6;6.6 The forward yield curve;138
4.6.7;6.7 The annuity yield curve;142
4.6.8;6.8 Analysing and interpreting the yield curve;142
4.6.9;6.9 Interpreting the yield curve;152
4.6.10;6.10 Fitting the yield curve;154
4.6.11;6.11 Spot and forward rates in the market;158
4.6.12;6.12 Examples, exercises and calculations;165
4.6.13;6.13 Case Study: Deriving a discount function28;168
4.6.14;6.14 Case Study exercise:;172
4.6.15;Appendices 6;176
4.6.16;Selected bibliography and references 6;179
4.6.17;Questions and exercises 6;179
4.7;7. Price, Yield and Interest Rate Risk I;183
4.7.1;7.1 Revisiting the bond price/yield relationship;183
4.7.2;7.2 Duration;186
4.7.3;7.3 A summary of the duration measure;199
4.7.4;7.4 Duration for other securities;200
4.7.5;Appendices 7;201
4.7.6;Selected bibliography 7;202
4.7.7;Questions and exercises 7;202
4.8;8. Price, Yield and Interest Rate Risk II;203
4.8.1;8.1 Basis point value;203
4.8.2;8.2 Yield value of price change;205
4.8.3;8.3 Hedging using basis point value;206
4.8.4;8.4 Volatility weighting for hedging;207
4.8.5;Selected bibliography and references 8;209
4.8.6;Questions and exercises 8;209
4.9;9. Price, Yield and Interest Rate Risk III;210
4.9.1;9.1 Convexity;210
4.9.2;9.2 Summarising the properties of convexity;216
4.9.3;9.3 Dispersion;217
4.9.4;Appendices 9;218
4.9.5;Selected bibliography 9;221
4.9.6;Questions and exercises 9;221
4.10;10. Price, Yield and Interest Rate Risk IV;222
4.10.1;10.1 Yield curve changes;222
4.10.2;10.2 Portfolio duration and changes in the yield curve;223
4.10.3;10.3 Hedging strategy and duration;225
4.10.4;Appendices 10;226
4.10.5;Selected bibliography 10 ;227
4.10.6;Questions and exercises 10 ;227
5;Part II Government Bond Markets;229
5.1;11.The United Kingdom Gilt Market;231
5.1.1;11.1 Introduction and history;231
5.1.2;11.2 Market instruments;234
5.1.3;11.3 Taxation;243
5.1.4;11.4 Market structure;244
5.1.5;11.5 Market makers and brokers;244
5.1.6;11.6 Issuing gilts;246
5.1.7;11.7 The DMO and secondary market trading;248
5.1.8;11.8 Settlement;249
5.1.9;11.9 Index-linked gilts analytics;251
5.1.10;11.10 Gilt strips;256
5.1.11;11.11 Zero-coupon bond trading and strategy;261
5.1.12;11.12 Strips market anomalies;263
5.1.13;11.13 Trading strategy;263
5.1.14;11.14 Illustration: Yield and cash flow analysis;268
5.1.15;11.15 Future developments in strips;270
5.1.16;11.16 HM Treasury and the remit of the Debt Management Office;271
5.1.17;11.17 Gilt derivatives and repo markets;272
5.1.18;11.18 The Minimum Funding Requirement;274
5.1.19;11.19 Developments in electronic trading;275
5.1.20;Appendices 11;276
5.1.21;Selected bibliography 11;283
5.1.22;Questions and exercises 11;283
5.2;12.The US Treasury Bond Market;285
5.2.1;12.1 The US Treasury;285
5.2.2;12.2 The Federal Reserve;286
5.2.3;12.3 Market convention;286
5.2.4;12.4 The Primary Market;289
5.2.5;12.5 The Secondary Market;290
5.2.6;12.6 Treasury strips;292
5.2.7;12.7 Inflation-protected Treasury bonds;293
5.2.8;12.8 Treasury repo market;294
5.2.9;12.9 Federal Agency bonds;295
5.2.10;12.10 Derivatives markets;297
5.2.11;12.11 Historical long-bond yields;299
5.2.12;Appendices 12;300
5.2.13;Selected bibliography 12 ;303
5.2.14;Questions and exercises 12;303
5.3;13.International Bond Markets;305
5.3.1;13.1 Overview of government markets;307
5.3.2;13.2 Germany;310
5.3.3;13.3 Italy;312
5.3.4;13.4 France;315
5.3.5;13.5 Japan;320
5.3.6;13.6 Australia;322
5.3.7;13.7 New Zealand;325
5.3.8;13.8 Canada;326
5.3.9;13.9 Hungary;329
5.3.10;13.10 South Africa;329
5.3.11;13.11 Egypt;331
5.3.12;Appendices 13;333
5.3.13;Selected bibliography 13;343
6;Part III Corporate Debt Markets;345
6.1;14.Corporate Debt Markets;347
6.1.1;14.1 Introduction;348
6.1.2;14.2 Determinants of the development of a corporate market;350
6.1.3;14.3 The primary market;350
6.1.4;14.4 The secondary market;351
6.1.5;14.5 Fundamentals of corporate bonds;352
6.1.6;14.6 Bond security;354
6.1.7;14.7 Redemption provisions;356
6.1.8;14.8 Corporate bond risks;357
6.1.9;14.9 High-yield corporate bonds;360
6.1.10;14.10 Corporate bond offering circular;360
6.1.11;Selected bibliography 14;365
6.1.12;Questions and exercises 14;365
6.2;15.Analysis of Bonds With Embedded Options;367
6.2.1;15.1 Understanding embedded option elements in a bond;367
6.2.2;15.2 The Binomial tree of short-term interest rates;369
6.2.3;15.3 Pricing callable bonds;373
6.2.4;15.4 Price and yield sensitivity;375
6.2.5;15.5 Price volatility of bonds with embedded options;377
6.2.6;15.6 Sinking funds;378
6.2.7;Appendices 15;379
6.2.8;Selected bibliography 15;383
6.2.9;Questions and exercises 15;384
6.3;16.Convertible Bonds I;385
6.3.1;16.1 Basic description;385
6.3.2;16.2 Advantages of issuing and holding convertibles;390
6.3.3;Selected bibliography and references 16;391
6.4;17.Convertible Bonds II;392
6.4.1;17.1 Traditional valuation methodology;392
6.4.2;17.2 Fair value of a convertible bond;393
6.4.3;17.3 Further issues in valuing convertible bonds;399
6.4.4;17.4 Convertible bond default risk;400
6.4.5;Appendices 17;402
6.4.6;Selected bibliography 17;403
6.4.7;Questions and exercises 17;404
6.5;18.The Eurobond Market I;406
6.5.1;18.1 Eurobonds;406
6.5.2;18.2 Foreign bonds;407
6.5.3;18.3 Eurobond instruments;408
6.5.4;18.4 The issuing process: market participants;410
6.5.5;18.5 Fees, expenses and pricing;413
6.5.6;18.6 Issuing the bond;414
6.5.7;18.7 Covenants;416
6.5.8;18.8 Trust services;416
6.5.9;18.9 Form of the bond;418
6.5.10;18.10 Clearing systems;419
6.5.11;18.11 Market associations;420
6.5.12;18.12 Secondary market;421
6.5.13;18.13 Settlement;421
6.5.14;Selected bibliography 18;421
6.6;19.Eurobonds II;422
6.6.1;19.1 Legal and tax issues;422
6.6.2;19.2 The secondary market;422
6.6.3;19.3 Eurobonds and swap transactions;423
6.7;20.Warrants;424
6.7.1;20.1 Introduction;424
6.7.2;20.2 Analysis;424
6.7.3;20.3 Bond warrants;425
6.7.4;20.4 Comparison of warrants and convertibles;426
6.7.5;Selected bibliography and references 20;426
6.8;21.Medium-term Notes;428
6.8.1;21.1 Introduction;429
6.8.2;21.2 The primary market;429
6.8.3;21.3 MTNs and corporate bonds;431
6.8.4;21.4 Issue mechanism;433
6.8.5;21.5 The secondary market;434
6.8.6;21.6 The Euro-MTN market;436
6.8.7;21.7 Structured MTNs;436
6.8.8;Selected bibliography and references 21;441
6.8.9;Questions and exercises 21;441
6.9;22.Commercial Paper;442
6.9.1;22.1 Commercial Paper programmes;443
6.9.2;22.2 Commercial paper yields;444
6.9.3;Selected bibliography 22;445
6.9.4;Questions and exercises 22;445
6.10;23.Preference Shares and Preferred Stock;446
6.10.1;23.1 The size of the market;446
6.10.2;23.2 Description and definition of preference shares;447
6.10.3;23.3 Cost of preference share capital;450
6.10.4;23.4 The preference share market;451
6.10.5;23.5 Auction market preferred stock (Amps);451
6.10.6;A lingering death in the corporate debt market 23;453
6.10.7;Selected bibliography 23;454
6.11;24.The US Municipal Bond Market;455
6.11.1;24.1 Description of municipal bonds;455
6.11.2;24.2 The municipal bond market;457
6.11.3;24.3 Municipal bonds credit ratings;458
6.11.4;24.4 Bond insurance;459
6.11.5;24.5 Taxation issues;459
6.11.6;24.6 Exotic municipal bonds;459
6.11.7;24.7 Municipal money market instruments;460
6.11.8;Appendices 24;460
6.11.9;Selected bibliography and references 24;460
6.12;25.Asset-Backed Bonds I: Mortgage-backed Securities;462
6.12.1;25.1 Mortgage-backed securities;462
6.12.2;25.2 Cash flow patterns;468
6.12.3;25.3 Evaluation and analysis of mortgage-backed bonds;472
6.12.4;Selected bibliography and references 25;478
6.12.5;Questions and exercises 25;478
6.13;26.Mortgage-backed Bonds II;480
6.13.1;26.1 Basic concepts;480
6.13.2;26.2 Pricing and modelling techniques;480
6.13.3;26.3 Interest rate risk;483
6.13.4;26.4 Portfolio performance;485
6.13.5;Selected bibliography and references 26;486
6.14;27.Asset-backed Securities III;487
6.14.1;27.1 Collateralised mortgage securities;487
6.14.2;27.2 Non-agency CMO bonds;493
6.14.3;27.3 Commercial mortgage-backed securities;495
6.14.4;27.4 Motor-car-backed securities;496
6.14.5;27.5 Credit card asset-backed securities;498
6.14.6;27.6 Static spread analysis of asset-backed bonds;501
6.14.7;27.7 Conclusion;503
6.14.8;Selected bibliography and references 27;504
6.14.9;Questions and exercises 27;504
6.15;28.Collateralised Debt Obligations;506
6.15.1;28.1 An overview of CDOs;506
6.15.2;28.2 Relative value analysis;512
6.15.3;28.3 Credit derivatives6;513
6.15.4;Selected bibliography 28;516
6.16;29.High-yield Bonds;517
6.16.1;29.1 Growth of the market;517
6.16.2;29.2 High-yield securities;518
6.16.3;29.3 High-yield bond performance;520
6.16.4;Selected bibliography and references 29;523
6.17;30.Corporate Bonds and Credit Analysis;524
6.17.1;30.1 Credit ratings;524
6.17.2;30.2 Credit analysis;526
6.17.3;30.3 Industry-specific analysis;530
6.17.4;30.4 The art of credit analysis;531
6.17.5;Selected bibliography and references 31;531
6.17.6;Questions and exercises 31;531
7;Part IV The Money Markets;533
7.1;31.The Money Markets;535
7.1.1;31.1 Introduction;535
7.1.2;31.2 Securities quoted on a yield basis;536
7.1.3;31.3 Securities quoted on a discount basis;540
7.1.4;31.4 Foreign exchange;545
7.1.5;Appendices;551
7.1.6;Selected bibliography and references;553
7.2;32.Banking Regulatory Capital Requirements;554
7.2.1;32.1 Regulatory issues;554
7.2.2;32.2 Capital adequacy requirements;555
7.2.3;32.3 Proposed changes to Basle rules;557
7.2.4;Selected bibliography and references;559
7.3;33.Asset and Liability Management;560
7.3.1;33.1 Introduction;560
7.3.2;33.2 The ALM desk;562
7.3.3;33.3 Liquidity and interest-rate risk;564
7.3.4;33.4 Critique of the traditional approach;571
7.3.5;33.5 Securitisation;572
7.3.6;Appendices;576
7.3.7;Selected bibliography and references;577
7.4;34.The Repo Markets;578
7.4.1;34.1 Development of the repo market;578
7.4.2;34.2 Introduction to repo;579
7.4.3;34.3 Uses and economic functions of repo;580
7.4.4;34.4 Repo mechanics;582
7.4.5;34.5 Other repo structures;584
7.4.6;34.6 Pricing and margin;586
7.4.7;34.7 Risks in dealing repo;588
7.4.8;34.8 Legal issues;590
7.4.9;34.9 Accounting, Tax and capital issues;591
7.4.10;34.10 Market participants;593
7.4.11;34.11 The United Kingdom gilt repo market;593
7.4.12;34.12 Market structure;595
7.4.13;34.13 Trading patterns;596
7.4.14;34.14 Open market operations;598
7.4.15;34.15 Gilts settlement and the CREST service;599
7.4.16;34.16 Gilt repo Code of Best Practice;600
7.4.17;34.17 Trading approach;600
7.4.18;34.18 Electronic repo trading;607
7.4.19;34.19 Repo netting;608
7.4.20;34.20 The implied repo rate and basis trading;610
7.4.21;34.21 Repo market structures;618
7.4.22;34.22 Central bank repo and overseas markets;621
7.4.23;Appendices;622
7.4.24;Selected bibliography and references;625
7.4.25;Questions and exercises;625
7.5;35.Money Markets Derivatives;627
7.5.1;35.1 Forward rate agreements;627
7.5.2;35.2 FRA mechanics;628
7.5.3;35.3 Long-dated FRAs;634
7.5.4;35.4 Forward contracts;635
7.5.5;35.5 Short-term interest rate futures;635
7.5.6;Appendices 35;643
7.5.7;Selected bibliography and references 35;644
7.5.8;Questions and exercises 35;644
8;Part V Risk Management;647
8.1;36.Risk Management;649
8.1.1;36.1 Introduction;649
8.1.2;36.2 Risk management;650
8.1.3;36.3 Non-VaR measure of risk;652
8.1.4;Selected bibliography and references 36;652
8.2;37.Bank Risk Exposure and Value-at-Risk;653
8.2.1;37.1 Value-at-Risk;653
8.2.2;37.2 Explaining Value-at-Risk;655
8.2.3;37.3 Variance-covariance Value-at-Risk;656
8.2.4;37.4 Historical VaR methodology;663
8.2.5;37.5 Simulation methodology;663
8.2.6;37.6 Value-at-risk for fixed interest instruments;664
8.2.7;37.7 Derivative products and Value-at-Risk;668
8.2.8;37.8 Stress testing;671
8.2.9;37.9 Value-at-Risk methodology for credit risk;673
8.2.10;Appendices 37;678
8.2.11;Selected bibliography and references 37;687
8.2.12;Questions and exercises 37;688
8.3;38.Interest-rate Risk and a Critique of Value- at- Risk;689
8.3.1;38.1 Interest-rate risk;689
8.3.2;38.2 Comparison with traditional duration-based risk measurement;691
8.3.3;38.3 A critique of Value-at-Risk;691
9;Part VI Derivative Instruments;695
9.1;39.Swaps I;697
9.1.1;39.1 Introduction;697
9.1.2;39.2 Interest rate swaps;700
9.1.3;39.3 Relationship between interest-rate swaps and FRAs;708
9.1.4;39.4 Generic swap valuation;708
9.1.5;39.5 Zero-coupon swap pricing;709
9.1.6;39.6 Non-vanilla interest-rate swaps;717
9.1.7;39.7 Cancelling a swap;720
9.1.8;39.8 Swaptions;720
9.1.9;39.9 Cross-currency swaps;722
9.1.10;39.10 Credit risk;724
9.1.11;Appendices 39;724
9.1.12;Selected bibliography and references39;730
9.1.13;Questions and exercises39;730
9.2;40.Swaps II;733
9.2.1;40.1 Using swaps;733
9.2.2;40.2 Hedging an interest-rate swap;735
9.2.3;40.3 The convexity bias;739
9.2.4;40.4 Swaps netting;744
9.2.5;Appendices 40.;745
9.2.6;Selected bibliography and references 40;747
9.2.7;Questions and exercises 40;747
9.3;41.Bond Futures;748
9.3.1;41.1 Introduction;748
9.3.2;41.2 Futures pricing;751
9.3.3;41.3 Hedging using futures;754
9.3.4;41.4 The margin process;758
9.3.5;Appendices 41;758
9.3.6;Selected bibliography and references 41;760
9.3.7;Questions and exercises 41;760
9.4;42.Options I;762
9.4.1;42.1 Introduction;762
9.4.2;42.2 Option instruments;766
9.4.3;42.3 Options and payoff profiles;767
9.4.4;42.4 Option pricing parameters;768
9.4.5;Appendices 42;770
9.4.6;Selected Bibliography and References 42;772
9.4.7;Questions and exercises 42;772
9.5;43.The Dynamics of Asset Prices;773
9.5.1;43.1 The behaviour of asset prices;773
9.5.2;43.2 Stochastic calculus models: Brownian motion and Itô calculus;780
9.5.3;43.3 Perfect capital markets;783
9.5.4;Appendices 43;785
9.5.5;Selected bibliography and references 43;788
9.5.6;Questions and exercises 43;788
9.6;44.Options II: Pricing and Valuation;790
9.6.1;44.1 Option pricing;790
9.6.2;44.2 Pricing derivative securities;791
9.6.3;44.3 Simulation methods;798
9.6.4;44.4 Valuation of bond options;799
9.6.5;44.5 Interest-rate options and the Black model;800
9.6.6;44.6 Critique of the Black–Scholes model;801
9.6.7;44.7 The Barone–Adesi and Whaley model;802
9.6.8;44.8 Valuation of American options;803
9.6.9;44.9 Describing stochastic volatilities;806
9.6.10;44.10 A final word on (and summary of) the models;808
9.6.11;Appendices 44;809
9.6.12;Selected bibliography and rederences 44;812
9.6.13;Questions and exercises 44;814
9.7;45.Options III: The Binomial Pricing Model;816
9.7.1;45.1 The binomial option pricing model;816
9.7.2;45.2 The binomial approach for interest-rate options;818
9.7.3;45.3 Comparison with B–S model;819
9.7.4;Appendices 45;819
9.7.5;Selected bibliography and references 45;821
9.8;46.Options IV: Pricing Models for Bond Options;822
9.8.1;46.1 Introduction;822
9.8.2;46.2 Pricing bond options;823
9.8.3;46.3 Using option models to price corporate bonds1;825
9.8.4;Appendices 46;827
9.8.5;Selected bibliography 46;827
9.8.6;Questions and exercises 46;828
9.9;47.Options V – Managing an Option Book;829
9.9.1;47.1 Behaviour of option prices;829
9.9.2;47.2 Measuring option risk: The Greeks;830
9.9.3;47.3 The option smile;837
9.9.4;Appendices 47;838
9.9.5;Selected bibliography and references 47;838
9.9.6;Questions and exercises 47;839
9.10;48.Options VI: Strategies and Uses;840
9.10.1;48.1 Introduction;840
9.10.2;48.2 Spreads;840
9.10.3;48.3 Volatility trades;844
9.10.4;48.4 Collars, caps and floors;848
9.10.5;48.5 Using options in bond markets;850
9.10.6;Appendices 48;852
9.10.7;Portfolio management case study2 48;854
9.10.8;Selected bibliography and references 48;859
9.10.9;Questions and exercises 48;859
9.11;49.Options VII: Exotic Options;860
9.11.1;49.1 Options with modified contract terms;860
9.11.2;49.2 Path-dependent options;861
9.11.3;49.3 Multi-asset options;865
9.11.4;49.4 Pricing and hedging exotic options;866
9.11.5;49.5 Using exotic options: case studies;868
9.11.6;Selected bibliography and references 49;870
9.11.7;Questions and exercises 49;871
10;Part VII Approaches to Trading and Hedging;873
10.1;50.Approaches to Trading and Hedging;875
10.1.1;50.1 Futures trading;876
10.1.2;50.2 Yield curves and relative value;879
10.1.3;50.3 Yield spread trades;883
10.1.4;50.4 Hedging bond positions;884
10.1.5;50.5 Introduction to bond analysis using spot rates and forward rates in continuous time7;886
10.1.6;Appendices 50;889
10.1.7;Selected bibliography 50;890
10.1.8;Questions and exercises 50;891
11;Part VIII Advanced Fixed Income Analytics;893
11.1;51.Interest-rate Models I;901
11.1.1;51.1 Introduction;901
11.1.2;51.2 Interest-rate processes;902
11.1.3;51.3 One-factor models;904
11.1.4;51.4 Arbitrage-free models;908
11.1.5;51.5 Fitting the model;912
11.1.6;51.6 Summary;914
11.1.7;Selected bibliography and references 51;914
11.1.8;Questions and exercises 51;915
11.2;52.Interest-rate Models II;916
11.2.1;52.1 Introduction;916
11.2.2;52.2 The Heath–Jarrow–Morton model;916
11.2.3;52.3 Multi-factor term structure models;920
11.2.4;52.4 Assessing one-factor and multi-factor models;923
11.2.5;Selected bibliography and references 52;926
11.2.6;Questions and exercises 52;928
11.3;53.Estimating and Fitting the Term Structure;929
11.3.1;53.1 Introduction;929
11.3.2;53.2 Bond market information;931
11.3.3;53.3 Curve-fitting techniques: parametric;932
11.3.4;53.4 The cubic spline method for estimating and;935
11.3.5;fitting the yield curve;935
11.3.6;53.5 The Anderson–Sleath evaluation;938
11.3.7;Appendices 53;942
11.3.8;Selected bibliography and references 53;943
11.3.9;Questions and exercises 53;944
11.4;54.Advanced Analytics for Index- Linked Bonds;946
11.4.1;54.1 Index-linked bonds and real yields;946
11.4.2;54.2 Duration and index-linked bonds;947
11.4.3;54.3 Estimating the real term structure of interest rates;949
11.4.4;Selected bibliography and references 54;953
11.4.5;Questions and exercises 54;953
11.5;55.Analysing the Long Bond Yield;954
11.5.1;55.1 Theories of long-dated bond yields;954
11.5.2;55.2 Pricing a long bond;957
11.5.3;55.3 Further views on the long-dated bond yield;959
11.5.4;55.4 Analysing the convexity bias in long-bond yields;960
11.5.5;Selected bibliography and references 55;960
11.6;56.The Default Risk of Corporate Bonds;962
11.6.1;56.1 Corporate bond default spread risk;962
11.6.2;56.2 Default risk and default spreads;963
11.6.3;Selected bibliography and references 56;966
12;Part IX Portfolio Management;967
12.1;57.Portfolio Management I;969
12.1.1;57.1 Generic portfolio management;969
12.1.2;57.2 Active bond portfolio management;971
12.1.3;Appendices 57;972
12.1.4;Selected bibliography and references 57;975
12.1.5;Questions and exercises 57;975
12.2;58.Portfolio Management II;976
12.2.1;58.1 Overview;976
12.2.2;58.2 Structured portfolio strategies;980
12.2.3;58.3 Immunisation;983
12.2.4;58.4 Extending traditional immunisation theory;987
12.2.5;58.5 Multiple liabilities immunisation;988
12.2.6;Selected bibliography and references 58;990
12.2.7;Questions and exercises13 58;990
12.3;59.Portfolio Management III;994
12.3.1;59.1 Introduction;994
12.3.2;59.2 Performance evaluation;994
12.3.3;Selected bibliography and references 59;996
12.3.4;Questions and exercises 59;996
12.4;60.Portfolio Yield Measurement;997
12.4.1;60.1 Portfolio yield;997
12.4.2;60.2 Value-weighted portfolio yield;998
12.4.3;Selected bibliography and references 60;999
12.5;61.Bond Indices;1000
12.5.1;61.1 Overview;1000
12.5.2;61.2 Maturity of an index;1001
12.5.3;61.3 Responding to events;1002
12.5.4;61.4 Composition of the index;1002
12.5.5;61.5 Calculation of index value2;1003
12.5.6;Appendices 61;1005
12.5.7;Selected bibliography and references 61;1005
12.6;62.International Investment;1006
12.6.1;62.1 Arguments for investing in international bonds;1006
12.6.2;62.2 International portfolio management;1007
12.6.3;Selected bibliography and references 62;1008
13;Part X Technical Analysis;1009
13.1;63.Technical Analysis;1011
13.1.1;63.1 Introduction;1011
13.1.2;63.2 Trading market profile;1013
13.1.3;63.3 Dow theory;1014
13.1.4;63.4 Chart construction;1015
13.1.5;63.5 Trend analysis;1017
13.1.6;63.6 Reversal patterns;1023
13.1.7;63.7 Continuation patterns;1028
13.1.8;63.8 Point and figure charting8;1031
13.1.9;63.9 Mathematical approaches;1033
13.1.10;63.10 Contrary opinion theory;1037
13.1.11;63.11 Volume and open interest;1037
13.1.12;63.12 Candlestick charting;1038
13.1.13;63.13 Elliott wave theory;1045
13.1.14;63.14 Stop losses;1047
13.1.15;63.15 Concluding remarks;1047
13.1.16;Questions and exercises 63;1048
13.1.17;Selected bibliography 63;1053
14;Part XI Introduction to Credit Derivatives;1055
14.1;64.Introduction to Credit Derivatives;1057
14.1.1;64.1 Overview;1057
14.1.2;64.2 Pricing;1060
14.1.3;64.3 Regulatory issues;1064
14.1.4;Appendices;1066
14.1.5;Selected bibliography and references;1072
14.2;65. Credit Derivatives II;1073
14.2.1;65.1 Theoretical pricing models;1073
14.2.2;65.2 Credit spread options;1075
14.2.3;65.3 Default options pricing;1076
14.2.4;Selected bibliography and references 65;1079
14.3;66.Credit Derivatives III: Instruments and Applications;1080
14.3.1;66.1 Credit default swaps;1080
14.3.2;66.2 Total return swap;1081
14.3.3;66.3 Credit options;1082
14.3.4;66.4 Credit-linked notes;1083
14.3.5;66.5 Applications;1083
14.3.6;Selected bibliography and references 66;1085
15;Part XII Emerging Bond Markets;1087
15.1;67.Emerging Bond Markets and Brady Bonds;1089
15.1.1;67.1 Overview;1089
15.1.2;67.2 Key features;1091
15.1.3;67.3 Trading in the emerging bond markets;1092
15.1.4;67.4 Brady bonds;1095
15.1.5;Appendices;1099
15.1.6;Selected bibliography and references;1100
15.2;68.Emerging Bond Markets II;1101
15.2.1;68.1 Analysing of relative value;1101
15.2.2;68.2 Selected emerging bond markets;1103
15.2.3;Selected bibliography and references 68;1108
16;Concluding Remarks;1109
17;Glossary;1113
18;Index;1135