Fixed Income and Interest Rate Derivative Analysis

Fixed Income and Interest Rate Derivative Analysis

by Mark Britten-Jones
Released November 1998
Publisher(s): Butterworth-Heinemann
ISBN: 9780080506548

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Book description

Fixed Income and Interest Rate Derivative Analysis gives a clear and accessible approach to the analytical techniques of debt instrument valuation. Without using complicated mathematical abstractions, this text shows that the fundamentals of fixed income and interest rate derivate analysis can be easily understood when seen as a small number of simple economic concepts.

* A comprehensive and accessible explanation of underlying theory, and its practical application * Case studies and worked examples from around the world's capital markets * How to use spreadsheet modelling in fixed income and interest rate derivative analysis

Concepts inroduced in this book are reinforced and explained, not with the use of high-powered mathematics, but with actual examples of various market instruments and case studies from North America, Europe, Australia and Hong Kong. The text also contains review questions which aid the reader in their understanding.

Mark Britten-Jones, BEcon, MA, PhD, is an Assistant Professor of Finance at the London Business School where he teaches Fixed Income Securities and Markets as part of a MBA and Master's course in Finance.

A comprehensive and accessible explanation of underlying theory, and its practical application.
Case studies and worked examples from around the world's capital markets.
How to use spreadsheet modelling in fixed income and interest rate derivative valuation.

Table of contents

  1. Front Cover
  2. Fixed Income and Interest Rate Derivative Analysis
  3. Copyright Page
  4. Contents (1/2)
  5. Contents (2/2)
  6. Preface
  7. Acknowledgements
  8. Part I: Fixed Cash Flows
    1. Chapter 1. Valuation of fixed cash flows with perfect replication
      1. 1.1 Implications of a competitive market
      2. 1.2 Zero prices and market conventions (1/2)
      3. 1.2 Zero prices and market conventions (2/2)
      4. 1.3 Fitting the treasury strip curve
      5. 1.4 Further reading
      6. 1.5 Questions
    2. Chapter 2. Imperfect replication: immunization and duration
      1. 2.1 Duration-matching (1/2)
      2. 2.1 Duration-matching (2/2)
      3. 2.2 Key rate analysis (1/2)
      4. 2.2 Key rate analysis (2/2)
      5. 2.3 Further reading
      6. 2.4 Questions
  9. Part II: Simple Random Cash Flows
    1. Chapter 3. Forward rates, T-bill futures, and quasi-arbitrage
      1. 3.1 Forward contracts
      2. 3.2 T-bill futures (1/2)
      3. 3.2 T-bill futures (2/2)
      4. 3.3 Repurchase agreements— 'repos'
      5. 3.4 Transaction costs and quasi-arbitrage
      6. 3.5 Further reading
      7. 3.6 Questions
    2. Chapter 4. The Eurodollar market and simple interest rate swaps
      1. 4.1 Eurodollar futures
      2. 4.2 Forward rate agreements—- FRAs
      3. 4.3 Floating rate notes
      4. 4.4 Simple interest rate swaps
      5. 4.5 Hedging and PVBP
      6. 4.6 Questions
  10. Part III: General Rate-Sensitive Cash Flows
    1. Chapter 5. No-arbitrage and risk-neutral pricing
      1. 5.1 A binomial example—a call option on a 6 month T-bill
      2. 5.2 State prices
      3. 5.3 Risk-neutral probabilities
      4. 5.4 Linking state prices and probabilities
      5. 5.5 Multi-period valuation (1/2)
      6. 5.5 Multi-period valuation (2/2)
      7. 5.6 Questions
    2. Chapter 6. State prices, forward induction, and tree-fitting
      1. 6.1 State prices and valuation
      2. 6.2 Forward induction and the state-price tree
      3. 6.3 Interest rate trees
      4. 6.4 Fitting market prices
      5. 6.5 Questions
    3. Chapter 7. The Black–Derman–Toy model
      1. 7.1 Model characteristics
      2. 7.2 Implementing BDT
      3. 7.3 Example: the bias in Eurodollar futures
      4. 7.4 Example: valuation of an interest rate caplet
      5. 7.5 Example: valuation of a general FRN
      6. 7.6 Further reading
      7. 7.7 Questions
    4. Chapter 8. Convexity
      1. 8.1 Curvature (1/2)
      2. 8.1 Curvature (2/2)
      3. 8.2 The convexity adjustment for swap and FRN valuation (1/2)
      4. 8.2 The convexity adjustment for swap and FRN valuation (2/2)
      5. 8.3 Further reading
      6. 8.4 Questions
    5. Chapter 9. Callable and convertible bonds
      1. 9.1 Valuing callable bonds
      2. 9.2 Convertible bonds
      3. 9.3 Further reading
      4. 9.4 Questions
    6. Chapter 10. Credit risk
      1. 10.1 Credit ratings
      2. 10.2 A model of credit risk
      3. 10.3 Further reading
    7. Chapter 11. Continuous–time finance
      1. 11.1 The basics
      2. 11.2 Ito's lemma
      3. 11.3 Martingales
      4. 11.4 The market risk premium or the continuous-time APT
      5. 11.5 The risk-neutral measure
      6. 11.6 Change of probability measure
      7. 11.7 Continuous-time term structure models
      8. 11.8 References
  11. Index

Product information

  • Title: Fixed Income and Interest Rate Derivative Analysis
  • Author(s): Mark Britten-Jones
  • Release date: November 1998
  • Publisher(s): Butterworth-Heinemann
  • ISBN: 9780080506548