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Fixed Income Markets: Management, Trading and Hedging, 2nd Edition

by Moorad Choudhry, David Moskovic, Max Wong

September 2014

Beginner

640 pages

22h 53m

English

Wiley

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Acknowledgments
Bond-Market Basics Capital Market Participants Investors World Bond Markets Overview of the Main Bond Markets Time Value of Money Bond Pricing and Yield: The Traditional Approach Bond Yield Selected Bibliography and References Notes
Duration, Modified Duration, and Convexity Appendices Appendix 2.1 Formal Derivation of Modified-Duration Measure Appendix 2.2 Measuring Convexity Appendix 2.3 Taylor Expansion of the Price/Yield Function Selected Bibliography and References Notes
Basic Concepts Coupon Bonds Bond Price in Continuous Time Forward Rates Term Structure Hypotheses Evidence on the Expectations Hypothesis Appendices Appendix 3.1 The Integral Appendix 3.2 The Derivation of the Bond Price Equation in Continuous Time Notes Selected Bibliography and References
Background One-Factor Term-Structure Models Choosing a Term-Structure Model Appendix Appendix 4.1 Geometric Brownian Motion Notes Selected Bibliography and References
Yield-Curve Smoothing Non-parametric Methods Comparing Curves Yield Curve Construction: A Practical Guide Appendices Appendix 5.1 Linear Regression: Ordinary Least Squares Appendix 5.2 Regression Splines Notes Selected Bibliography and References

Overview Securities Quoted on a Yield Basis The Repo Instrument Money-Market Derivatives Short-Term Interest-Rate Futures Appendices Appendix 6.1 Notes Selected Bibliography and References
Floating-Rate Notes Indexed Amortising Note Synthetic Convertible Note Interest-Differential Notes Convertible Bonds Contingent Convertible Securities References
Understanding Embedded-Option Elements in a Bond The Binomial Tree of Short-Term Interest Rates Price Volatility of Bonds with Embedded Options Correct Way to Risk-Manage a Callable Note Appendices Appendix 8.1 Calculating Interest Rate Paths Using Microsoft Excel Notes Selected Bibliography and References
Basic Concepts Index-Linked Bond Yields Inflation-Indexed Derivatives Applications Appendices Appendix 9.1 Current Issuers of Public-Sector Indexed Securities Appendix 9.2 U.S. Treasury Inflation-Indexed Securities (TIPS) Notes Selected Bibliography and References
The Concept of Securitisation The Process of Securitisation Securitising Mortgages ABS Structures: A Primer on Performance Metrics and Test Measures The Securitisation Market Post-2007 Special Purpose Vehicles (SPVs) Summary and Conclusions Notes Selected Bibliography and References
Recommended Reading
Introduction Forwards Futures Forwards and Futures Cash Flow Differences Relationship between Forward and Future Price The Forward-Spot Parity The Basis and Implied Repo Rate Notes Selected Bibliography and References
Background Bond Futures Contracts Futures Pricing Hedging Using Futures The Margin Process Appendix Appendix 12.1 The Conversion Factor for the Long Gilt Future Notes Selected Bibliography and References
Interest-Rate Swaps Generic Swap Valuation Asset Swaps An Overview of Interest-Rate Swap Applications Bloomberg Screens Appendix Appendix 13.1 Calculating Futures Strip Rates and Implied Swap Rates Notes Selected Bibliography and References
Credit Risk Credit Risk and Credit Derivatives Applications Credit Event Credit Derivative Instruments Credit-Linked Notes Sidebar: Uncollateralised CDS The iTraxx Index Note Applications for Portfolio Managers Risks in Credit Default Swaps Big Bang in CDS Conclusion Appendix Appendix 14.1 Bond Credit Ratings Notes Selected Bibliography and References
Introduction Asset Swap Pricing Pricing Models Notes Selected Bibliography and References
Background Option Instruments Option Pricing: Setting the Scene Option Pricing The Black-Scholes Option Model Interest-Rate Options and the Black Model Comment on the Black-Scholes Model A Final Word on Option Models Appendices Appendix 16.2 Lognormal Distribution of Returns Appendix 16.3 Black-Scholes Model in Microsoft Excel Notes Selected Bibliography and References
Behaviour of Option Prices Assessing Time Value American Options Measuring Option Risk: The Greeks Delta Gamma Theta Vega Rho Lambda The Option Smile Notes Selected Bibliography and References
Introducing Value-at-Risk Explaining Value-at-Risk Value-at-Risk for Fixed-Income Derivative Instruments Stress Testing Value-at-Risk Methodology for Credit Risk Appendix 18.1 Assumption of Normality Notes Selected Bibliography and References
The Determinants of Yield Practical Uses of Redemption Yield and Duration Implied Spot Rates and Market Zero-Coupon Yields Yield-Spread Trades Coupon Spread Butterfly Trades Case Study: Spread Trade Notes Selected Bibliography and References
Futures Trading Yield Curves and Relative Value Yield-Spread Trades Hedging Bond Positions Bond Analysis Using Spot Rates and Forward Rates in Continuous Time Bond Prices as a Function of Spot and Forward Rates Appendices Appendix 20.1 Summary of Derivation of Optimum Hedge Equation Appendix 20.2 Forward-Rate Structure in Conventional Yield-Curve Environment Notes Selected Bibliography
Abstract Why Correlation Occurs in the Markets Correlation and Causation How Can We Define Correlation? Measuring Correlation Correlation Swaps, Pricing, and Their Risks Quantos, Pricing, and their Risks Differences between Instantaneous and Terminal Volatilities and Correlations Hedging a Portfolio of Correlation Swaps and Quantos Uncollateralised Derivatives and Note Discounting Explanation of the Risk-Neutral Measure What Does Discounting Really Represent? Pricing an Uncollateralised Cash Flow Graph of PV from Different CSAs Senior Unsecured Bonds: Equivalence to Uncollateralised Derivatives Funding a Trading Book A Diversion: St. Petersburg Paradox and Credit Risk Making Money for Whom? Chapter Summary
Mean and Standard Deviation
Summation and Product Operators Standard Brownian Motion and the Dynamics of the Asset-Price Process The Integral Calculus Stochastic Integrals
Bond Pricing Yield to Maturity (YTM) Expectation Hypothesis Notes References
Description of the Content

Overview

A comprehensive, in-depth look at global debt capital markets in the post-crisis world

Fully updated with comprehensive coverage of the post-crisis debt markets and their impact on key industry issues, Fixed Income Markets: Management, Trading, and Hedging, Second Edition offers insights into derivative pricing, cross-currency hedging, and new liquidity legislation. Written by Choudhry, Moskovic, and Wong, Fixed Income Markets is an indispensable read for anyone working in bond markets, interest-rate markets, and credit derivatives markets looking to better understand today's debt markets.

This acclaimed book takes a unique look into the leading practices in bond markets as well as post-credit-crunch impacts on pricing that are rarely captured in textbooks. The new edition provides expanded coverage on a wide range of topics within hedging, derivatives, bonds, rebalancing, and global debt capital markets. New topics include:

Dynamic hedging practices and cross-currency hedging

Collateralized and uncollateralized derivatives, and their impact on valuation

Callable bonds, pricing, trading, and regulatory aspects related to liquidity

Rebalancing as a method for capturing contingencies and other complex imbedded risks

As a bonus, the book includes reference information for statistical concepts and fixed income pricing, as well as a full glossary and index. Written in Choudhry's usual accessible style, Fixed Income Markets is a comprehensive and in-depth account of the global debt capital markets in today's post-crisis world.

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Publisher Resources

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