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Fixed Income Securities: Tools for Today's Markets, 3rd Edition by Bruce Tuckman, Angel Serrat

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Part Four

Selected Securities and Topics

Parts One, Two, and Three provided the basic tools with which to price and measure the risk of fixed income securities and portfolios. This part can now apply these tools to the details of various products and markets. The chapter titles are for the most part explanation enough for the purposes of introduction. A few additional comments are warranted, however, and are made here.

Chapter 12 covers repo markets and financing. This is an important subject in its own right, both under normal conditions and particularly under conditions of financial stress. But financing is a crucial part of many other valuation and risk problems. Forward and futures prices in bond markets, for example, depend directly on financing rates. And even more fundamentally, as argued in Chapter 17, the foundations of arbitrage pricing depend on financing arrangements and on the relationships of financing rates across securities.

Chapter 13 presents preliminaries on forward and futures contracts. The preliminary subject matter necessary to understand these contracts is substantial enough to distract from the narrative flow of chapters about individual products. Hence, this material is collected here and applied in the rest of Part Four, particularly in the chapters on note and bond futures and on short-term rate derivatives.

Chapter 17 presents material that may be completely new to many readers. First, it revisits the fundamentals of arbitrage pricing under realistic ...

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