March 2013
Intermediate to advanced
608 pages
17h 23m
English
book
Investment Risk and Uncertainty: Advanced Risk Awareness Techniques for the Intelligent Investor
by Steven P. Greiner
Content preview from Investment Risk and Uncertainty: Advanced Risk Awareness Techniques for the Intelligent Investor
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CHAPTER 8
Fixed Income Issues
In prior chapters, we introduced some of the common fixed income (FI) risk measures and put their evolution into a historical perspective. In particular, we introduced the concepts of duration and convexity, and how they provide information on the return profile a bond will enjoy given a movement in interest rates and spreads. We also introduced briefly a few of the bond sectors: government, corporate, and securitized. In this chapter we take a deeper look at how these risk measures can be tied together into a joint estimation of risk for fixed income.
We will start Part Two with a discussion of the issues unique to fixed income that must be dealt with up front in this chapter. The most immediate features of fixed income markets that we must grapple with are their sheer size, variety, and illiquidity. These features present us with very real problems from both a modeling and a physical resource (i.e., computers) perspective. Our approach to overcoming these problems will lay the framework for how we view the individual components of the total risk, specifically the interest rate, rate volatility, spread, bond idiosyncratic, and currency risks. We will introduce a method for linearizing the fix income return equation, and discuss what this means for the concepts of risk exposure and risk factor.
We then discuss each of these risks in detail, starting with interest rate risk. In Chapter 9 we discuss ...
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I'm always learning. So when I got on to O'Reilly, I was like a kid in a candy store. There are playlists. There are answers. There's on-demand training. It's worth its weight in gold, in terms of what it allows me to do.