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The Handbook of Fixed Income Securities, Eighth Edition, 8th Edition

Book Description

The Definitive Guide to Fixed Income Securities—Revised and Updated for the New Era of Investing

For decades, The Handbook of Fixed Income Securities has been the most trusted resource in the world for fixed income investing. Since the publication of the last edition, however, the financial markets have experienced major upheavals, introducing dramatic new opportunities and risks.

This completely revised and expanded eighth edition contains 31 new chapters that bring you up to date on the latest products, analytical tools, methodologies, and strategies for identifying and capitalizing on the potential of the fixed income securities market in order to enhance returns. Among the world’s leading authorities on the subject, Frank J. Fabozzi, along with Steven V. Mann, has gathered a powerful global team of leading experts to provide you with the newest and best techniques for taking advantage of this market. New topics include:

  • Electronic trading
  • Macro-economic dynamics and the corporate bond market
  • Leveraged loans
  • Structured and credit-linked notes
  • Exchange-traded funds
  • Covered bonds
  • Collateralized loan obligations
  • Risk analysis from multifactor fixed income models
  • High-yield bond portfolio management
  • Distressed structured credit securities
  • Hedge fund fixed income strategies
  • Credit derivatives valuation and risk
  • Tail risk hedging
  • Principles of performance attribution

Invaluable for its theoretical insights, unsurpassed in its hands-on guidance, and unequaled in the expertise and authority of its contributors, this all-new edition of The Handbook of Fixed Income Securities delivers the information and knowledge you need to stay on top of the market and ahead of the curve.

Table of Contents

  1. Cover Page
  2. The Handbook of Fixed Income Securities
  3. Copyright Page
  4. Contents
  5. Preface
  6. Acknowledgments
  7. Contributors
  8. Part One Background
    1. Chapter 1 Overview of the Types and Features of Fixed Income Securities
      1. Frank J. Fabozzi, Michael G. Ferri, and Steven V. Mann
      2. Bonds
      3. Preferred Stock
      4. Residential Mortgage-Backed Securities
      5. Commercial Mortgage-Backed Securities
      6. Asset-Backed Securities
      7. Covered Bonds
      8. Key Points
    2. Chapter 2 Risks Associated with Investing in Fixed Income Securities
      1. Ravi F. Dattatreya, Frank J. Fabozzi, and Sergio M. Focardi
      2. Interest-Rate Risk
      3. Reinvestment Risk
      4. Call/Prepayment Risk
      5. Credit Risk
      6. Inflation, or Purchasing-Power, Risk
      7. Liquidity Risk
      8. Exchange-Rate, or Currency, Risk
      9. Volatility Risk
      10. Political or Legal Risk
      11. Event Risk
      12. Sector Risk
      13. Other Risks
      14. Statistical Measures of Portfolio Risk: Standard Deviation, Skewness, and Kurtosis
      15. Tracking Error Risk
      16. Key Points
    3. Chapter 3 Bond Market Indexes
      1. Frank K. Reilly and David J. Wright
      2. Uses of Bond Indexes
      3. Building and Maintaining a Bond Index
      4. Description of Alternative Bond Indexes
      5. Risk/Return Characteristics
      6. Correlation Relationships
      7. Key Points
    4. Chapter 4 Electronic Trading for Fixed Income Markets
      1. Marshall Nicholson
      2. Overall Bond Market Growth
      3. The Rise of Electronic Trading
      4. The Impact of Regulatory Requirements
      5. Shift to a Fee-Based Broker-Dealer Revenue Model
      6. Universe of Electronic Trading Platforms
      7. Current Technologies
      8. Market Data and the Aggregation of Fixed Income ECNs
      9. Retail-Fixed Income Market Participation
      10. Retail Access to Individual Bonds
      11. Fixed Income Pricing
      12. Key Points
    5. Chapter 5 Macro-Economic Dynamics and the Corporate Bond Market
      1. Steven I. Dym
      2. The Macro-Economy
      3. Corporate Profits
      4. Interest Rates
      5. The Central Bank
      6. Important Considerations
      7. The Yield Curve
      8. The Spread Curve
      9. Cyclicality of Credit Spreads
      10. Stagflation
      11. Correlation and Capital Structure
      12. Key Points
    6. Chapter 6 Bond Pricing, Yield Measures, and Total Return
      1. Frank J. Fabozzi
      2. Bond Pricing
      3. Conventional Yield Measures
      4. Total Return Analysis
      5. Key Points
    7. Chapter 7 Measuring Interest-Rate Risk
      1. Frank J. Fabozzi, Gerald W. Buetow, Jr., Robert R. Johnson, and Brian J. Henderson
      2. The Full-Valuation Approach
      3. Price Volatility Characteristics of Bonds
      4. Duration
      5. Modified Duration versus Effective Duration
      6. Convexity
      7. Price Value of a Basis Point
      8. The Importance of Yield Volatility
      9. Key Points
    8. Chapter 8 The Structure of Interest Rates
      1. Frank J. Fabozzi
      2. The Base Interest Rate
      3. Risk Premium
      4. The Term Structure of Interest Rates
      5. Key Points
  9. Part Two Government Securities and Corporate Debt Obligations
    1. Chapter 9 U.S. Treasury Securities
      1. Michael J. Fleming and Frank J. Fabozzi
      2. Types of Securities
      3. The Primary Market
      4. The Secondary Market
      5. Zero-Coupon Treasury Securities
      6. Acknowledgments
      7. Key Points
    2. Chapter 10 Agency Debt Securities
      1. Mark O. Cabana and Frank J. Fabozzi
      2. Agency Debt Market Overview
      3. Types of Agency Debt Securities
      4. The Primary Market
      5. The Secondary Market
      6. Agency Debt Issuance
      7. Issuing Agencies
      8. Large, Active Issuers
      9. Smaller, Active Issuers
      10. Nonactive Issuers and Recently Retired GSEs
      11. Acknowledgments
      12. Key Points
    3. Chapter 11 Municipal Bonds
      1. Sylvan G. Feldstein, Frank J. Fabozzi, Alexander Grant, and David Ratner
      2. Features of Municipal Securities
      3. Types of Municipal Obligations
      4. The Commercial Credit Rating of Municipal Bonds
      5. Municipal Bond Insurance
      6. Valuation Methods
      7. Tax Provisions Affecting Municipals
      8. Yield Relationships within the Municipal Bond Market
      9. Primary and Secondary Markets
      10. Bond Indexes
      11. Official Statement
      12. Regulation of the Municipal Securities Market
      13. Key Points
    4. Chapter 12 Corporate Bonds
      1. Frank J. Fabozzi, Steven V. Mann, and Adam B. Cohen
      2. The Corporate Trustee
      3. Some Bond Fundamentals
      4. Security for Bonds
      5. Alternative Mechanisms to Retire Debt before Maturity
      6. Credit Risk
      7. Event Risk
      8. High-Yield Bonds
      9. Default Rates and Recovery Rates
      10. Medium-Term Notes
      11. Key Points
    5. Chapter 13 Leveraged Loans
      1. Stephen J. Antczak, Frank J. Fabozzi, and Jung Lee
      2. Syndicated Bank Loans
      3. Loan Structure
      4. Loan Terms
      5. Recovery Rates
      6. Secondary Market
      7. Key Points
    6. Chapter 14 Convertible Securities and Their Investment Application
      1. Jonathan L. Horne and Chris P. Dialynas
      2. Basic Characteristics of Convertible Securities and Key Terms
      3. Overview of Convertible Bond Valuation and Risk Metrics
      4. Primary Investors in Convertible Bonds
      5. Motivations behind the Issuance of Convertible Securities
      6. Key Points
    7. Chapter 15 Structured Notes and Credit-Linked Notes
      1. John D. Finnerty and Rachael W. Park
      2. Structured Notes
      3. Credit-Linked Notes
      4. Key Points
    8. Chapter 16 Private Money Market Instruments
      1. Frank J. Fabozzi and Steven V. Mann
      2. Commercial Paper
      3. Bankers Acceptances
      4. Large-Denomination Negotiable CDs
      5. Repurchase Agreements
      6. Federal Funds
      7. Key Points
    9. Chapter 17 Floating-Rate Securities
      1. Frank J. Fabozzi and Steven V. Mann
      2. General Features of Floaters and Major Product Types
      3. Call and Put Provisions
      4. Spread Measures
      5. Price Volatility Characteristics of Floaters
      6. Portfolio Strategies
      7. Key Points
    10. Chapter 18 Inflation-Linked Bonds
      1. John B. Brynjolfsson
      2. Mechanics and Measurement
      3. Marketplace
      4. Valuation and Performance Dynamics
      5. Investors
      6. Issuers
      7. Other Issues
      8. Key Points
    11. Chapter 19 International Bond Markets and Instruments
      1. Karthik Ramanathan
      2. Overview and Scope of International Bond Markets
      3. The Instruments: Domestic, Euro, and Foreign
      4. Dollar-Denominated International Bonds
      5. Non-Dollar-Denominated Debt International Bonds
      6. International Fixed Income and Understanding Currency Risk
      7. Key Points
    12. Chapter 20 Emerging Markets Debt
      1. Jane Sachar Brauer
      2. The Debt Universe
      3. Emerging Markets Debt Performance History
      4. Brady Bonds
      5. Defaults, Exchanges, Restructurings, Workouts, and Litigation
      6. Derivatives
      7. Credit-Linked Notes (CLNs)
      8. Valuation Methods
      9. Conclusion
      10. Collateralized Brady Bonds
      11. Noncollateralized Brady Bonds
    13. Chapter 21 Fixed Income Exchange Traded Funds
      1. Matthew Tucker and Stephen Laipply
      2. Investment Characteristics
      3. Fixed Income ETF Management
      4. Fixed Income ETF Characteristics and Mechanics
      5. Trading Behavior: A Closer Look at Premiums and Discounts
      6. Key Points
    14. Chapter 22 Covered Bonds
      1. Vinod Kothari
      2. Covered Bonds: From Europe to the Rest of the World
      3. Understanding Covered Bonds
      4. Structure of Covered Bonds
      5. Cover Assets and Credit Enhancements
      6. Asset/Liability Mismatches and Liquidity Risk
      7. Ratings of Covered Bonds
      8. Covered Bonds and Securitization
      9. Accounting for Covered Bonds
      10. Key Points
    15. Chapter 23 Nonconvertible Preferred Stock
      1. Steven V. Mann
      2. Preferred Stock Issuance
      3. Trust Preferred
      4. Preferred Stock Ratings
      5. Tax Treatment of Dividends
      6. Key Points
  10. Part Three Securitized Products
    1. Chapter 24 An Overview of Mortgages and the Mortgage Market
      1. Anand K. Bhattacharya and William S. Berliner
      2. Product Definition and Terms
      3. Mechanics of Mortgage Loans
      4. The Mortgage Industry
      5. Generation of Mortgage Lending Rates
      6. Component Risks of Mortgage Products
      7. Key Points
    2. Chapter 25 Agency Mortgage-Backed Securities
      1. Andrew Davidson, Anne Ching, and Eknath Belbase
      2. Mortgage Loans
      3. History of Secondary Mortgage Market
      4. Agency Pool Programs
      5. Trading Characteristics
      6. Prepayment and Cash-Flow Behavior
      7. Prepayment Conventions
      8. Sources of Prepayments
      9. Prepayment Models
      10. Valuation
      11. Key Points
    3. Chapter 26 Agency Collateralized Mortgage Obligations
      1. Alexander Crawford
      2. The CMO Market
      3. The Reasons Why CMOs Exist
      4. CMO Tranche Types
      5. Agency versus Nonagency CMOs
      6. Agency CMO Analysis
      7. Key Points
    4. Chapter 27 The Effect of Agency CMO PAC Bond Features on Performance
      1. Linda Lowell
      2. The Term Structure of CMO Yields
      3. Collars and Collateral
      4. Interaction of Collars and Collateral
      5. PAC Collar Drift
      6. When the PAC Breaks
      7. Windows
      8. Lockout
      9. Is There a Z in the Deal?
      10. Effect of Jump-Z and VADM Structures on PAC Bonds
      11. Priority to Receive Excess Cash Flows
      12. The Option Costs of PAC Features
      13. Key Points
    5. Chapter 28 Agency CMO Z-Bonds
      1. Linda Lowell
      2. The Basic Accrual Structure
      3. How the Z Interacts with Other Bonds in the Structure
      4. CMOs with PACs and a Z-Bond
      5. Performance of Z-Bonds
      6. More Fun with Accrual Bonds
      7. PAC Zs
      8. Structures with More Than One Z-Bond
      9. Key Points
    6. Chapter 29 Support Bonds with Schedules in Agency CMO Deals
      1. Linda Lowell
      2. Support Bond Basics
      3. Support TAC Bonds
      4. Reverse TACs
      5. Layered PAC Bonds
      6. Summary of Average Life Volatilities
      7. Key Points
    7. Chapter 30 Stripped Mortgage-Backed Securities
      1. Cyrus Mohebbi, Gary Li, Todd White, and David Kwun 629
      2. Overview of the SMBS Market
      3. Investment Characteristics
      4. Key Points
    8. Chapter 31 Nonagency Residential Mortgage-Backed Securities
      1. Dapeng Hu and Robert Goldstein
      2. Market Overview
      3. Collateral
      4. Capital Structure
      5. Housing Market
      6. Mortgage Modification
      7. Relative Value and Risk Analysis
      8. Key Points
    9. Chapter 32 Commercial Mortgage-Backed Securities
      1. Wayne M. Fitzgerald II and Mark D. Paltrowitz
      2. The Collateral Pool
      3. CMBS Trust Structure
      4. Transaction Participants
      5. Transaction Features
      6. Market Development
      7. Modeling
      8. Key Points
    10. Chapter 33 Credit Card Asset-Backed Securities
      1. John McElravey
      2. Securitization of Credit Card Receivables
      3. The Credit Card ABS Life Cycle
      4. Cash-Flow Allocations
      5. Credit and Investment Considerations
      6. Key Points
    11. Chapter 34 Securities Backed by Auto Loans and Leases, Equipment Loans and Leases, and Student Loans
      1. John McElravey
      2. Securitization in Brief
      3. Auto Loans and Leases
      4. Equipment Loans and Leases
      5. Student Loans
      6. Key Points
    12. Chapter 35 Collateralized Loan Obligations
      1. Frank J. Fabozzi
      2. Assets
      3. Capital Structure
      4. Creation Purpose
      5. Credit Structures
      6. Key Points
  11. Part Four Term Structure of Interest Rates
    1. Chapter 36 Overview of Forward Rate Analysis
      1. Antti Ilmanen
      2. Computation of Par, Spot, and Forward Rates
      3. Main Influences on the Yield-Curve Shape
      4. Using Forward Rate Analysis in Yield-Curve Trades
      5. Key Points
    2. Chapter 37 A Framework for Analyzing Yield-Curve Trades
      1. Antti Ilmanen
      2. Forward Rates and Their Determinants
      3. Decomposing Expected Returns of Bond Positions
      4. Key Points
    3. Chapter 38 Empirical Yield-Curve Dynamics and Yield-Curve Exposure
      1. Wesley Phoa
      2. Fundamental Determinants of Yield-Curve Dynamics
      3. Empirical Analysis of Yield-Curve Dynamics
      4. Beyond Level and Slope Risk
      5. Key Points
    4. Chapter 39 Term Structure Modeling with No-Arbitrage Interest Rate Models
      1. Gerald W. Buetow, Jr., and Brian J. Henderson
      2. Introduction to Models of the Short Rate
      3. Binomial Interest Rate Lattices
      4. Trinomial Lattice
      5. Key Points
  12. Part Five Valuation Modeling
    1. Chapter 40 Valuation of Bonds with Embedded Options
      1. Frank J. Fabozzi, Andrew Kalotay, and Michael Dorigan
      2. The Interest Rate Lattice
      3. Calibrating the Lattice
      4. Using the Lattice for Valuation
      5. Fixed-Coupon Bonds with Embedded Options
      6. Valuation of Two More Exotic Structures
      7. Extensions
      8. Key Points
    2. Chapter 41 Valuation of Agency Mortgage-Backed Securities
      1. Frank J. Fabozzi, Scott F. Richard, and Peter Ru
      2. Static Valuation
      3. Dynamic Valuation Modeling
      4. Illustrations
      5. Key Points
    3. Chapter 42 Convertible Securities: Their Structures, Valuation, and Trading
      1. Mihir Bhattacharya
      2. Evolution in the Convertible Markets
      3. Basic Characteristics of Convertible Securities
      4. Approaches to Valuation of Convertibles
      5. Exercising the Embedded Options
      6. Looking Forward
      7. Key Points
  13. Part Six Credit Risk
    1. Chapter 43 Credit Analysis for Corporate Bonds
      1. Martin Fridson, Frank J. Fabozzi, and Adam B. Cohen
      2. Approaches to Credit Analysis
      3. Industry Considerations
      4. Financial Analysis
      5. Combining Financial and Nonfinancial Analysis
      6. Indenture Provisions
      7. Utilities
      8. Finance Companies
      9. The Analysis of High-Yield Corporate Bonds
      10. Credit Scoring Models
      11. Key Points
    2. Chapter 44 The Credit Analysis of Municipal General Obligation and Revenue Bonds
      1. Sylvan G. Feldstein, Alexander Grant, and David Ratner
      2. The Legal Opinion
      3. The Need to Know Who Really Is the Issuer
      4. On the Financial Advisor and Underwriter
      5. General Credit Indicators and Economic Factors in the Credit Analysis
      6. Red Flags for the Investor
      7. Information Sources for the Analyst
      8. Key Points
    3. Chapter 45 Credit-Risk Modeling
      1. Tim Backshall, Kay Giesecke, and Lisa Goldberg
      2. Structural Credit Models
      3. Reduced-Form Credit Models
      4. Incomplete-Information Credit Models
      5. Key Points
  14. Part Seven Multifactor Risk Models
    1. Chapter 46 Introduction to Multifactor Risk Models in Fixed Income and Their Applications
      1. Anthony Lazanas, António Baldaque da Silva, Radu Găbudean, and Arne D. Staal
      2. Motivation and Structure Underlying Fixed Income Multifactor Risk Models
      3. Fixed Income Risk Models
      4. Applications of Risk Modeling
      5. Key Points
    2. Chapter 47 Analyzing Risk from Multifactor Fixed Income Models
      1. Anthony Lazanas, António Baldaque da Silva, Radu C. Găbudean, and Arne D. Staal
      2. Approaches Used to Analyze Risk
      3. Key Points
    3. Chapter 48 Hedging Interest-Rate Risk with Term-Structure Factor Models
      1. Lionel Martellini, Philippe Priaulet, and Frank J. Fabozzi
      2. Defining Interest-Rate Risk(s)
      3. Hedging with Duration
      4. Relaxing the Assumption of a Small Shift
      5. Relaxing the Assumption of a Parallel Shift
      6. Comparative Analysis of Various Hedging Techniques
      7. Key Points
  15. Part Eight Bond Portfolio Management
    1. Chapter 49 Introduction to Bond Portfolio Management
      1. Kenneth E. Volpert
      2. Overview of Traditional Bond Management
      3. Overview of the Core/Satellite Approach
      4. Why Choose Indexing?
      5. Which Index Should Be Used?
      6. Primary Bond Indexing Risk Factors
      7. Enhancing Bond Indexing
      8. Measuring Success
      9. Key Points
    2. Chapter 50 Quantitative Management of Benchmarked Portfolios
      1. Lev Dynkin, Jay Hyman, Vadim Konstantinovsky, and Bruce D. Phelps
      2. Selection and Customization of Benchmarks
      3. Diversification Issues in Benchmarks
      4. Portfolio Analysis Relative to a Benchmark
      5. Quantitative Approaches to Benchmark Replication
      6. Replication with Cash Instruments: Stratified Sampling
      7. Controlling Issuer-Specific Risk in the Portfolio
      8. Quantitative Methods for Portfolio Optimization
      9. Tools for Quantitative Portfolio Management
      10. Key Points
    3. Chapter 51 Global Credit Bond Portfolio Management
      1. Jack Malvey
      2. Credit Relative-Value Analysis
      3. Total-Return Analysis
      4. Primary Market Analysis
      5. Liquidity and Trading Analysis
      6. Secondary Trade Rationales
      7. Spread Analysis
      8. Structural Analysis
      9. Credit-Curve Analysis
      10. Credit Analysis
      11. Asset Allocation/Sector Rotation
      12. Key Points
    4. Chapter 52 Elements of Managing a High-Yield Bond Portfolio
      1. Mark R. Shenkman and Nicholas R. Sarchese
      2. Bottom-Up–Credit/Security Analysis
      3. Top-Down High-Yield Market Drivers and Macro Considerations
      4. Portfolio Considerations
      5. Key Points
    5. Chapter 53 International Bond Portfolio Management
      1. Karthik Ramanathan, James M. Gerard, and Frank J. Fabozzi
      2. Overview of International Bond Market Investing
      3. Investment Objectives and Policy Statements
      4. Developing a Portfolio Strategy
      5. Sources of Excess Return
      6. The Fundamental-Based Investment Approach
      7. Portfolio Construction
      8. Key Points
    6. Chapter 54 Fixed Income Transition Management
      1. Ananth Madhavan and Daniel Gallegos
      2. Basics of Fixed Income Transitions
      3. Transition Metrics and Objectives
      4. Case Study of Risk Management
      5. Key Points
    7. Chapter 55 Managing the Spread Risk of Credit Portfolios Using the Duration Times Spread Measure
      1. Arik Ben Dor, Lev Dynkin, and Jay Hyman
      2. The Need for a New Measure of Credit Spread Exposure
      3. Spread Volatility and DTS
      4. Risk Projection: Predicting Spread Volatility
      5. Hedging: Predicting Sensitivities to Market Spread Changes
      6. Replication: Creating Index Tracking Portfolios
      7. Expressing Macro Views in Active Portfolios
      8. Portfolio Construction: Optimal Diversification of Issuer Risk
      9. Modeling: Calibrating Credit-Risk Factors
      10. Key Points
    8. Chapter 56 Investing in Distressed Structured Credit Securities
      1. Alfred Murata
      2. Background
      3. Economic (Credit) Risk versus Financial (Leverage) Risk
      4. Analysis of Nonagency Mortgage-Backed Securities
      5. Key Points
    9. Chapter 57 Hedge Fund Fixed Income Strategies
      1. Ellen Rachlin, Chris P. Dialynas, and Vineer Bhansali
      2. Macro Investing
      3. Asset-Backed Credit Strategy
      4. Capital Structure Arbitrage
      5. Long/Short Credit Strategy
      6. Distressed
      7. Basis Trading
      8. Index Arbitrage and Correlation Trading
      9. Volatility Trading
      10. Key Points
    10. Chapter 58 Financing Positions in the Bond Market
      1. Frank J. Fabozzi and Steven V. Mann
      2. Repurchase Agreement
      3. Dollar Rolls
      4. Margin Buying
      5. Securities Lending
      6. Key Points
  16. Part Nine Derivatives
    1. Chapter 59 Introduction to Interest-Rate Futures and Options Contracts
      1. Frank J. Fabozzi, Steven V. Mann, Mark Pitts, and Robin Grieves
      2. Basic Characteristics of Derivative Contracts
      3. Representative Exchange-Traded Interest-Rate Futures Contracts
      4. Mechanics of Futures Trading
      5. Representative Exchange-Traded Futures Options Contracts
      6. OTC Contracts
      7. Key Points
    2. Chapter 60 Pricing Futures and Portfolio Applications
      1. Frank J. Fabozzi, Mark Pitts, and Bruce M. Collins
      2. Pricing of Futures Contracts
      3. Applications to Portfolio Management
      4. Portable Alpha
      5. Key Points
    3. Chapter 61 Controlling Interest-Rate Risk with Futures and Options
      1. Frank J. Fabozzi, Shrikant Ramamurthy, and Mark Pitts
      2. Controlling Interest-Rate Risk with Futures
      3. Hedging with Options
      4. Key Points
    4. Chapter 62 Interest-Rate Swaps and Swaptions
      1. Frank J. Fabozzi, Steven V. Mann, and Moorad Choudhry
      2. Description of an Interest-Rate Swap
      3. Interpreting a Swap Position
      4. Terminology, Conventions, and Market Quotes
      5. Valuing Interest-Rate Swaps
      6. Primary Determinants of Swap Spreads
      7. Nongeneric Interest-Rate Swaps
      8. Canceling a Swap
      9. Credit Risk
      10. Swaptions
      11. Key Points
    5. Chapter 63 The Valuation of Interest-Rate Swaps and Swaptions
      1. Gerald W. Buetow and Brian J. Henderson
      2. Swap Valuation Using the Lattice Approach
      3. Forward-Start Swaps
      4. Valuing Swaptions
      5. Valuing Basis Swaps and Non-LIBOR-Based Swaps
      6. Factors Affecting Swap Valuation
      7. Key Points
    6. Chapter 64 The Basics of Interest-Rate Options
      1. William J. Gartland and Nicholas C. Letica
      2. How Options Work
      3. Options Strategies—Reorganizing the Profit/Loss Graph
      4. Classic Option Strategies
      5. Practical Portfolio Strategies
      6. Volatility
      7. Key Points
    7. Chapter 65 Interest-Rate Caps and Floors
      1. George L. Albota and Radu S. Tunaru
      2. Caps and Floors Defined
      3. Collars and Corridors
      4. Hybrid Type Instruments
      5. Potential Applications of Caps and Floors
      6. Caplets and Floorlets
      7. Insights on Trading Caps and Floors
      8. Caps and Floors versus Swaptions Wedge
      9. Key Points
    8. Chapter 66 Credit Derivatives
      1. Dominic O’Kane
      2. Evolution of the Credit Derivatives Market
      3. The Credit Default Swap
      4. CDS Mechanics
      5. Credit Events
      6. The CDS Settlement Timeline
      7. CDS Indices
      8. Importance of the CDS Market
      9. Key Points
    9. Chapter 67 Credit Derivative Valuation and Risk
      1. Dominic O’Kane
      2. CDS Valuation
      3. The CDS–Bond Relationship
      4. Model
      5. New and Existing Contracts
      6. Risk Management
      7. CDS Index Valuation
      8. Key Points
    10. Chapter 68 Hedging Tail Risk
      1. Stephen J. Antczak
      2. Step-by-Step Guide to Hedging
      3. The Need to Hedge
      4. Overview of Select Tail Risks
      5. Generic Challenges Facing Hedgers
      6. Unfunded Hedges (Insurance)
      7. Funded Hedges (Alpha Trades)
      8. Key Points
  17. Part Ten Performance Evaluation and Return Attribution Analysis
    1. Chapter 69 Principles of Performance Attribution
      1. Anthony Lazanas, António Baldaque da Silva, Chris Sturhahn, Eric P. Wilson, and Pam Zhong
      2. Principles of Performance Attribution
      3. Mathematics of Performance Attribution
      4. Applications of Performance Attribution
      5. Key Points
    2. Chapter 70 Performance Attribution for Portfolios of Fixed Income Securities
      1. Anthony Lazanas, António Baldaque da Silva, Chris Sturhahn, Eric P. Wilson, and Pam Zhong
      2. Return Splitting
      3. Outperformance Breakdown
      4. Total Return Model
      5. Excess Return Model
      6. Fully Analytical Model
      7. Selecting an Appropriate Attribution Model
      8. Key Points
    3. Chapter 71 Advanced Topics in Performance Attribution
      1. Anthony Lazanas, António Baldaque da Silva, Chris Sturhahn, Eric P. Wilson, and Pam Zhong
      2. Multicurrency Attribution
      3. Derivatives and Leverage
      4. From Theory to Practice
      5. Key Points
  18. Appendix Methodology for Calculating Currency Exposures in Bond Portfolios and Indexes
    1. Curt Hollingsworth
    2. Main Formula for Bond Portfolios
    3. Main Formula for Citigroup Indexes
    4. Main Formula for Barclays Capital Indices
  19. Index
  20. Footnotes
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      8. 8.
      9. 9.
    7. Chapter 7
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      7. 7.
      8. 8.
      9. 9.
      10. 10.
      11. 11.
    8. Chapter 8
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      3. 3.
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      6. 6.
      7. 7.
      8. 8.
    9. Chapter 9
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      8. 8.
      9. 9.
    10. Chapter 10
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      3. 3.
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      6. 6.
      7. 7.
    11. Chapter 11
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      3. 3.
      4. 4.
    12. Chapter 12
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      3. 3.
      4. 4.
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      6. 6.
      7. 7.
      8. 8.
      9. 9.
      10. 10.
      11. *
    13. Chapter 13
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      2. 2.
      3. 3.
      4. 4.
      5. 5.
      6. 6.
      7. 7.
    14. Chapter 15
      1. 1.
    15. Chapter 16
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      2. 2.
      3. 3.
      4. 4.
      5. 5.
    16. Chapter 17
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      2. 2.
      3. 3.
      4. 4.
    17. Chapter 18
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      2. 2.
      3. 3.
      4. 4.
      5. 5.
      6. 6.
      7. 7.
      8. 8.
      9. 9.
      10. 10.
    18. Chapter 19
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      2. 2.
      3. 3.
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      5. 5.
      6. 6.
      7. 7.
      8. 8.
      9. 9.
      10. 10.
      11. 11.
      12. 12.
      13. 13.
      14. 14.
    19. Chapter 20
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      2. 2.
      3. 3.
      4. 4.
      5. 5.
      6. 6.
      7. 7.
      8. 8.
      9. 9.
      10. 10.
    20. Chapter 21
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      2. 2.
      3. 3.
      4. 4.
    21. Chapter 22
      1. 1.
    22. Chapter 23
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      2. 2.
      3. 3.
      4. 4.
      5. 5.
    23. Chapter 24
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      2. 2.
      3. 3.
      4. 4.
    24. Chapter 25
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      2. 2.
      3. 3.
    25. Chapter 26
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      2. 2.
      3. 3.
    26. Chapter 27
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      3. 3.
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      5. 5.
      6. 6.
      7. 7.
      8. 8.
    27. Chapter 28
      1. 1.
    28. Chapter 29
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      2. 2.
      3. 3.
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      5. 5.
    29. Chapter 30
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      2. 2.
    30. Chapter 31
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      2. 2.
      3. 3.
      4. 4.
      5. 5.
    31. Chapter 32
      1. 1.
    32. Chapter 34
      1. 1.
    33. Chapter 35
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      2. 2.
    34. Chapter 36
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      3. 3.
      4. 4.
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      6. 6.
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      11. 11.
      12. 12.
      13. 13.
      14. 14.
      15. 15.
      16. 16.
      17. 17.
      18. 18.
      19. 19.
      20. 20.
      21. 21.
    35. Chapter 37
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      2. 2.
      3. 3.
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      6. 6.
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      12. 12.
      13. 13.
      14. 14.
      15. 15.
      16. 16.
      17. 17.
      18. 18.
      19. 19.
      20. 20.
    36. Chapter 38
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      11. 11.
      12. 12.
      13. 13.
      14. 14.
      15. 15.
      16. 16.
    37. Chapter 39
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      2. 2.
      3. 3.
      4. 4.
      5. 5.
      6. 6.
    38. Chapter 40
      1. 1.
      2. 2.
    39. Chapter 41
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      2. 2.
    40. Chapter 42
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      2. 2.
      3. 3.
      4. 4.
      5. 5.
      6. 6.
      7. 7.
      8. 8.
      9. 9.
      10. 42.
      11. 43.
      12. 44.
      13. 45.
      14. 46.
      15. 47.
      16. 48.
      17. 49.
      18. 50.
      19. 51.
      20. 52.
      21. 53.
      22. 54.
      23. 55.
    41. Chapter 43
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      2. 2.
      3. 3.
      4. 4.
      5. 5.
      6. 6.
      7. 7.
      8. 8.
      9. 9.
      10. 10.
    42. Chapter 45
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      2. 2.
      3. 3.
      4. 4.
      5. 5.
      6. 6.
      7. 7.
      8. 8.
      9. 9.
    43. Chapter 46
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      7. 7.
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      10. 10.
      11. 11.
      12. 12.
      13. 13.
      14. 14.
    44. Chapter 47
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      3. 3.
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      11. 11.
      12. 12.
      13. 13.
      14. 14.
      15. 15.
      16. 16.
      17. 17.
    45. Chapter 48
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      3. 3.
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      6. 6.
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      10. 10.
      11. 11.
      12. 12.
      13. 13.
      14. 14.
      15. 15.
      16. 16.
      17. 17.
    46. Chapter 50
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      3. 3.
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      12. 12.
      13. 13.
      14. 14.
      15. 15.
      16. 16.
      17. 17.
      18. 18.
      19. 19.
      20. 20.
      21. 21.
      22. 22.
      23. 23.
      24. 24.
    47. Chapter 51
      1. 1.
      2. 2.
      3. 3.
      4. 1 This section is adapted from Nicholas Sarchese, Amy Levine, “Credit Analysis and Analyzing a High-Yield Issuance,” Chapter 7 in William F.
      5. 2 This section is adapted from Mark R.
    48. Chapter 53
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      2. 2.
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      10. 10.
      11. 11.
      12. 12.
      13. 13.
      14. 14.
      15. 15.
      16. 16.
    49. Chapter 54
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      2. 2.
      3. 3.
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      6. 6.
      7. 7.
      8. 8.
      9. 9.
    50. Chapter 55
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      17. 17.
      18. 18.
      19. 19.
      20. 20.
      21. 21.
      22. 22.
      23. 23.
      24. 24.
      25. 25.
      26. 26.
      27. 27.
      28. 28.
      29. 29.
    51. Chapter 57
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      2. 2.
      3. 3.
      4. 4.
    52. Chapter 58
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      2. 2.
    53. Chapter 59
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      2. 2.
    54. Chapter 60
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      3. 3.
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      6. 6.
    55. Chapter 61
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    56. Chapter 62
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      3. 3.
      4. 4.
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      6. 6.
    57. Chapter 63
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      2. 2.
      3. 3.
    58. Chapter 64
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    59. Chapter 65
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      3. 3.
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    60. Chapter 66
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      6. 6.
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      11. 11.
      12. 12.
      13. 13.
    61. Chapter 67
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      14. 14.
      15. 15.
      16. 16.
      17. 17.
      18. 18.
      19. 19.
      20. 20.
    62. Chapter 68
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      2. 2.
      3. 3.
    63. Chapter 69
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      3. 3.
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      8. 8.
    64. Chapter 70
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      14. 14.
      15. 15.
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      17. 17.
      18. 18.
      19. 19.
    65. Chapter 71
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      9. 10.
      10. 11.