Reactive PublishingThis book is a rigorous, practitioner-focused guide to modelling the fixed-income term structure across modern capital markets. It bridges academic interest rate theory with applied engineering, showing how traders, risk managers, treasury analysts, and quants can construct, calibrate, and deploy rate models in real pricing, hedging, and portfolio optimization workflows.
The material covers the mathematical foundations of short-rate, forward-rate, and HJM models; the numerical machinery required to solve and simulate them; and the market conventions needed for accurate implementation. Readers will learn how to engineer the yield curve from noisy market instruments, extract forward-looking expectations of macro conditions, stress test exposures across scenario space, and hedge dynamically using swaps, futures, options, and structured rate derivatives.
Topics include:
- Yield curve construction and interpolation schemes
- Bootstrapping discount factors and forward curves
- Short-rate models (Vasicek, CIR, Hull-White, Black-Karasinski)
- HJM, LMM, and forward-rate models
- Term structure calibration to swap, futures, and volatility data
- Interest rate option pricing and Greeks
- Multi-curve frameworks and post-2008 collateral effects
- Monte Carlo simulation and lattice methods for rates
- Scenario analysis, convexity effects, and hedge design
- Cross-currency curves and basis dynamics
- Risk engines, stress testing, and macro-quant inference
Written for domain professionals, the text emphasizes numerical implementation, model diagnostics, market accuracy, and sensitivity analysis. The goal is not merely to introduce interest rate models, but to operationalize them, turning the yield curve into a stateful instrument for pricing, forecasting, and risk control.
For quants, researchers, and portfolio engineers looking to master the term structure, this is both a reference and a playbook for modern fixed-income modelling.
