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Introduction to Fixed Income Analytics: Relative Value Analysis, Risk Measures and Valuation

Introduction to Fixed Income Analytics: Relative Value Analysis, Risk Measures and Valuation

          
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About the Book

A comprehensive introduction to the key concepts of fixed income analytics The First Edition of Introduction to Fixed Income Analytics skillfully covered the fundamentals of this discipline and was the first book to feature Bloomberg screens in examples and illustrations. Since publication over eight years ago, the markets have experienced cathartic change. That's why authors Frank Fabozzi and Steven Mann have returned with a fully updated Second Edition. This reliable resource reflects current economic conditions, and offers additional chapters on relative value analysis, value-at-risk measures and information on instruments like TIPS (treasury inflation protected securities). Offers insights into value-at-risk, relative value measures, convertible bond analysis, and much more Includes updated charts and descriptions using Bloomberg screens Covers important analytical concepts used by portfolio managers Understanding fixed-income analytics is essential in today's dynamic financial environment. The Second Edition of Introduction to Fixed Income Analytics will help you build a solid foundation in this field.

Table of Contents:
Preface xiii About the Authors xv CHAPTER 1: Time Value of Money 1 Future Value of a Single Cash Flow 1 Present Value of a Single Cash Flow 4 Compounding/Discounting When Interest Is Paid More Than Annually 8 Future and Present Values of an Ordinary Annuity 10 Yield (Internal Rate of Return) 20 Concepts Presented in this Chapter 26 Appendix: Compounding and Discounting in Continuous Time 27 Questions 31 CHAPTER 2: Yield Curve Analysis: Spot Rates and Forward Rates 33 A Bond Is a Package of Zero-Coupon Instruments 33 Theoretical Spot Rates 34 Forward Rates 44 Dynamics of the Yield Curve 57 Concepts Presented in this CHAPTER 60 Questions 60 CHAPTER 3: Day Count Conventions and Accrued Interest 63 Day Count Conventions 63 Computing the Accrued Interest 74 Concepts Presented in this Chapter 76 Questions 76 CHAPTER 4: Valuation of Option-Free Bonds 77 General Principles of Valuation 77 Determining a Bond’s Value 80 The Price/Discount Rate Relationship 84 Time Path of Bond 86 Valuing a Zero-Coupon Bond 90 Valuing a Bond Between Coupon Payments 90 Traditional Approach to Valuation 94 The Arbitrage-Free Valuation Approach 96 Concepts Presented in this Chapter 107 Questions 108 CHAPTER 5: Yield Measures 109 Sources of Return 109 Traditional Yield Measures 113 Yield to Call 121 Yield to Put 123 Yield to Worst 123 Cash Flow Yield 124 Portfolio Yield Measures 125 Yield Measures for U.S. Treasury Bills 128 Yield Spread Measures Relative to a Spot Rate Curve 134 Concepts Presented in this Chapter 137 Appendix: Mathematics of the Internal Rate of Return 138 Questions 139 CHAPTER 6: Analysis of Floating Rate Securities 141 General Features of Floaters 141 Valuing a Risky Floater 150 Valuation of Floaters with Embedded Options 157 Margin Measures 157 Concepts Presented in this Chapter 166 Questions 167 CHAPTER 7: Valuation of Bonds with Embedded Options 169 Overview of the Valuation of Bonds with Embedded Options 169 Option-Adjusted Spread and Option Cost 170 Lattice Model 172 Binomial Model 175 Illustration 196 Concepts Presented in this Chapter 198 Questions 198 CHAPTER 8: Cash Flow for Mortgage-Backed Securities and Amortizing Asset-Backed Securities 199 Cash Flow of Mortgage-Backed Securities 199 Amortizing Asset-Backed Securities 238 Concepts Presented in this Chapter 242 Questions 244 CHAPTER 9: Valuation of Mortgage-Backed and Asset-Backed Securities 247 Static Cash Flow Yield Analysis 247 Monte Carlo Simulation/OAS 249 Concepts Presented in this Chapter 270 Questions 270 CHAPTER 10: Analysis of Convertible Bonds 273 General Characteristics of Convertible Bonds 273 Tools for Analyzing Convertibles 276 Call and Put Features 278 Convertible Bond Arbitrage 279 Other Types of Convertibles 283 Concepts Presented in this Chapter 285 Questions 285 CHAPTER 11: Total Return 287 Computing the Total Return 287 OAS-Total Return 290 Total Return to Maturity 291 Total Return for a Mortgage-Backed Security 299 Portfolio Total Return 301 Total Return Analysis for Multiple Scenarios 301 Concepts Presented in this Chapter 314 Questions 314 CHAPTER 12: Measuring Interest Rate Risk 317 The Full Valuation Approach 317 Price Volatility Characteristics of Bonds 324 Duration 334 Other Duration Measures 350 Convexity 360 Price Value of a Basis Point 365 The Importance of Yield Volatility 367 Concepts Presented in this Chapter 369 Questions 370 CHAPTER 13: Value-at-Risk Measure and Extensions 373 Value-at-Risk 373 Conditional Value-at-Risk 384 Concepts Presented in this Chapter 385 Questions 386 CHAPTER 14: Analysis of Inflation-Protected Bonds 387 Breakeven Inflation rate 388 Valuation of TIPS 389 Measuring Interest Rate Risk 394 Concepts Presented in this Chapter 397 Questions 397 CHAPTER 15: The Tools of Relative Value Analysis 399 How Portfolio Managers Add Value 399 Yield Spreads over Swap and Treasury Curves 400 Asset Swaps 403 Credit Default Swaps 410 Concepts Presented in this Chapter 413 Questions 414 CHAPTER 16: Analysis of Interest Rate Swaps 417 Description of an Interest Rate Swap 417 Interpreting a Swap Position 419 Terminology, Conventions, and Market Quotes 421 Valuing Interest Rate Swaps 424 Primary Determinants of Swap Spreads 440 Dollar Duration of a Swap 445 Concepts Presented in this Chapter 447 Questions 447 CHAPTER 17: Estimating Yield Volatility 451 Historical Volatility 451 Implied Volatility 455 Forecasting Yield Volatility 459 Concepts Presented in this Chapter 463 Questions 463 Index 465


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Product Details
  • ISBN-13: 9780470572139
  • Publisher: John Wiley & Sons Inc
  • Publisher Imprint: John Wiley & Sons Inc
  • Depth: 44
  • Height: 236 mm
  • No of Pages: 496
  • Series Title: Frank J. Fabozzi (Hardcover)
  • Sub Title: Relative Value Analysis, Risk Measures and Valuation
  • Width: 160 mm
  • ISBN-10: 0470572132
  • Publisher Date: 27 Oct 2010
  • Binding: Hardback
  • Edition: 2
  • Language: English
  • Returnable: N
  • Spine Width: 39 mm
  • Weight: 735 gr


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