Synopses & Reviews
The
Second Edition of the
Fixed-Income Securities and Derivatives Handbook offers a completely updated and revised look at an important area of today’s financial world. In addition to providing an accessible description of the main elements of the debt market—concentrating on the instruments used and their applications—this edition takes into account the effect of the recent financial crisis on fixed income securities and derivatives.
Divided into three comprehensive parts, this reliable resource opens with coverage of essential issues in this field, including bond mathematics, pricing and yield analytics, as well as a discussion of term structure models. Part Two, entitled “Cash and Derivative Instruments and Analysis,” offers an analysis of various debt market instruments including callable bonds and convertibles. It also covers securitization and the impact of the financial crisis on the market. Finally, in part three, “Selected Market Analysis and Trading Considerations,” the book discusses the practical uses of redemption yield and duration as well as relative value trading strategies based on the author’s personal experiences at a primary dealer’s desk.
As timely as it is timeless, the Second Edition of the Fixed-Income Securities and Derivatives Handbook includes a wealth of new material on such topics as covered bonds, credit derivatives, convertible bonds, swaps, synthetic securitization, bond portfolio management, and much more. And by focusing on its illustrative case studies and real-world examples, you’ll quickly gain a firm understanding of the book’s key concepts.
Synopsis
Regulatory changes, volatile markets, incalculable valuations, mark-to-market accounting: these are just a few of the dramatic changes to occur since the great credit crash of 2008. In this fully updated and expanded post-crash edition of the handbook, Moorad Choudhry explains the new regulatory twists affecting the fixed-income market, the evolving derivatives market, as well as new instruments and opportunities in the bond market. A mix of practical tips and academic theory, the second edition includes new material on covered bonds, credit derivatives, convertible bonds, swaps, synthetic securitization, bond portfolio management, and more.
Synopsis
Praise for Fixed-Income Securities and Derivatives Handbook, Second Edition
"I have been looking for books for my clients and obtained a copy of your book. I think it is the best book about fixed-income securities out there. The book is extremely well written and is the best resource I have found so far."
Patrick Y. Shim, Financial Advisor, CG Investment Group, Wells Fargo Advisors, LLC
The Second Edition of the Fixed-Income Securities and Derivatives Handbook is a fully updated and expanded post-crash edition of Moorad Choudhry's bestselling guide. In this latest edition, he explains the new regulatory twists, the evolving derivatives market, as well as a new set of instruments and opportunities in the bond market.
Thoroughly updated and revised, this Second Edition includes new material on important topics such as:
A practical demonstration of cubic spline methodology, useful in constructing yield curves
The latest developments in the credit derivative market
An accessible analysis of credit default swap pricing principles
A description of inflation-indexed derivatives
A more detailed look at the basic principles of securitization and an updated chapter on collateralized debt obligations
A new chapter on credit analysis and the different metrics used to measure bond-relative value
Written in a straightforward and accessible style, Moorad Choudhry's new book offers the ideal mix of practical tips and academic theory.
Synopsis
The definitive guide to fixed-come securities-revised to reflect today's dynamic financial environment
The Second Edition of the Fixed-Income Securities and Derivatives Handbook offers a completely updated and revised look at an important area of today's financial world. In addition to providing an accessible description of the main elements of the debt market, concentrating on the instruments used and their applications, this edition takes into account the effect of the recent financial crisis on fixed income securities and derivatives.
As timely as it is timeless, the Second Edition of the Fixed-Income Securities and Derivatives Handbook includes a wealth of new material on such topics as covered and convertible bonds, swaps, synthetic securitization, and bond portfolio management, as well as discussions regarding new regulatory twists and the evolving derivatives market.
- Offers a more detailed look at the basic principles of securitization and an updated chapter on collateralized debt obligations
- Covers bond mathematics, pricing and yield analytics, and term structure models
- Includes a new chapter on credit analysis and the different metrics used to measure bond-relative value
- Contains illustrative case studies and real-world examples of the topics touched upon throughout the book
Written in a straightforward and accessible style, Moorad Choudhry's new book offers the ideal mix of practical tips and academic theory within this important field.
About the Author
MOORAD CHOUDHRY is Head of Treasury at Europe Arab Bank, a subsidiary of Arab Bank. He was previously at KBC Financial Products in London, the derivatives and convertible bond trading arm of KBC Bank N.V. Brussels. Prior to that, he was a vice president in structured finance services sales and marketing at JPMorgan Chase Bank, a sterling proprietary trader in the treasury division at Hambros Bank Ltd, and a gilt-edged market maker and money markets trader at ABN AMRO Hoare Govett Ltd.
Table of Contents
Foreword.
Preface.
PART ONE: INTRODUCTION TO BONDS.
1 The Bond Instrument.
The Time Value of Money.
Bond Pricing and Yield: The Traditional Approach.
Accrued Interest.
2 Bond Instruments and Interest Rate Risk.
Duration, Modifi ed Duration, and Convexity.
3 Bond Pricing and Spot and Forward Rates.
Zero-Coupon Bonds.
Coupon Bonds.
Bond Price in Continuous Time.
Forward Rates.
Term Structure Hypotheses.
4 Interest Rate Modeling.
Basic Concepts.
One-Factor Term-Structure Models.
Further One-Factor Term-Structure Models.
Two-Factor Interest Rate Models.
Choosing a Term-Structure Model.
5 Fitting the Yield Curve.
Non-Parametric Methods.
Comparing Curves.
Fitting the Term Structure of Interest Rates: The Practical Implementation of Cubic Spline Methodology.
Cubic Spline Methodology.
The Hypothesis.
Practical Approach.
A Look at Forward Rates.
Conclusion.
PART TWO: SELECTED CASH AND DERIVATIVE INSTRUMENTS.
6 Forwards and Futures Valuation.
Forwards and Futures.
Forward-Spot Parity.
The Basis and Implied Repo Rate.
7 Swaps.
Interest Rate Swaps.
Generic Swap Valuation.
Non–Plain Vanilla Interest Rate Swaps.
Interest Rate Swap Applications.
8 Options.
Option Basics.
Option Instruments.
Option Pricing: Setting the Scene.
Option Pricing.
The Black-Scholes Option Model.
Other Option Models.
9 Measuring Option Risk.
Option Price Behavior.
The Greeks.
The Option Smile.
Caps and Floors.
10 Credit Derivatives.
Credit Risk.
Credit Risk and Credit Derivatives.
Credit Derivative Instruments.
Investment Applications.
Credit Derivatives and Relative Value Trading.
Credit-Derivative Pricing.
11 The Analysis of Bonds with Embedded Options.
12 Option-Adjusted Spread Analysis.
13 Convertible Bonds.
Basic Features.
Advantages of Issuing and Holding Convertibles.
Convertible Bond Valuation.
Pricing Spreadsheet.
14 Inflation-Indexed Bonds.
Basic Concepts.
Index-Linked Bond Cash Flows and Yields.
Analysis of Real Interest Rates.
15 Securitization and Asset-Backed Securities.
The Concept of Securitization.
The Process of Securitization.
Securitizing Mortgages.
Cash Flow Patterns.
ABS Structures: A Primer on Performance Metrics and Test Measures.
Securitization: Features of the 2007–2009 Financial Crisis.
16 Collateralized Debt Obligations.
CDO Structures.
Motivation Behind CDO Issuance.
Analysis and Evaluation.
Expected Loss.
CDO Market Overview Since 2005.
PART THREE: SELECTED MARKET TRADING CONSIDERATIONS.
17 The Yield Curve, Bond Yield, and Spot Rates.
Practical Uses of Redemption Yield and Duration.
Illustrating Bond Yield Using a Microsoft Excel Spreadsheet.
Implied Spot Rates and Market Zero-Coupon Yields.
Implied Spot Yields and Zero-Coupon Bond Yields.
Determining Strip Values.
Strips Market Anomalies.
Strips Trading Strategy.
Case Study: Treasury Strip Yields and Cash Flow Analysis.
18 Approaches to Trading.
Futures Trading.
Yield Curves and Relative Value.
Characterizing the Complete Term Structure.
Hedging Bond Positions.
Summary of the Derivation of the Optimum-Hedge Equation.
19 Credit Analysis and Relative Value Measurement.
Credit Ratings.
Credit Analysis.
Industry-Specific Analysis.
The Art of Credit Analysis.
Bond Spreads and Relative Value.
Appendix I: The Black-Scholes Model in Microsoft Excel.
Appendix II: Iterative Formula Spreadsheet.
Appendix III: Pricing Spreadsheet.
References.
About the Author.
Index.