Fixed-income securities and derivatives handbook: analysis and valuation
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| Main Author: | |
|---|---|
| Format: | Book |
| Language: | English |
| Published: |
Princeton
Bloomberg Press
2005
|
| Edition: | 1. ed. |
| Subjects: | |
| Online Access: | Inhaltsverzeichnis |
| Physical Description: | XVI, 355 S. graph. Darst. |
| ISBN: | 1576601641 |
Staff View
MARC
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Record in the Search Index
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| adam_text | mNTENTS
Foreword xiii
Preface xv
PART ONE Introduction to Bonds 1 The Bond Instrument 3
The Time Value of Money 4
Basic Features and Definitions 5
Present Value and Discounting 6
Discount Factors 12
Bond Pricing and Yield: The Traditional Approach 15
Bond Pricing 15
Bond Yield 19
Accrued Interest 27
Clean and Dirty Bond Prices 27
Day Count Conventions 28
2 Bond Instruments and Interest Rate Risk 31
Duration, Modified Duration, and Convexity 31
Duration 32
Properties of Macaulay Duration 36
Modified Duration 37
Convexity 41
3 Bond Pricing and Spot and Forward Rates 47
Zero Coupon Bonds 47
Coupon Bonds 49
Bond Price in Continuous Time 51
Fundamental Concepts 51
Stochastic Rates 54
Coupon Bonds 56
Forward Rates 57
Guaranteeing a Forward Rate 57
The Spot and Forward Yield Curve 59
Calculating Spot Rates 60
Term Structure Hypotheses 63
The Expectations Hypothesis 63
Liquidity Premium Hypothesis 65
Segmented Markets Hypothesis 65
4 Interest Rate Modeling 67
Basic Concepts 67
Short Rate Processes 68
Ito s Lemma 70
One Factor Term Structure Models 71
Vasicek Model 71
Hull White Model 72
Further One Factor Term Structure Models 73
Cox Ingersoll Ross (CIR) Model 74
Two Factor Interest Rate Models 75
Brennan Schwartz Model 76
Extended Cox Ingersoll Ross Model 76
Heath Jarrow Morton (HJM) Model 77
The Multifactor HJM Model 78
Choosing a Term Structure Model 79
5 Fitting the Yield Curve 83
Yield Curve Smoothing 84
Smoothing Techniques 86
Cubic Polynomials 87
Non Parametric Methods 88
Spline Based Methods 88
Nelson and Siegel Curves 91
Comparing Curves 92
PART TWO Selected Cash and Derivative Instruments
6 Forwards and Futures Valuation . 95
Forwards and Futures 95
Cash Flow Differences 96
Relationship Between Forward and Futures Prices 98
Forward Spot Parity 99
The Basis and Implied Repo Rate 101
7 Swaps 105
Interest Rate Swaps 106
Market Terminology 107
Swap Spreads and the Swap Yield Curve 109
Generic Swap Valuation 112
Intuitive Swap Valuation 112
Zero Coupon Swap Valuation 113
Calculating the Forward Rate from Spot Rate Discount Factors 113
The Key Principles of an Interest Rate Swap 117
Valuation Using the Final Maturity Discount Factor 118
Non Plain Vanilla Interest Rate Swaps 119
Swaptions 122
Valuation 122
Interest Rate Swap Applications 124
Corporate and Investor Applications 124
Hedging Bond Instruments Using Interest Rate Swaps 127
8 Options 133
Option Basics 134
Terminology 136
Option Instruments 137
Option Pricing: Setting the Scene 140
Limits on Option Prices 141
Option Pricing 142
The Black Scholes Option Model 144
Assumptions 145
Pricing Derivative Instruments Using the Black Scholes Model 145
Put Call Parity 149
Pricing Options on Bonds Using the Black Scholes Model 149
Interest Rate Options and the Black Model 152
Comments on the Black Scholes Model 155
Stochastic Volatility 156
Implied Volatility 156
Other Option Models 157
9 Measuring Option Risk 159
Option Price Behavior 159
Assessing Time Value 159
American Options 160
The Greeks 161
Delta 161
Gamma 163
Theta 165
Vega 165
Rho 166
Lambda 168
The Option Smile 169
Caps and Floors 170
10 Credit Derivatives 173
Credit Risk 175
Credit Risk and Credit Derivatives 175
Applications of Credit Derivatives 177
Credit Derivative Instruments 178
Credit Default Swap 178
Credit Options 179
Credit Linked Notes 180
Total Return Swaps 181
Investment Applications 184
Capital Structure Arbitrage 184
Exposure to Market Sectors 184
Credit Spreads 184
Funding Positions 185
Credit Derivative Pricing 186
Pricing Total Return Swaps 187
Asset Swap Pricing 187
Credit Spread Pricing Models 188
11 The Analysis of Bonds with Embedded Options 189
Understanding Option Elements Embedded in a Bond 189
Basic Options Features 190
Option Valuation 191
The Call Provision 192
The Binomial Tree of Short Term Interest Rates 193
Arbitrage Free Pricing 194
Options Pricing 196
Risk Neutral Pricing 197
Recombining and Nonrecombining Trees 198
Pricing Callable Bonds 200
Price and Yield Sensitivity 205
Measuring Bond Yield Spreads 206
Price Volatility of Bonds with Embedded Options 207
Effective Duration 207
Effective Convexity 208
Sinking Funds 209
12 Inflation Indexed Bonds 211
Basic Concepts 211
Choice of Index 211
Indexation Lag 213
Coupon Frequency 214
Type of Indexation 214
Index Linked Bond Cash Flows and Yields 216
TIPS Cash Flow Calculations 217
TIPS Price and Yield Calculations 217
Assessing Yields on Index Linked Bonds 221
Which to Hold: Indexed or Conventional Bonds? 222
Analysis of Real Interest Rates 223
Indexation Lags and Inflation Expectations 223
An Inflation Term Structure 225
13 Hybrid Securities 227
Floating Rate Notes 228
Inverse Floating Rate Notes 231
Hedging Inverse Floaters 233
Indexed Amortizing Notes 234
Advantages for Investors 236
Synthetic Convertible Notes 237
Investor Benefits 238
Interest Differential Notes 238
Benefits for Investors 240
14 Securitization and Mortgage Backed Securities 241
Reasons for Undertaking Securitization 242
Market Participants 242
Securitizing Mortgages 244
Growth of the Market 244
Types of Mortgages and Their Cash Flows 245
Mortgage Bond Risk 248
Types of Mortgage Backed Securities 249
Cash Flow Patterns 250
Prepayment Analysis 250
Prepayment Models 254
Collateralized Mortgage Securities 255
Sequential Pay 257
Planned Amortization Class 258
Targeted Amortization Class 260
Z Class Bonds 261
Interest Only and Principal Only Classes 261
Nonagency CMO Bonds 264
Credit Enhancements 264
Commercial Mortgage Backed Securities 265
Issuing a CMBS 265
Types of CMBS Structures 266
Evaluation and Analysis of Mortgage Backed Bonds 267
Term to Maturity 268
Calculating Yield and Price: Static Cash Flow Model 268
Bond Price and Option Adjusted Spread 270
Effective Duration and Convexity 271
Total Return 272
Price Yield Curves of Mortgage Pass Through, PO, and IO Securities . . 274
15 Collateralized Debt Obligations 279
CDO Structures 281
Conventional CDO Structures 281
Synthetic CDO Structures 283
Motivation Behind CDO Issuance 284
Balance Sheet Driven Transactions 285
Investor Driven Arbitrage Transactions 285
Analysis and Evaluation 286
Portfolio Characteristics 286
Cash Flow Analysis and Stress Testing 286
Originators Credit Quality 287
Operational Aspects 287
Review of Credit Enhancement Mechanisms 288
Legal Structure of the Transaction 288
Expected Loss 289
PART THREE SELECTED MARKET TRADING CONSIDERATIONS
16 The Yield Curve, Bond Yield, and Spot Rates 293
Practical Uses of Redemption Yield and Duration 293
The Concept of Yield 294
Yield Comparisons in the Market 296
Measuring a Bond s True Return 297
Implied Spot Rates and Market Zero Coupon Yields 300
Spot Yields and Coupon Bond Prices 300
Implied Spot Yields and Zero Coupon Bond Yields 304
Determining Strip Values 307
Strips Market Anomalies 308
Strips Trading Strategy 309
Case Study: Treasury Strip Yields and Cash Flow Analysis 311
17 Approaches to Trading 315
Futures Trading 316
Yield Curves and Relative Value 320
Determinants of Government Bond Yields 320
Characterizing the Complete Term Structure 323
Identifying Relative Value in Government Bonds 323
Hedging Bond Positions 326
Simple Hedging Approaches 326
Hedge Analysis 327
Summary of the Derivation of the Optimum Hedge Equation 329
Appendix: The Black Scholes Model in Microsoft Excel 331
References 333
Index 345
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| language | English |
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| spelling | Choudhry, Moorad Verfasser aut Fixed-income securities and derivatives handbook analysis and valuation Moorad Choudhry Fixed income securities and derivatives handbook 1. ed. Princeton Bloomberg Press 2005 XVI, 355 S. graph. Darst. txt rdacontent n rdamedia nc rdacarrier Derivaten (financiën) gtt Instruments dérivés (Finances) Securitisatie gtt Valeurs mobilières à revenus fixes Derivative securities Fixed-income securities Derivat Wertpapier (DE-588)4381572-8 gnd rswk-swf Festverzinsliches Wertpapier (DE-588)4121262-9 gnd rswk-swf Festverzinsliches Wertpapier (DE-588)4121262-9 s Derivat Wertpapier (DE-588)4381572-8 s DE-604 HBZ Datenaustausch application/pdf http://bvbr.bib-bvb.de:8991/F?func=service&doc_library=BVB01&local_base=BVB01&doc_number=013005343&sequence=000002&line_number=0001&func_code=DB_RECORDS&service_type=MEDIA Inhaltsverzeichnis |
| spellingShingle | Choudhry, Moorad Fixed-income securities and derivatives handbook analysis and valuation Derivaten (financiën) gtt Instruments dérivés (Finances) Securitisatie gtt Valeurs mobilières à revenus fixes Derivative securities Fixed-income securities Derivat Wertpapier (DE-588)4381572-8 gnd Festverzinsliches Wertpapier (DE-588)4121262-9 gnd |
| subject_GND | (DE-588)4381572-8 (DE-588)4121262-9 |
| title | Fixed-income securities and derivatives handbook analysis and valuation |
| title_alt | Fixed income securities and derivatives handbook |
| title_auth | Fixed-income securities and derivatives handbook analysis and valuation |
| title_exact_search | Fixed-income securities and derivatives handbook analysis and valuation |
| title_full | Fixed-income securities and derivatives handbook analysis and valuation Moorad Choudhry |
| title_fullStr | Fixed-income securities and derivatives handbook analysis and valuation Moorad Choudhry |
| title_full_unstemmed | Fixed-income securities and derivatives handbook analysis and valuation Moorad Choudhry |
| title_short | Fixed-income securities and derivatives handbook |
| title_sort | fixed income securities and derivatives handbook analysis and valuation |
| title_sub | analysis and valuation |
| topic | Derivaten (financiën) gtt Instruments dérivés (Finances) Securitisatie gtt Valeurs mobilières à revenus fixes Derivative securities Fixed-income securities Derivat Wertpapier (DE-588)4381572-8 gnd Festverzinsliches Wertpapier (DE-588)4121262-9 gnd |
| topic_facet | Derivaten (financiën) Instruments dérivés (Finances) Securitisatie Valeurs mobilières à revenus fixes Derivative securities Fixed-income securities Derivat Wertpapier Festverzinsliches Wertpapier |
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