An introduction to bond markets:
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| Main Author: | |
|---|---|
| Format: | Book |
| Language: | English |
| Published: |
New York
Wiley
2006
|
| Edition: | 3. ed. |
| Subjects: | |
| Online Access: | Inhaltsverzeichnis |
| Physical Description: | XXIV, 405 S. Ill., graph. Darst. |
| ISBN: | 0470017589 9780470017586 |
Staff View
MARC
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| 245 | 1 | 0 | |a An introduction to bond markets |c Moorad Choudhry |
| 250 | |a 3. ed. | ||
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| 300 | |a XXIV, 405 S. |b Ill., graph. Darst. | ||
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Record in the Search Index
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| adam_text |
CONTENTS
Foreword xix
Preface xxi
About the author xxv
1 INTRODUCTION TO BONDS 1
Description 4
Outline of market participants 6
Bond analysis 8
Financial arithmetic: The time value of money 8
Present value and discounting 9
Discount factors 15
Bond pricing and yield: The traditional approach 18
Bond pricing 18
Bond yield 23
Accrued interest 30
Clean and dirty bond prices 30
Day count conventions 32
Illustrating bond yield using Excel spreadsheets 33
Bibliography 36
viii CONTENTS
2 THE YIELD CURVE, AND SPOT AND
FORWARD YIELDS 39
The yield curve 40
Yield to maturity yield curve 40
The par yield curve 42
The zero coupon (or spot) yield curve 43
The forward yield curve 47
Theories of the yield curve 48
Spot rates 52
Discount factors and the discount function 53
Implied spot and forward rates 53
Understanding forward rates 65
The term structure of interest rates 67
Bibliography 69
3 BOND INSTRUMENTS AND
INTEREST RATE RISK 71
Duration, modified duration and convexity 72
Duration 73
Properties of Macaulay duration 11
Modified duration 11
Convexity 82
Bibliography 87
CONTENTS ix
4 REVIEW OF FLOATING RATE NOTE
BOND INSTRUMENTS 89
Floating rate notes 90
Inverse floating rate note 94
Description 94
Hedging the note 97
Indexed amortising note 98
Description 98
Advantages to investors 100
Synthetic convertible note 100
Description 100
Investor benefits 101
Interest differential notes 101
Example of IDN 102
Benefits to investors 103
Convertible Quanto Note 104
Example of Japanese Equity Note 105
Bibliography 107
5 THE MONEY MARKETS 109
Introduction 111
Securities quoted on a yield basis 113
Money market deposits 113
Certificates of deposit 115
CD yields 115
Securities quoted on a discount basis 121
x CONTENTS
Treasury bills 121
Banker's acceptances 123
Eligible banker's acceptance 124
Commercial paper 124
Commercial paper programmes 126
Commercial paper yields 127
Money market screens on Bloomberg 129
Repo 131
Definition 133
The classic repo 134
Examples of classic repo 137
The sell/buy back 141
Examples of sell/buy back 142
Repo collateral 145
Legal treatment 146
Margin 146
Variation margin 148
5.A Currencies using money market year base
of 365 days 149
6 THE EUROBOND MARKET 151
Eurobonds 152
Foreign bonds 155
Eurobond instruments 156
Conventional bonds 156
Floating rate notes 157
CONTENTS xi
Zero coupon bonds 157
Convertible bonds 158
The issue process: market participants 159
The borrowing parties 161
The underwriting lead manager 162
The co lead manager 164
Investors 164
Fees, expenses and pricing 165
Fees 165
Expenses 165
Pricing 166
Issuing the bond 167
The grey market 168
Alternative issue procedures 169
Covenants 170
Trust services 171
Depositary 171
Paying agent 111
Registrar 173
Trustee 173
Custodian 173
Form of the bond 174
Temporary global form 174
Permanent global bond 174
Definitive form 175
xii CONTENTS
Registered bonds 176
Fiscal agent 176
Listing agent 177
Clearing systems 177
Market associations 178
International Capital Market Association 178
Bloomberg screens 179
Secondary market 179
Settlement 181
Bibliography 182
7 CONVERTIBLE BONDS, MTNs
AND WARRANTS 183
Description 184
Analysis 184
Value and premium issues 187
Warrants 188
Medium term notes 190
MTN programm e 190
Shelf registration 191
Credit rating 191
Secondary market 191
Issuers and investors 192
MTNs and corporate bonds 193
CONTENTS xiii
8 CREDIT RATINGS 195
Credit ratings 197
Purpose of credit ratings 197
Formal credit ratings 198
9 INFLATION LINKED BONDS 203
Basic concepts 204
Choice of index 204
Indexation lag 205
Coupon frequency 207
Type of indexation 207
Index linked bond cash flows and yields 209
TIPS cash flow calculations 210
TIPS price and yield calculations 210
Assessing yields on index linked bonds 214
Which to hold: indexed or conventional bonds! 215
Bibliography 216
10 AN INTRODUCTION TO
SECURITISED BONDS 217
The concept of securitisation 220
Reasons for undertaking securitisation 221
Benefits of securitisation to investors 224
The process of securitisation 225
Securitisation process 225
xiv
CONTENTS
SPV structures 227
Credit enhancement 228
Impact on balance sheet 230
Credit rating 2^1
Redemption mechanism 233
Average life 233
Illustrating the process of securitisation 234
Bloomberg screens 238
Bibliography 242
11 INTRODUCTION TO
DERIVATIVE INSTRUMENTS 243
Interest rate swaps
Characteristics of IR swaps 246
Swap spreads and the swap yield curve 249
Swap duration
Summary of IR swap
Non standard swaps o c „
253
Using swaps
255
Cancelling a swap
Zero coupon swap pricing 25g
Edging using bonds and swaps 259
Swaptions
263
Cross currency swaps
d; , 264
Bloomberg screens
266
CONTENTS xv
Futures contracts 269
Description 269
Bond futures contracts 271
Futures pricing 274
Arbitrage free futures pricing 278
Hedging using futures 280
The hedge ratio 282
Interest rate options 283
Introduction 283
Definition 283
Option terminology 286
Option premium 287
Pricing options 288
Behaviour of option prices 292
Using options in bond markets 293
Hedging using bond options 295
Exotic options 296
Bibliography 298
12 INTRODUCTION TO
CREDIT DERIVATIVES 299
Introduction 302
Why use credit derivatives? 303
Classification of credit derivative instruments 305
Definition of a credit event 306
xvi
CONTENTS
Asset swaps ~n7
Credit default swaps 311
Credit linked notes o, c
Total return swaps 31S
Synthetic repo 322
Reduction in credit risk 323
Capital structure arbitrage 323
Tie TRS as a funding instrument 324
Credit options
General applications of credit derivatives 327
Use of credit derivatives by portfolio managers 328
SUPPlswandbasisland ^ ^ "^ default
A negative basis
OO 1
Supply and demand
CjCjO
CDS mechanics
335
Bibliography
OO I
13ffiss^™g ssgsbond 339
Introduction
Th A 340
1 he determinants of yield
SPread trade risk weighting 341
Identifying yield spread trades 347
Coupon spreads
348
CONTENTS xvii
Butterfly trades 350
Basic concepts 350
Putting on the trade 351
Yield gain 353
Convexity gain 354
Bloomberg screens 358
Bibliography 362
14 RISK MANAGEMENT 363
Characterising risk 364
Risk management 366
The risk management function 367
Interest rate risk 368
Value at Risk 369
Definition 369
Calculation methods 370
Validity of the variance covariance (correlation)
VaR estimate 372
Assessment of VaR tool 373
VaR Methodology for credit risk 374
Modelling VaR for credit risk 375
Time horizon 377
Applications of credit VaR 378
Bibliography 378
™" CONTENTS
Glossary ^
List of abbreviations 387
Index 391 |
| adam_txt |
CONTENTS
Foreword xix
Preface xxi
About the author xxv
1 INTRODUCTION TO BONDS 1
Description 4
Outline of market participants 6
Bond analysis 8
Financial arithmetic: The time value of money 8
Present value and discounting 9
Discount factors 15
Bond pricing and yield: The traditional approach 18
Bond pricing 18
Bond yield 23
Accrued interest 30
Clean and dirty bond prices 30
Day count conventions 32
Illustrating bond yield using Excel spreadsheets 33
Bibliography 36
viii CONTENTS
2 THE YIELD CURVE, AND SPOT AND
FORWARD YIELDS 39
The yield curve 40
Yield to maturity yield curve 40
The par yield curve 42
The zero coupon (or spot) yield curve 43
The forward yield curve 47
Theories of the yield curve 48
Spot rates 52
Discount factors and the discount function 53
Implied spot and forward rates 53
Understanding forward rates 65
The term structure of interest rates 67
Bibliography 69
3 BOND INSTRUMENTS AND
INTEREST RATE RISK 71
Duration, modified duration and convexity 72
Duration 73
Properties of Macaulay duration 11
Modified duration 11
Convexity 82
Bibliography 87
CONTENTS ix
4 REVIEW OF FLOATING RATE NOTE
BOND INSTRUMENTS 89
Floating rate notes 90
Inverse floating rate note 94
Description 94
Hedging the note 97
Indexed amortising note 98
Description 98
Advantages to investors 100
Synthetic convertible note 100
Description 100
Investor benefits 101
Interest differential notes 101
Example of IDN 102
Benefits to investors 103
Convertible Quanto Note 104
Example of Japanese Equity Note 105
Bibliography 107
5 THE MONEY MARKETS 109
Introduction 111
Securities quoted on a yield basis 113
Money market deposits 113
Certificates of deposit 115
CD yields 115
Securities quoted on a discount basis 121
x CONTENTS
Treasury bills 121
Banker's acceptances 123
Eligible banker's acceptance 124
Commercial paper 124
Commercial paper programmes 126
Commercial paper yields 127
Money market screens on Bloomberg 129
Repo 131
Definition 133
The classic repo 134
Examples of classic repo 137
The sell/buy back 141
Examples of sell/buy back 142
Repo collateral 145
Legal treatment 146
Margin 146
Variation margin 148
5.A Currencies using money market year base
of 365 days 149
6 THE EUROBOND MARKET 151
Eurobonds 152
Foreign bonds 155
Eurobond instruments 156
Conventional bonds 156
Floating rate notes 157
CONTENTS xi
Zero coupon bonds 157
Convertible bonds 158
The issue process: market participants 159
The borrowing parties 161
The underwriting lead manager 162
The co lead manager 164
Investors 164
Fees, expenses and pricing 165
Fees 165
Expenses 165
Pricing 166
Issuing the bond 167
The grey market 168
Alternative issue procedures 169
Covenants 170
Trust services 171
Depositary 171
Paying agent 111
Registrar 173
Trustee 173
Custodian 173
Form of the bond 174
Temporary global form 174
Permanent global bond 174
Definitive form 175
xii CONTENTS
Registered bonds 176
Fiscal agent 176
Listing agent 177
Clearing systems 177
Market associations 178
International Capital Market Association 178
Bloomberg screens 179
Secondary market 179
Settlement 181
Bibliography 182
7 CONVERTIBLE BONDS, MTNs
AND WARRANTS 183
Description 184
Analysis 184
Value and premium issues 187
Warrants 188
Medium term notes 190
MTN programm e 190
Shelf registration 191
Credit rating 191
Secondary market 191
Issuers and investors 192
MTNs and corporate bonds 193
CONTENTS xiii
8 CREDIT RATINGS 195
Credit ratings 197
Purpose of credit ratings 197
Formal credit ratings 198
9 INFLATION LINKED BONDS 203
Basic concepts 204
Choice of index 204
Indexation lag 205
Coupon frequency 207
Type of indexation 207
Index linked bond cash flows and yields 209
TIPS cash flow calculations 210
TIPS price and yield calculations 210
Assessing yields on index linked bonds 214
Which to hold: indexed or conventional bonds! 215
Bibliography 216
10 AN INTRODUCTION TO
SECURITISED BONDS 217
The concept of securitisation 220
Reasons for undertaking securitisation 221
Benefits of securitisation to investors 224
The process of securitisation 225
Securitisation process 225
xiv
CONTENTS
SPV structures 227
Credit enhancement 228
Impact on balance sheet 230
Credit rating 2^1
Redemption mechanism 233
Average life 233
Illustrating the process of securitisation 234
Bloomberg screens 238
Bibliography 242
11 INTRODUCTION TO
DERIVATIVE INSTRUMENTS 243
Interest rate swaps
Characteristics of IR swaps 246
Swap spreads and the swap yield curve 249
Swap duration
Summary of IR swap
Non standard swaps o c „
253
Using swaps
255
Cancelling a swap
Zero coupon swap pricing 25g
Edging using bonds and swaps 259
Swaptions
263
Cross currency swaps
d; , 264
Bloomberg screens
266
CONTENTS xv
Futures contracts 269
Description 269
Bond futures contracts 271
Futures pricing 274
Arbitrage free futures pricing 278
Hedging using futures 280
The hedge ratio 282
Interest rate options 283
Introduction 283
Definition 283
Option terminology 286
Option premium 287
Pricing options 288
Behaviour of option prices 292
Using options in bond markets 293
Hedging using bond options 295
Exotic options 296
Bibliography 298
12 INTRODUCTION TO
CREDIT DERIVATIVES 299
Introduction 302
Why use credit derivatives? 303
Classification of credit derivative instruments 305
Definition of a credit event 306
xvi
CONTENTS
Asset swaps ~n7
Credit default swaps 311
Credit linked notes o, c
Total return swaps 31S
Synthetic repo 322
Reduction in credit risk 323
Capital structure arbitrage 323
Tie TRS as a funding instrument 324
Credit options
General applications of credit derivatives 327
Use of credit derivatives by portfolio managers 328
SUPPlswandbasisland ^ ^ "^ default
A negative basis
OO 1
Supply and demand
CjCjO
CDS mechanics
335
Bibliography
OO I
13ffiss^™g ssgsbond 339
Introduction
Th A 340
1 he determinants of yield
SPread trade risk weighting 341
Identifying yield spread trades 347
Coupon spreads
348
CONTENTS xvii
Butterfly trades 350
Basic concepts 350
Putting on the trade 351
Yield gain 353
Convexity gain 354
Bloomberg screens 358
Bibliography 362
14 RISK MANAGEMENT 363
Characterising risk 364
Risk management 366
The risk management function 367
Interest rate risk 368
Value at Risk 369
Definition 369
Calculation methods 370
Validity of the variance covariance (correlation)
VaR estimate 372
Assessment of VaR tool 373
VaR Methodology for credit risk 374
Modelling VaR for credit risk 375
Time horizon 377
Applications of credit VaR 378
Bibliography 378
™" CONTENTS
Glossary ^
List of abbreviations 387
Index 391 |
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| index_date | 2024-07-02T15:19:23Z |
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| spelling | Choudhry, Moorad Verfasser aut An introduction to bond markets Moorad Choudhry 3. ed. New York Wiley 2006 XXIV, 405 S. Ill., graph. Darst. txt rdacontent n rdamedia nc rdacarrier Bond market Bonds Festverzinsliches Wertpapier (DE-588)4121262-9 gnd rswk-swf Festverzinsliches Wertpapier (DE-588)4121262-9 s DE-604 HBZ Datenaustausch application/pdf http://bvbr.bib-bvb.de:8991/F?func=service&doc_library=BVB01&local_base=BVB01&doc_number=014921342&sequence=000002&line_number=0001&func_code=DB_RECORDS&service_type=MEDIA Inhaltsverzeichnis |
| spellingShingle | Choudhry, Moorad An introduction to bond markets Bond market Bonds Festverzinsliches Wertpapier (DE-588)4121262-9 gnd |
| subject_GND | (DE-588)4121262-9 |
| title | An introduction to bond markets |
| title_auth | An introduction to bond markets |
| title_exact_search | An introduction to bond markets |
| title_exact_search_txtP | An introduction to bond markets |
| title_full | An introduction to bond markets Moorad Choudhry |
| title_fullStr | An introduction to bond markets Moorad Choudhry |
| title_full_unstemmed | An introduction to bond markets Moorad Choudhry |
| title_short | An introduction to bond markets |
| title_sort | an introduction to bond markets |
| topic | Bond market Bonds Festverzinsliches Wertpapier (DE-588)4121262-9 gnd |
| topic_facet | Bond market Bonds Festverzinsliches Wertpapier |
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