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Fixed-Income Securities: Valuation, Risk Management and Portfolio Strategies (The Wiley Finance Series)

معرفی کتاب «Fixed-Income Securities: Valuation, Risk Management and Portfolio Strategies (The Wiley Finance Series)» نوشتهٔ Lionel Martellini, Philippe Priaulet, Stéphane Priaulet، منتشرشده توسط نشر John Wiley & Sons در سال 2003. این کتاب در 20 صفحه، فرمت pdf، زبان انگلیسی ارائه شده است.

This is the first comprehensive textbook for students studying fixed-income securities, and is ideally suited to MBA, MSc and final year undergraduate students in Finance and related topics. The text offers an accessible and detailed account of interest rates and risk management in bond markets. It develops insights into different bond portfolio strategies, and illustrates how various types of derivative securities can be used to shift the risks associated with investing in fixed-income securities. It also provides extensive coverage on all sectors of the bond market, and the techniques for valuing bonds. In addition, explanation is given of state-of-the-art techniques for bond portfolio management, including: A description of numerous fixed-income assets and related securities, namely zero coupon government bonds, coupon bearing government bonds, corporate bonds, exchange-traded bond options, bonds with embedded options, floating rate notes, caps, floors and collars, swaptions, credit derivatives, mortgage-backed securities, etc. The development of tools to analyse interest rate sensitivity and to value fixed- income securities, with an emphasis on active and passi ve bond management, and an overview of techniques used by mutual fund and also hedge fund managers. With numerous worked examples covering the valuation, risk management and portfolio strategies of fixed income securities, and imaginative discussion of important topics such as deriving the zero yield curve, deriving credit spreads, and hedging interest rate risk, the text provides an accessible route into the complex worlds of fixed income securities. "The authors have produced a work of the very highest quality. As focused as it is comprehensive, this is a superb contribution to the literature..." Moorad Choudhry, VP, Structured Finance Services, JPMorgan Chase Bank, Senior Fellow, Centre for Mathematical Trading and Finance, CASS Business School, London. Fixed-Income Securities......Page 4 Contents......Page 10 About the Authors......Page 22 Preface......Page 24 Acknowledgments......Page 28 Notation......Page 30 PART I INVESTMENT ENVIRONMENT......Page 34 1.1.1 General Characteristics of Bonds......Page 36 1.1.2 Bonds by Issuers......Page 50 1.2.2 The Role of the Central Bank......Page 58 1.2.3 T-Bills......Page 59 1.2.4 Certificates of Deposit......Page 61 1.2.6 Commercial Papers......Page 62 1.2.8 Repo and Reverse Repo Market Instruments......Page 63 1.3 End of Chapter Summary......Page 65 1.4.2 Websites and Others......Page 66 1.5.1 Problems on Bonds......Page 67 1.5.2 Problems on Money-Market Instruments......Page 69 1.6 Appendix: Sector Breakdown of the Euro, the UK and the Japan Corporate Bond Markets......Page 70 2.1 Introduction to Bond Pricing......Page 74 2.2.2 The Mathematics of Discounting......Page 76 2.2.3 Nominal versus Real Interest Rates......Page 78 2.2.4 Time Basis and Compounding Frequency Conventions......Page 79 2.2.5 Continuous Compounding......Page 80 2.3.2 Yield to Maturity......Page 82 2.3.3 Spot Zero-Coupon (or Discount) Rate......Page 84 2.3.4 Forward Rates......Page 85 2.5 References and Further Reading......Page 87 2.6 Problems......Page 88 PART II TERM STRUCTURE OF INTEREST RATES......Page 94 3.1 Definition and Properties of the Term Structure......Page 96 3.1.1 What Kind of Shape Can It Take?......Page 98 3.1.2 How Does It Evolve over Time?......Page 101 3.2 Classical Theories of the Term Structure......Page 114 3.2.1 The Pure Expectations Theory......Page 115 3.2.2 The Pure Risk Premium Theory......Page 116 3.2.3 The Market Segmentation Theory......Page 118 3.2.5 Illustration and Empirical Validation......Page 119 3.2.6 Summary and Extensions......Page 120 3.3 End of Chapter Summary......Page 121 3.4.1 On the Empirical Behavior of the Yield Curve......Page 122 3.4.3 On the Classical Theories of the Term Structure of Interest Rates......Page 123 3.5 Problems......Page 124 4.1.1 How to Select a Basket of Bonds?......Page 129 4.1.2 Direct Methods......Page 130 4.1.3 Indirect Methods......Page 136 4.2.1 How to Select the Basket of Instruments?......Page 163 4.2.3 Least Squares Methods Based on Rates......Page 165 4.2.4 Least Squares Methods Based on Prices......Page 166 4.3.1 Disjoint Methods......Page 169 4.3.2 Joint Methods......Page 170 4.4 End of Chapter Summary......Page 175 4.5 References and Further Reading......Page 177 4.6 Problems......Page 179 4.7 Appendix: A Useful Modified Newton’s Algorithm......Page 188 PART III HEDGING INTEREST-RATE RISK......Page 192 5.1.1 The Five Theorems of Bond Pricing......Page 196 5.1.2 Reinvestment Risk......Page 197 5.1.3 Capital Gain Risk......Page 198 5.1.4 Qualifying Interest-Rate Risk......Page 199 5.2.1 Using a One-Order Taylor Expansion......Page 200 5.2.2 Duration, $Duration and Modified Duration......Page 203 5.2.3 How to Hedge in Practice?......Page 206 5.3 End of Chapter Summary......Page 208 5.4.2 Papers......Page 209 5.5 Problems......Page 210 6.1.1 Using a Second-Order Taylor Expansion......Page 215 6.1.2 Properties of Convexity......Page 218 6.1.3 Hedging Method......Page 220 6.2.1 A Common Principle......Page 221 6.2.2 Regrouping Risk Factors through a Principal Component Analysis......Page 225 6.2.3 Hedging Using a Three-Factor Model of the Yield Curve......Page 228 6.3 End of Chapter Summary......Page 232 6.4 References and Further Reading......Page 233 6.5 Problems......Page 234 PART IV INVESTMENT STRATEGIES......Page 242 7.1 Straightforward Replication......Page 246 7.2 Replication by Stratified Sampling......Page 247 7.3.1 Optimization Procedure......Page 249 7.3.2 Bond Return Covariance Matrix Estimation......Page 250 7.4 Factor-Based Replication......Page 259 7.5 Derivatives-Based Replication......Page 262 7.7 End of Chapter Summary......Page 263 7.9 Problems......Page 264 8.1 Market Timing: Trading on Interest-Rate Predictions......Page 266 8.1.1 Timing Bets on No Change in the Yield Curve or “Riding the Yield Curve"......Page 267 8.1.2 Timing Bets on Interest-Rate Level......Page 269 8.1.3 Timing Bets on Specific Changes in the Yield Curve......Page 271 8.1.4 Scenario Analysis......Page 284 8.1.5 Active Fixed-Income Style Allocation Decisions......Page 288 8.2 Trading on Market Inefficiencies......Page 301 8.2.1 Trading within a Given Market: The Bond Relative Value Analysis......Page 302 8.2.2 Trading across Markets: Spread and Convergence Trades......Page 309 8.3 End of Chapter Summary......Page 315 8.4.1 On Active Fixed-Income Strategies......Page 316 8.4.2 On Active Asset Allocation Decisions......Page 317 8.5 Problems......Page 319 9.1.1 Arithmetic Rate of Return......Page 326 9.1.2 Geometric Rate of Return......Page 327 9.2 Risk-Adjusted Performance Evaluation......Page 328 9.2.1 Absolute Risk-Adjusted Performance Evaluation......Page 329 9.2.2 Relative Risk-Adjusted Performance Evaluation......Page 332 9.3 Application of Style Analysis to Performance Evaluation of Bond Portfolio Managers: An Example......Page 342 9.3.1 Alpha Analysis......Page 343 9.3.2 Passive Versus Active Managers......Page 346 9.4 End of Chapter Summary......Page 347 9.5.1 Books and Papers......Page 348 9.6 Problems......Page 349 PART V SWAPS AND FUTURES......Page 354 10.1.2 Terminology and Conventions......Page 358 10.2.1 Pricing of Swaps......Page 359 10.2.2 Market Quotes......Page 366 10.3 Uses of Swaps......Page 367 10.3.1 Optimizing the Financial Conditions of a Debt......Page 368 10.3.2 Converting the Financial Conditions of a Debt......Page 369 10.3.3 Creating New Assets Using Swaps......Page 370 10.3.4 Hedging Interest-Rate Risk Using Swaps......Page 372 10.4.1 Accrediting, Amortizing and Roller Coaster Swaps......Page 375 10.4.3 Constant Maturity Swap and Constant Maturity Treasury Swap......Page 376 10.4.6 Libor in Arrears Swap......Page 377 10.4.8 Zero-Coupon Swap......Page 378 10.6.1 Books and Papers......Page 379 10.7 Problems......Page 380 11.1 Definition......Page 386 11.2.1 Terminology and Conventions......Page 387 11.2.2 Quotes......Page 389 11.3 Margin Requirements and the Role of the Clearing House......Page 391 11.4 Conversion Factor and the Cheapest-to-Deliver Bond......Page 392 11.4.1 The Cheapest to Deliver on the Repartition Date......Page 393 11.4.2 The Cheapest to Deliver before the Repartition Date......Page 394 11.5.1 Forward-Spot Parity or How to Price a Forward Contract?......Page 395 11.5.2 The Forward Contract Payoff......Page 397 11.6.1 Pure Speculation with Leverage Effect......Page 398 11.6.2 Fixing Today the Financial Conditions of a Loan or Investment in the Future......Page 399 11.6.3 Detecting Riskless Arbitrage Opportunities Using Futures......Page 400 11.6.4 Hedging Interest-Rate Risk Using Futures......Page 401 11.7 End of Chapter Summary......Page 403 11.8.2 Websites of Futures Markets and of the Futures Industry Association......Page 404 11.9 Problems......Page 405 11.10 Appendix: Forward and Futures Prices Are Identical When Interest Rates Are Constant......Page 408 PART VI MODELING THE TERM STRUCTURE OF INTEREST RATES AND CREDIT SPREADS......Page 410 12 Modeling the Yield Curve Dynamics......Page 414 12.1.1 Building an Interest-Rate Tree......Page 415 12.1.2 Calibrating an Interest-Rate Tree......Page 417 12.2 Continuous-Time Models......Page 420 12.2.1 Single-Factor Models......Page 421 12.2.2 Multifactor Models......Page 425 12.3.1 A Discrete-Time Example: Ho and Lee’s Binomial Lattice......Page 429 12.3.2 Arbitrage Models in Continuous Time......Page 434 12.4 End of Chapter Summary......Page 439 12.5 References and Further Reading......Page 440 12.6 Problems......Page 444 12.7.1 Discretizing the Short Rate......Page 446 12.7.2 Calibrating the Lattice to the Current Spot Yield Curve......Page 449 12.7.3 Option Pricing......Page 452 12.8.1 Brownian Motion......Page 453 12.8.2 Stochastic Integral......Page 456 12.8.3 Stochastic Differential Equations (SDE)......Page 458 12.8.5 Representation of Brownian Martingales......Page 459 12.8.6 Continuous-Time Asset Pricing......Page 460 12.8.7 Feynman–Kac Formula......Page 464 12.8.8 Application to Equilibrium Models of the Term Structure......Page 465 13 Modeling the Credit Spreads Dynamics......Page 470 13.1.1 Ratings......Page 471 13.1.2 Default Probability......Page 473 13.2 Modeling Credit Spreads......Page 474 13.2.1 Structural Models......Page 475 13.2.2 Subsequent Models......Page 479 13.2.3 Reduced-Form Models......Page 481 13.2.4 Historical versus Risk-Adjusted Probability of Default......Page 483 13.3 End of Chapter Summary......Page 485 13.4.1 Books and Papers......Page 486 13.4.2 Websites......Page 487 13.5 Problems......Page 488 PART VII PLAIN VANILLA OPTIONS AND MORE EXOTIC DERIVATIVES......Page 490 14.1.1 Institutional Aspects......Page 492 14.1.2 Pricing......Page 493 14.1.3 OAS Analysis......Page 500 14.1.4 Effective Duration and Convexity......Page 501 14.2.1 Institutional Aspects......Page 503 14.2.2 Valuation of Convertible Bonds......Page 506 14.2.3 Convertible Arbitrage......Page 512 14.3.1 Definition......Page 515 14.3.2 Uses......Page 516 14.3.3 Pricing......Page 520 14.4 End of Chapter Summary......Page 524 14.5.2 On Convertible Bonds......Page 525 14.5.3 On Options on Bonds......Page 526 14.6 Problems......Page 527 14.7 Appendix: Bond Option Prices in the Hull and White (1990) Model......Page 531 14.7.2 Call on Coupon Bond......Page 532 15.1.1 Definition and Terminology......Page 533 15.1.2 Pricing and Hedging Options on Futures......Page 535 15.1.3 Market Quotes......Page 538 15.2.1 Definition and Terminology......Page 541 15.2.2 Pricing and Hedging Caps, Floors and Collars......Page 543 15.2.3 Market Quotes......Page 547 15.2.4 Uses of Caps, Floors and Collars......Page 549 15.3.1 Definition and Terminology......Page 553 15.3.2 Pricing and Hedging Swaptions......Page 554 15.3.4 Uses of Swaptions......Page 559 15.4 End of Chapter Summary......Page 560 15.5.1 Books and Papers......Page 561 15.6 Problems......Page 562 15.7 Appendix 1: Proof of the Cap and Floor Formulas in the Black (1976) Model......Page 567 15.8 Appendix 2: Proof of the Swaption Formula in the Black (1976) Model......Page 568 15.9.1 Options on Forward Contracts......Page 569 15.9.2 Options on Futures Contracts......Page 570 15.10.1 Cap and Floor......Page 572 15.10.2 Swaption......Page 573 15.11.1 Why Define New Variables?......Page 574 15.11.2 Building New Variables......Page 575 15.11.3 The Dynamics of L(t, q) and K(t, t + q)......Page 576 15.11.4 Pricing of Caps......Page 578 15.11.5 Calibration of the Model......Page 579 16.1.1 Barrier Caps and Floors......Page 581 16.1.2 Bounded Caps, Floors, Barrier Caps and Floors......Page 583 16.1.5 Choosercaps and Flexicaps-and-Floors......Page 584 16.1.6 Contingent Premium Caps and Floors......Page 586 16.1.8 Incremental Fixed Swaps......Page 587 16.1.9 Index Amortizing Bonds and Swaps......Page 588 16.1.11 Moving Average Caps and Floors......Page 590 16.1.13 Q-Caps and Floors......Page 591 16.1.14 Range Accrual Swaps......Page 592 16.1.15 Ratchet Caps and Floors......Page 593 16.1.16 Reflex Caps and Floors......Page 594 16.1.18 Rolling Caps and Floors......Page 595 16.1.20 Subsidized Swaps......Page 596 16.2.1 The Significance of Credit Derivatives......Page 598 16.2.2 Types of Credit Derivatives......Page 600 16.4.1 On Interest-Rate Exotic Options......Page 608 16.4.3 On Numerical Methods (See the Appendix 2)......Page 609 16.5 Problems......Page 610 16.6.1 Barrier Cap Formulas......Page 613 16.6.3 Barrier Cap and Floor Greeks......Page 614 16.7.1 Monte Carlo Simulations......Page 616 16.7.2 Finite-Difference Methods......Page 618 PART VIII SECURITIZATION......Page 622 17.1.2 The Amortization Mechanism......Page 626 17.1.4 Typology of MBS......Page 629 17.2 Market Quotes and Pricing......Page 631 17.2.1 Market Quotes......Page 632 17.2.2 Pricing of MBS......Page 633 17.3 End of Chapter Summary......Page 636 17.4.1 Books and Papers......Page 637 17.5 Problems......Page 638 18.1.2 Credit Enhancement......Page 640 18.1.3 Cash-Flow Structure......Page 641 18.2 Market Quotes and Pricing......Page 643 18.3 CAT Bonds and CAT Derivatives......Page 645 18.5 References and Further Reading......Page 648 18.6 Problems......Page 649 Subject Index......Page 650 Author Index......Page 662 This is the first comprehensive textbook for students studying fixed-income securities, and is ideally suited to MBA, MSc and final year undergraduate students in Finance and related topics. The text offers an accessible and detailed account of interest rates and risk management in bond markets. It develops insights into different bond portfolio strategies, and illustrates how various types of derivative securities can be used to shift the risks associated with investing in fixed-income securities. It also provides extensive coverage on all sectors of the bond market, and the techniques for valuing bonds. In addition, explanation is given of state-of-the-art techniques for bond portfolio management, including: A description of numerous fixed-income assets and related securities, namely zero coupon government bonds, coupon bearing government bonds, corporate bonds, exchange-traded bond options, bonds with embedded options, floating rate notes, caps, floors and collars, swaptions, credit derivatives, mortgage-backed securities, etc. The development of tools to analyse interest rate sensitivity and to value fixed- income securities, with an emphasis on active and passi ve bond management, and an overview of techniques used by mutual fund and also hedge fund managers. With numerous worked examples covering the valuation, risk management and portfolio strategies of fixed income securities, and imaginative discussion of important topics such as deriving the zero yield curve, deriving credit spreads, and hedging interest rate risk, the text provides an accessible routeinto the complex worlds of fixed income securities. Supplementary materials for lecturers and students (including a syllabus, a course web page, PowerPoint slides, solutions to problems, and Excel illustrations) can befound at the following website: http://www.wiley.co.uk/martellini "The authors haveproduced a work of the very highest quality. As focused as it is comprehensive, this is a superb contribution to the literature ..." Moorad Choudhry, VP, Structured Finance Services, JPMorgan Chase Bank, Senior Fellow, Centre for Mathematical Trading and Finance, CASS Business School, London

This textbook will be designed for fixed-income securities courses taught on MSc Finance and MBA courses. There is currently no suitable text that offers a 'Hull-type' book for the fixed income student market. This book aims to fill this need. The book will contain numerous worked examples, excel spreadsheets, with a building block approach throughout. A key feature of the book will be coverage of both traditional and alternative investment strategies in the fixed-income market, for example, the book will cover the modern strategies used by fixed-income hedge funds.

  • The text will be supported by a set of PowerPoint slides for use by the lecturer
  • First textbook designed for students written on fixed-income securities - a growing market
  • Contains numerous worked examples throughout
  • Includes coverage of important topics often omitted in other books i.e. deriving the zero yield curve, deriving credit spreads, hedging and also covers interest rate and credit derivatives

This textbook will be designed for fixed-income securities courses taught on MSc Finance and MBA courses. There is currently no suitable text that offers a 'Hull-type' book for the fixed income student market. This book aims to fill this need. The book will contain numerous worked examples, excel spreadsheets, with a building block approach throughout. A key feature of the book will be coverage of both traditional and alternative investment strategies in the fixed-income market, for example, the book will cover the modern strategies used by fixed-income hedge funds.

  • The text will be supported by a set of PowerPoint slides for use by the lecturer
  • First textbook designed for students written on fixed-income securities - a growing market
  • Contains numerous worked examples throughout
  • Includes coverage of important topics often omitted in other books i.e. deriving the zero yield curve, deriving credit spreads, hedging and also covers interest rate and credit derivatives
Designed for fixed income securities courses taught on MSc Finance and MBA courses, this textbook contains worked examples, excel spreadsheets, with a building block approach throughout. It covers the traditional and alternative investment strategies in the fixed income market, for example the modern strategies used by fixed income hedge funds
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