Modeling Fixed Income Securities And Interest Rate Options (chapman And Hall/crc Financial Mathematics Series)

Modeling Fixed Income Securities and Interest Rate Options, Third Edition presents the basics of fixed-income securities in a way that, unlike competitive texts, requires a minimum of prerequisites. While other books focus heavily on institutional details of the bond market, all of which could easily be learned "on the job," the third edition of this classic textbook is more focused with presenting a coherent theoretical framework for understanding all basic models. The author's unified approach--the Heath Jarrow Morton model--under which all other models are presented as special cases, enhances understanding of the material. The author's pricing model is widely used in today's securities industry. This new edition offers many updates to align with advances in the research and requires a minimum of prerequisites while presenting the basics of fixed-income securities. Highlights of the Third Edition Chapters 1-16 completely updated to align with advances in research Thoroughly eliminates out-of-date material while advancing the presentation Includes an ample amount of exercises and examples throughout the text which illustrate key concepts . Read more... Cover Half Title Series Page Title Page Copyright Page Dedication Page Contents Preface to the Third Edition Section I Introduction Chapter 1 Introduction 1.1 The Approach 1.2 Motivation 1.3 The Methodology 1.4 An Overview References Chapter 2 Traded Securities 2.1 Treasury Securities 2.2 Treasury Security Markets 2.3 Repo Markets 2.4 Treasury Futures Markets 2.5 Interest Rate Derivatives on Treasuries 2.6 Eurodollar Spot, Forward, and Futures Markets 2.7 Interest Rate Derivatives on LIBOR References Chapter 3 The Classical Approach 3.1 Motivation 3.2 Coupon Bonds 3.3 The Bond's Yield, Duration, Modified Duration, and Convexity3.4 Risk Management Reference Section II Theory Chapter 4 The Term Structure of Interest Rates 4.1 The Economy 4.2 The Traded Securities 4.3 Interest Rates 4.4 Forward Prices 4.5 Futures Prices 4.6 Option Contracts 4.6.1 Definitions 4.6.2 Payoff Diagrams 4.7 Summary References Chapter 5 The Evolution of the Term Structure of Interest Rates 5.1 Motivation 5.2 The One-Factor Economy 5.2.1 The State Space Process 5.2.2 The Bond Price Process 5.2.3 The Forward Rate Process 5.2.4 The Spot Rate Process 5.3 The Two-Factor Economy5.3.1 The State Space Process 5.3.2 The Bond Price Process 5.3.3 The Forward Rate Process 5.3.4 The Spot Rate Process 5.4 N ≥ 3-Factor Economies 5.5 Consistency with Equilibrium References Chapter 6 The Expectations Hypothesis 6.1 Motivation 6.2 Present Value Form 6.3 Unbiased Forward Rate Form 6.4 Relation between the Two Versions of the Expectations Hypothesis 6.5 Empirical Illustration 6.5.1 Present Value Form 6.5.2 Unbiased Forward Rate Form References Chapter 7 Trading Strategies, Arbitrage Opportunities, and Complete Markets 7.1 Motivation 7.2 Trading Strategies7.3 Arbitrage Opportunities 7.4 Complete Markets Chapter 8 Bond Trading Strategies -- An Example 8.1 Motivation 8.2 Method 1: Synthetic Construction 8.2.1 An Arbitrage-Free Evolution 8.2.2 Complete Markets 8.3 Method 2: Risk-Neutral Valuation 8.3.1 Risk-Neutral Probabilities 8.3.2 Risk-Neutral Valuation 8.3.3 Exploiting an Arbitrage Opportunity Chapter 9 Bond Trading Strategies -- The Theory 9.1 The One-Factor Economy 9.1.1 Complete Markets 9.1.2 Risk-Neutral Probabilities 9.1.3 Risk-Neutral Valuation 9.1.4 Bond Trading Strategies 9.2 The Two-Factor Economy9.2.1 Complete Markets 9.2.2 Risk-Neutral Probabilities 9.2.3 Risk-Neutral Valuation 9.2.4 Bond Trading Strategies 9.3 Multiple Factor Economies Appendix References Chapter 10 Contingent Claims Valuation -- Theory 10.1 Motivation 10.2 The One-Factor Economy 10.2.1 Complete Markets 10.2.2 Risk-Neutral Probabilities 10.2.3 Risk-Neutral Valuation 10.3 The Two-Factor Economy 10.3.1 Complete Markets 10.3.2 Risk-Neutral Probabilities 10.3.3 Risk-Neutral Valuation 10.4 Multiple Factor Economies Appendix Section III Applications Chapter 11 Coupon Bonds **__Modeling Fixed Income Securities and Interest Rate Options, Third Edition__** presents the basics of fixed-income securities in a way that, unlike competitive texts, requires a minimum of prerequisites. While other books focus heavily on institutional details of the bond market, all of which could easily be learned "on the job," the third edition of this classic textbook is more focused with presenting a coherent theoretical framework for understanding all basic models. The author’s unified approach—the Heath Jarrow Morton model—under which all other models are presented as special cases, enhances understanding of the material. The author’s pricing model is widely used in today’s securities industry. This new edition offers many updates to align with advances in the research and requires a minimum of prerequisites while presenting the basics of fixed-income securities. **Highlights of the Third Edition**- Chapters 1-16 completely updated to align with advances in research - Thoroughly eliminates out-of-date material while advancing the presentation - Includes an ample amount of exercises and examples throughout the text which illustrate key concepts . Contents 8 Preface to the Third Edition 16 Section I Introduction 18 Chapter 1 ◾ Introduction 20 Chapter 2 ◾ Traded Securities 30 Chapter 3 ◾ The Classical Approach 40 Section II Theory 56 Chapter 4 ◾ The Term Structure of Interest Rates 58 Chapter 5 ◾ The Evolution of the Term Structure of Interest Rates 74 Chapter 6 ◾ The Expectations Hypothesis 102 Chapter 7 ◾ Trading Strategies, Arbitrage Opportunities, and Complete Markets 116 Chapter 8 ◾ Bond Trading Strategies – An Example 138 Chapter 9 ◾ Bond Trading Strategies – The Theory 154 Chapter 10 ◾ Contingent Claims Valuation – Theory 184 Section III Applications 204 Chapter 11 ◾ Coupon Bonds 206 Chapter 12 ◾ Options on Bonds 222 Chapter 13 ◾ Forwards and Futures 248 Chapter 14 ◾ Swaps, Caps, Floors, and Swaptions 270 Chapter 15 ◾ Interest Rate Exotics 298 Section IV Implementation/Estimation 318 Chapter 16 ◾ Continuous-Time Limits 320 Chapter 17 ◾ Parameter Estimation 350 Extensions 376 Index 380 Modeling,Fixed,Income,Securities,and,Interest,Rate,Options Modeling Fixed Income Securities And Interest Rate Options Offers Several New Updates. The New Edition Of The Classic Textbook Presents The Basics Of Fixed-income Securities. It Requires A Minimum Of Prerequisites. The Author Presents A Coherent Theoretical Framework For Understanding All Basic Models. The Author's Pricing Model Is Widely Used In Today's Securities Industry-- "The Third Edition of this popular textbook offers several new updates. Thebook presents the basics of fixed-income securities. It requires a minimum of prerequisites. The author presents a coherent theoretical framework for understanding all basic models. The author's pricing model is widely used in today's securities industry"-- Provided by publisher "The third edition of this popular textbook offers several new updates. The book presents the basics of fixed-income securities. It requires a minimum of prerequisites. The author presents a coherent theoretical framework for understanding all basic models. The author's pricing model is widely used in today's securities industry."