Fixed Income Markets and Their Derivatives

Name: Fixed Income Markets and Their Derivatives
Price: 5490 ISK
Availability: InStock
Author: Sundaresan, Suresh
ISBN: 9780123704719

Höfundar: Sundaresan, Suresh (Útgáfa: 3)

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The 3e of this well-respected textbook continues the tradition of providing clear and concise explanations for fixed income securities, pricing, and markets. The book matches well with fixed income securities courses. The book's organization emphasizes institutions in the first part, analytics in the second, selected segments of fixed income markets in the third, and fixed income derivatives in the fourth.

This enables instructors to customize the material to suit their course structure and the mathematical ability of their students. * New material on Credit Default Swaps, Collateralized Debt Obligations, and an intergrated discussion of the Credit Crisis have been added. *Online Resources for instructors on password protected website provides worked out examples for each chapter. * A detailed description of all key financial terms is provided in a glossary at the back of the book.

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Útgefandi: Elsevier S & T

ISBN: 9780123704719

Print ISBN: 9780123704719

Format: Page Fidelity (PDF)

Útgáfa: 3

Höfundar: Sundaresan, Suresh

Tungumál: English

Útgefið: 03/2009

Prent takmörkun á líftíma: 10

Prent takmörkun: 10

Afritunar takmörkun: 10

Flokkar: Viðskiptafræði

Efnisflokkar: Viðskipti og hagfræði › Almennt Viðskipti og hagfræði › Fjármál

Kaflar

Front Cover
Fixed Income Markets and Their Derivatives
Copyright Page
Contents
Preface
Acknowledgments
PART 1 INSTITUTIONS AND CONVENTIONS
CHAPTER 1 Overview of Fixed Income Markets
1.1 Overview of Debt Contracts
1.1.1 Cash-Flow Rights of Debt Securities
1.1.2 Primary and Secondary Markets
1.2 Players and Their Objectives
1.2.1 Governments
1.2.2 Central Banks
1.2.3 Federal Agencies and Government-Sponsored Enterprises (GSEs)
1.2.4 Corporations and Banks
1.2.5 Financial Institutions and Dealers
1.2.6 "Buy-Side" Institutions
1.2.7 Households
1.3 Classification of Debt Securities
1.4 Risk of Debt Securities
1.4.1 Interest Rate Risk
1.4.2 Credit Risk
1.4.3 Liquidity Risk
1.4.4 Contractual Risk
1.4.5 Inflation Risk
1.4.6 Event Risk
1.4.7 Tax Risk
1.4.8 FX Risk
1.5 Return-Risk History
Suggested References and Readings
CHAPTER 2 Price-Yield Conventions
2.1 Concepts of Compounding and Discounting
2.1.1 Future Values
2.1.2 Annuities
2.1.3 Present Values
2.2. Yield to Maturity or Internal Rate of Return
2.2.1 Semiannual Compounding
2.3. Prices in Practice
2.4. Prices and Yields of T-Bills
2.4.1 Yield of a T-Bill with n < 182 Days
2.4.2 Yield of a T-Bill with n > 182 Days
2.5. Prices and Yields of T-Notes and T-Bonds
2.6. Price-Yield Relation Is Convex
2.7. Conventions in Other Markets
Suggested References and Readings
CHAPTER 3 Federal Reserve (Central Bank) and Fixed Income Markets
3.1 Central Banks
3.2 Monetary Policies
3.2.1 Open Market Operations
3.2.2 The Discount Window
3.2.3 Reserve Requirements
3.3 Fed Funds Rates
3.4 Payments Systems and Conduct of Auctions
3.5 Fed's Actions to Stem the Credit Crunch of 2007–2008
Suggested Readings and References
CHAPTER 4 Organization and Transparency of Fixed Income Markets
4.1 Introduction
4.2 Primary Markets
4.2.1 Treasury Markets
4.2.2 Corporate Debt
4.3 Interdealer Brokers
4.4 Secondary Markets
4.4.1 Dealer Market Transparency
4.4.2 Indicators of Transparency
4.4.3 Evidence on Trading Characteristics
4.4.4 Matrix Prices and Execution Costs
4.5 Evolution of Secondary Markets
Suggested Readings and References
CHAPTER 5 Financing Debt Securities: Repurchase (Repo) Agreements
5.1 Repo and Reverse Repo Contracts
5.1.1 Repo Contract Defined
5.1.2 Reverse Repo Contract Defined
5.1.3 Repo as Secured Lending
5.2 Real-Life Features
5.3 Long and Short Positions Using Repo and Reverse Repo
5.4 General Collateral Repo Agreement
5.4.1 GC Repo Contract and Market
5.4.2 GC Repo Rates
5.5 Special Collateral Repo Agreement
5.6 Fails in Repo Market
5.7 Developments in Repo Markets
Suggested Readings and References
CHAPTER 6 Auctions of Treasury Debt Securities
6.1 Benchmark Auctions Schedule
6.1.1 Auctions of Money Market Instruments
6.1.2 Auctions of Treasury Notes
6.1.3 Auctions of Treasury Bonds
6.1.4 Auctions of TIPS
6.2 Conduct of Treasury Auctions
6.2.1 Auction Announcement
6.2.2 When-Issued Trading and Book Building
6.2.3 Auction Mechanisms
6.2.4 Uniform Price Auctions
6.2.5 Discriminatory Auctions
6.3 Auction Theory and Empirical Evidence
6.3.1 Winner's Curse and Bid Shading
6.4 Auction Cycles and Financing Rates
Suggested Readings and References
PART 2 ANALYTICS OF FIXED INCOME MARKETS
CHAPTER 7 Bond Mathematics: DV01, Duration, and Convexity
7.1 DV01/PVBP or Price Risk
7.2 Duration
7.2.1 Excel Applications
7.2.2 Properties of Duration and PVBP
7.2.3 PVBP and Duration of Portfolios
7.3 Trading and Hedging
7.3.1 Spread Trades: Curve Steepening or Curve Flattening Trades
7.4 Convexity
7.4.1 Bullet versus Barbell Securities (Butterfly Trade)
7.5 Effective Duration and Effective Convexity
Suggested Readings and References
CHAPTER 8 Yield Curve and the Term Structure
8.1 Yield-Curve Analysis
8.1.1 Principal Components Analysis of Yield Curve
8.1.2 Volatility of Short and Long Rates
8.1.3 Price-Based Versus Yield-Based Volatility
8.1.4 Economic News Announcements and Volatility
8.1.5 Yield Versus Duration
8.1.6 Coupon and Vintage Effects
8.2 Term Structure
8.2.1 Implied Zeroes
8.2.2 Bootstrapping Procedure
8.2.3 Par Bond Yield Curve
8.3 Forward Rates of Interest
8.4 STRIPS Markets
8.5 Extracting Zeroes in Practice
Suggested References and Readings
CHAPTER 9 Models of Yield Curve and the Term Structure
9.1 Introduction
9.2 Modeling Mean-Reverting Interest Rates
9.2.1 The Vasicek Model
9.2.2 The Cox, Ingersoll, and Ross Model
9.3 Calibration to Market Data
9.3.1 The Black, Derman, and Toy Model
9.3.2 General Implementation of the BDT Approach
9.4 Interest Rate Derivatives
9.5 A Review of One-Factor Models
Suggested Readings and References
CHAPTER 10 Modeling Credit Risk and Corporate Debt Securities
10.1 Defaults, Business Cycles, and Recoveries
10.2 Rating Agencies
10.3 Structural Models of Default
10.3.1 Probability of Default and Loss Given Default
10.3.2 Market Prices
10.4 Implementing Structural Models: The KMV Approach
10.4.1 Subordinated Corporate Debt
10.4.2 Safety Covenants
10.5 Costs of Financial Distress and Corporate Debt Pricing
10.6 Reduced-Form Models
10.7 Credit Spreads Puzzle
Suggested Readings and References
PART 3 SOME FIXED INCOME MARKET SEGMENTS
CHAPTER 11 Mortgages, Federal Agencies, and Agency Debt
11.1 Overview of Mortgage Contracts
11.1.1 Lenders' Risks
11.1.1.1 Default Risk
11.1.1.2 Prepayments
11.1.1.3 Interest Rate Risk
11.2 Types of Mortgages
11.2.1 Fixed-Rate Mortgages (FRMs)
11.2.2 Adjustable-Rate Mortgages (ARMs)
11.2.3 Agency Mortgages
11.2.4 Jumbo Mortgages
11.2.5 Alt-A Mortgages
11.2.6 Subprime Mortgages
11.3 Mortgage Cash Flows and Yields
11.4 Federal Agencies
11.5 Federal Agency Debt Securities
11.5.1 Empirical Evidence on Spreads
Suggested Readings and References
CHAPTER 12 Mortgage-Backed Securities
12.1 Overview of Mortgage-Backed Securities
12.1.1 Securitization
12.1.2 Guarantees and Credit Enhancement
12.1.3 Creation of an Agency MBS
12.1.4 Cash Flows and Market Conventions
12.2 Risks: Prepayments
12.2.1 Measuring Prepayments
12.2.1.1 Twelve-Year Retirement
12.2.1.2 Constant Monthly Mortality
12.2.2 FHA Experience
12.2.3 PSA Experience
12.2.4 Mortgage Cash Flows with Prepayments
12.3 Factors Affecting Prepayments
12.3.1 Refinancing Incentive
12.3.2 Seasonality Factor
12.3.3 Age of the Mortgage
12.3.4 Family Circumstances
12.3.5 Housing Prices
12.3.6 Mortgage Status (Premium Burnout)
12.3.7 Mortgage Term
12.4 Valuation Framework
12.5 Valuation of Pass-Through MBS
12.5.1 Empirical Behavior of an OAS
12.6 REMICS
12.6.1 REMIC Structure
12.6.2 Sequential Structure
12.6.3 Planned Amortization Class Structure
Suggested Readings and References
CHAPTER 13 Inflation-Linked Debt: Treasury Inflation-Protected Securities
13.1 Overview of Inflation-Indexed Debt
13.2 Role of Indexed Debt
13.3 Design of TIPS
13.3.1 Choice of Index
13.3.2 Indexation Lag
13.3.3 Maturity Composition of TIPS
13.3.4 Strippability of TIPS
13.3.5 Tax Treatment
13.4 Cash-Flow Structure
13.4.1 Indexed Zero Coupon Structure
13.4.2 Principal-Indexed Structure
13.4.3 Interest-Indexed Structure
13.5 Real Yields, Nominal Yields, and Break-Even Inflation
13.6 Cash Flows, Prices, Yields, and Risks of TIPS
13.7 Investor's Perspective
13.7.1 Conclusion
Suggested Readings and References
PART 4 FIXED INCOME DERIVATIVES
CHAPTER 14 Derivatives on Overnight Interest Rates
14.1 Overview
14.2 Fed Funds Futures Contracts
14.2.1 Recovering Market Expectations of Future Actions by the FOMC
14.3 Overnight Index Swaps (OIS)
14.3.1 Contract Specifications
14.4 Valuation of OIS
14.5 OIS Spreads with Other Money Market Yields
Suggested Readings and References
CHAPTER 15 Eurodollar Futures Contracts
15.1 Eurodollar Markets and LIBOR
15.1.1 LIBOR Fixing
15.1.2 Calculating Yields in the Cash Market
15.2 Eurodollar Futures Markets and LIBOR
15.2.1 Eurodollar Futures Settlement to Yields
15.3 Deriving Swap Rates from ED Futures
15.3.1 Eurodollar Futures Versus Swap Markets
15.4 Intermarket Spreads
15.5 Options on ED Futures
15.5.1 Caps, Floors, and Collars on LIBOR
15.6 Valuation of Caps
Suggested Readings and References
CHAPTER 16 Interest-Rate Swaps
16.1 Swaps and Swap-Related Products and Terminology
16.1.1 Asset Swaps
16.1.2 Diversity of Swap Contracts
16.2 Valuation of Swaps
16.2.1 Forward Swap
16.2.2 ED Futures and Swap Pricing
16.2.3 Convexity Adjustment
16.3 Swap Spreads
16.3.1 Liquidity Factor or the Systemic Risk Factor
16.3.2 Credit Risk in the Bank Sector
16.3.3 Agency Activities
16.4 Risk Management
16.4.1 Management of the Credit Risk of Swaps
16.5 Swap Bid Rate, Offer Rate, and Bid-Offer Spreads
16.6 Swaptions
16.6.1 Swaption Parity Relation
16.7 Conclusion
Suggested Readings and References
CHAPTER 17 Treasury Futures Contracts
17.1 Forward Contracts Defined
17.2 Futures Contracts Defined
17.3 Design of Contractual Features
17.3.1 Delivery Specifications
17.3.2 Price Limits
17.3.3 Margins
17.4 Futures Versus Forwards
17.5 Treasury Futures Contracts
17.5.1 Delivery Options in Treasury Note Futures
17.5.2 Conversion Factor
17.5.3 Seller's Option in the September 2007 Contract
17.5.3.1 Basis in T-Bond Futures
17.5.4 Determination of Delivery
17.5.5 Basis after Carry, or Net Basis
17.5.6 Implied Repo Rate
17.5.7 Duration Bias in Deliveries
17.5.8 Hedging Applications
Suggested Readings and References
CHAPTER 18 Credit Default Swaps: Single-Name, Portfolio, and Indexes
18.1 Credit Default Swaps
18.2 Players
18.3 Growth of CDS Market and Evolution
18.4 Restructuring and Deliverables
18.5 Settlement on Credit Events
18.6 Valuation of CDS
18.6.1 CDS Spreads, Probability of Default, and Recovery Rates
18.6.2 Applications
18.7 Credit-Linked Notes
18.8 Credit Default Indexes
Suggested Readings and References
CHAPTER 19 Structured Credit Products: Collateralized Debt Obligations
19.1 Collateralized Debt Obligations
19.1.1 CDO Structure and Players
19.1.2 Types of Cash CDOs
19.1.3 Synthetic CDOs
19.2 Analysis of CDO Structure
19.2.1 Leverage
19.2.2 Extent of Subordination, Overcollateralization, and Waterfalls
19.2.3 Quality of Collateral Pool and Rating
19.3 Growth of the CDO Market
19.4 Credit Default Indexes (CDX)
19.5 CDX Tranches
19.6 Valuation of CDOs
Suggested Readings and References
Glossary of Financial Terms
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