Fixed income securities : valuation, risk, and risk management

Fixed income securities valuation, risk, and risk management

The deep understanding of the forces that affect the valuation, risk and return of fixed income securities and their derivatives has never been so important. As the world of fixed income securities becomes more complex, anybody who studies fixed income securities must be exposed more directly to thi...

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Detalles Bibliográficos
Formato: Libro electrónico
Idioma:Inglés
Publicado: Hoboken, N.J.: Wiley c2010.
Hoboken, New Jersey : 2010.
Edición:1st edition
Materias:
Fixed-income securities.
Risk management.
Ver en Biblioteca Universitat Ramon Llull:https://discovery.url.edu/permalink/34CSUC_URL/1im36ta/alma991009628284206719
Tabla de Contenidos:
  • Cover
  • Title Page
  • Copyright
  • Contents
  • Preface
  • Acknowledgments
  • part I. Basics
  • chapter 1. An Introduction to Fixed Income Markets
  • 1.1. Introduction
  • 1.1.1. The Complexity of Fixed Income Markets
  • 1.1.2. No Arbitrage and the Law of One Price
  • 1.2. The Government Debt Markets
  • 1.2.1. Zero Coupon Bonds
  • 1.2.2. Floating Rate Coupon Bonds
  • 1.2.3. The Municipal Debt Market
  • 1.3. The Money Market
  • 1.3.1. Federal Funds Rate
  • 1.3.2. Eurodollar Rate
  • 1.3.3. LIBOR
  • 1.4. The Repo Market
  • 1.4.1. General Collateral Rate and Special Repos
  • 1.4.2. What if the T-bond Is Not Delivered?
  • 1.5. The Mortgage Backed Securities Market and Asset-Backed Securities Market
  • 1.6. The Derivatives Market
  • 1.6.1. Swaps
  • 1.6.2. Futures and Forwards
  • 1.6.3. Options
  • 1.7. Roadmap of Future Chapters
  • 1.8. Summary
  • chapter 2. Basics of fixed Income Securities
  • 2.1. Discount Factors
  • 2.1.1. Discount Factors across Maturities
  • 2.1.2. Discount Factors over Time
  • 2.2. Interest Rates
  • 2.2.1. Discount Factors, Interest Rates, and Compounding Frequencies
  • 2.2.2. The Relation between Discounts Factors and Interest Rates
  • 2.3. The Term Structure of Interest Rates
  • 2.3.1. The Term Structure of Interest Rates over Time
  • 2.4. Coupon Bonds
  • 2.4.1. From Zero Coupon Bonds to Coupon Bonds
  • 2.4.2. From Coupon Bonds to Zero Coupon Bonds
  • 2.4.3. Expected Return and the Yield to Maturity
  • 2.4.4. Quoting Conventions
  • 2.5. Floating Rate Bonds
  • 2.5.1. The Pricing of Floating Rate Bonds
  • 2.5.2. Complications
  • 2.6. Summary
  • 2.7. Exercises
  • 2.8. Case Study: Orange County Inverse Floaters
  • 2.8.1. Decomposing Inverse Floaters into a Portfolio of Basic Securities
  • 2.8.2. Calculating the Term Structure of Interest Rates from Coupon Bonds
  • 2.8.3. Calculating the Price of the Inverse Floater.
  • 2.8.4. Leveraged Inverse Floaters
  • 2.9. Appendix: Extracting the Discount Factors Z(0, T) from Coupon Bonds
  • 2.9.1. Bootstrap Again
  • 2.9.2. Regressions
  • 2.9.3. Curve Fitting
  • 2.9.4. Curve Fitting with Splines
  • chapter 3. Basics of interest Rate Risk Management
  • 3.1. The Variation in Interest Rates
  • 3.1.1. The Savings and Loan Debacle
  • 3.1.2. The Bankruptcy of Orange County
  • 3.2. Duration
  • 3.2.1. Duration of a Zero Coupon Bond
  • 3.2.2. Duration of a Portfolio
  • 3.2.3. Duration of a Coupon Bond
  • 3.2.4. Duration and Average Time of Cash Flow Payments
  • 3.2.5. Properties of Duration
  • 3.2.6. Traditional Definitions of Duration
  • 3.2.7. The Duration of Zero Investment Portfolios: Dollar Duration
  • 3.2.8. Duration and Value-at-Risk
  • 3.2.9. Duration and Expected Shortfall
  • 3.3. Interest Rate Risk Management
  • 3.3.1. Cash Flow Matching and Immunization
  • 3.3.2. Immunization versus Simpler Investment Strategies
  • 3.3.3. Why Does the Immunization Strategy Work?
  • 3.4. Asset-Liability Management
  • 3.5. Summary
  • 3.6. Exercises
  • 3.7. Case Study: The 1994 Bankruptcy of Orange County
  • 3.7.1. Benchmark: What if Orange County was Invested in Zero Coupon Bonds Only?
  • 3.7.2. The Risk in Leverage
  • 3.7.3. The Risk in Inverse Floaters
  • 3.7.4. The Risk in Leveraged Inverse Floaters
  • 3.7.5. What Can We Infer about the Orange County Portfolio?
  • 3.7.6. Conclusion
  • 3.8. Case Analysis: The Ex-Ante Risk in Orange County's Portfolio
  • 3.8.1. The Importance of the Sampling Period
  • 3.8.2. Conclusion
  • 3.9. Appendix: Expected Shortfall under the Normal Distribution
  • chapter 4. Basic Refinements in Interest Rate Risk Management
  • 4.1. Convexity
  • 4.1.1. The Convexity of Zero Coupon Bonds
  • 4.1.2. The Convexity of a Portfolio of Securities
  • 4.1.3. The Convexity of a Coupon Bond.
  • 4.1.4. Positive Convexity: Good News for Average Returns
  • 4.1.5. A Common Pitfall
  • 4.1.6. Convexity and Risk Management
  • 4.1.7. Convexity Trading and the Passage of Time
  • 4.2. Slope and Curvature
  • 4.2.1. Implications for Risk Management
  • 4.2.2. Factor Models and Factor Neutrality
  • 4.2.3. Factor Duration
  • 4.2.4. Factor Neutrality
  • 4.2.5. Estimation of the Factor Model
  • 4.3. Summary
  • 4.4. Exercises
  • 4.5. Case Study: Factor Structure in Orange County's Portfolio
  • 4.5.1. Factor Estimation
  • 4.5.2. Factor Duration of the Orange County Portfolio
  • 4.5.3. The Value-at-Risk of the Orange County Portfolio with Multiple Factors
  • 4.6. Appendix: Principal Component Analysis
  • 4.6.1. Benefits from PCA
  • 4.6.2. The Implementation of PCA
  • chapter 5. Interest Rate Derivatives: Forwards and Swaps
  • 5.1. Forward Rates and Forward Discount Factors
  • 5.1.1. Forward Rates by No Arbitrage
  • 5.1.2. The Forward Curve
  • 5.1.3. Extracting the Spot Rate Curve from Forward Rates
  • 5.2. Forward Rate Agreements
  • 5.2.1. The Value of a Forward Rate Agreement
  • 5.3. Forward Contracts
  • 5.3.1. A No Arbitrage Argument
  • 5.3.2. Forward Contracts on Treasury Bonds
  • 5.3.3. The Value of a Forward Contract
  • 5.4. Interest Rate Swaps
  • 5.4.1. The Value of a Swap
  • 5.4.2. The Swap Rate
  • 5.4.3. The Swap Curve
  • 5.4.4. The LIBOR Yield Curve and the Swap Spread
  • 5.4.5. The Forward Swap Contract and the Forward Swap Rate
  • 5.4.6. Payment Frequency and Day Count Conventions
  • 5.5. Interest Rate Risk Management using Derivative Securities
  • 5.6. Summary
  • 5.7. Exercises
  • 5.8. Case Study: PiVe Capital Swap Spread Trades
  • 5.8.1. Setting Up the Trade
  • 5.8.2. The Quarterly Cash Flow
  • 5.8.3. Unwinding the Position?
  • 5.8.4. Conclusion
  • chapter 6. Interest Rate Derivatives: Futures and Options
  • 6.1. Interest Rate Futures.
  • 6.1.1. Standardization
  • 6.1.2. Margins and Mark-to-Market
  • 6.1.3. The Convergence Property of Futures Prices
  • 6.1.4. Futures versus Forwards
  • 6.1.5. Hedging with Futures or Forwards?
  • 6.2. Options
  • 6.2.1. Options as Insurance Contracts
  • 6.2.2. Option Strategies
  • 6.2.3. Put-Call Parity
  • 6.2.4. Hedging with Futures or with Options?
  • 6.3. Summary
  • 6.4. Exercises
  • 6.5. Appendix: Liquidity and the LIBOR Curve
  • chapter 7. Inflation, Monetary Policy, and The Federal Funds Rate
  • 7.1. The Federal Reserve
  • 7.1.1. Monetary Policy, Economic Growth, and Inflation
  • 7.1.2. The Tools of Monetary Policy
  • 7.1.3. The Federal Funds Rate
  • 7.2. Predicting the Future Fed Funds Rate
  • 7.2.1. Fed Funds Rate, Inflation and Employment Growth
  • 7.2.2. Long-Term Fed Funds Rate Forecasts
  • 7.2.3. Fed Funds Rate Predictions Using Fed Funds Futures
  • 7.3. Understanding the Term Structure of Interest Rates
  • 7.3.1. Why Does the Term Structure Slope up in Average?
  • 7.3.2. The Expectation Hypothesis
  • 7.3.3. Predicting Excess Returns
  • 7.3.4. Conclusion
  • 7.4. Coping with Inflation Risk: Treasury Inflation-Protected Securities
  • 7.4.1. TIPS Mechanics
  • 7.4.2. Real Bonds and the Real Term Structure of Interest Rates
  • 7.4.3. Real Bonds and TIPS
  • 7.4.4. Fitting the Real Yield Curve
  • 7.4.5. The Relation between Nominal and Real Rates
  • 7.5. Summary
  • 7.6. Exercises
  • 7.7. Case Study: Monetary Policy during the Subprime Crisis of 2007 - 2008
  • 7.7.1. Problems on the Horizon
  • 7.7.2. August 17, 2007: Fed Lowers the Discount Rate
  • 7.7.3. September - December 2007: The Fed Decreases Rates and Starts TAF
  • 7.7.4. January 2008: The Fed Cuts the Fed Funds Target and Discount Rates
  • 7.7.5. March 2008: Bearn Stearns Collapses and the Fed Bolsters Liquidity Support to Primary Dealers.
  • 7.7.6. September - October 2008: Fannie Mae, Freddie Mac, Lehman Brothers, and AIG Collapse
  • 7.8. Appendix: Derivation of Expected Return Relation
  • chapter 8. Basics of Residential Mortgage Backed Securities
  • 8.1. Securitization
  • 8.1.1. The Main Players in the RMBS Market
  • 8.1.2. Private Labels and the 2007 - 2009 Credit Crisis
  • 8.1.3. Default Risk and Prepayment in Agency RMBSs
  • 8.2. Mortgages and the Prepayment Option
  • 8.2.1. The Risk in the Prepayment Option
  • 8.2.2. Mortgage Prepayment
  • 8.3. Mortgage Backed Securities
  • 8.3.1. Measures of Prepayment Speed
  • 8.3.2. Pass-Through Securities
  • 8.3.3. The Effective Duration of Pass-Through Securities
  • 8.3.4. The Negative Effective Convexity of Pass-Through Securities
  • 8.3.5. The TBA Market
  • 8.4. Collateralized Mortgage Obligations
  • 8.4.1. CMO Sequential Structure
  • 8.4.2. CMO Planned Amortization Class (PAC)
  • 8.4.3. Interest Only and Principal Only Strips.
  • 8.5. Summary
  • 8.6. Exercises
  • 8.7. Case Study: PiVe Investment Group and the Hedging of Pass-Through Securities
  • 8.7.1. Three Measures of Duration and Convexity
  • 8.7.2. PSA-Adjusted Effective Duration and Convexity
  • 8.7.3. Empirical Estimate of Duration and Convexity
  • 8.7.4. The Hedge Ratio
  • 8.8. Appendix: Effective Convexity
  • part II. Term Structure Models: Trees
  • chapter 9. One Step Binomial Trees
  • 9.1. A one-step interest rate binomial tree
  • 9.1.1. Continuous Compounding
  • 9.1.2. The Binomial Tree for a Two-Period Zero Coupon Bond
  • 9.2. No Arbitrage on a Binomial Tree
  • 9.2.1. The Replicating Portfolio Via No Arbitrage
  • 9.2.2. Where Is the Probability p?
  • 9.3. Derivative Pricing as Present Discounted Values of Future Cash Flows
  • 9.3.1. Risk Premia in Interest Rate Securities
  • 9.3.2. The Market Price of Interest Rate Risk
  • 9.3.3. An Interest Rate Security Pricing Formula.
  • 9.3.4. What If We Do Not Know p?.

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