Interest Rate Markets: A Practical Approach to Fixed Income
With trillions of dollars worth of trades conducted every year in everything from U.S. Treasury bonds to mortgage-backed securities, the U.S. interest rate market is one of the largest fixed income markets in the world.
Interest Rate Markets: A Practical Approach to Fixed Income details the typical quantitative tools used to analyze rates markets; the range of fixed income products on the cash side; interest rate movements; and, the derivatives side of the business.
- Emphasizes the importance of hedging and quantitatively managing risks inherent in interest rate trades
- Details the common trades which can be used by investors to take views on interest rates in an efficient manner, the methods used to accurately set up these trades, as well as common pitfalls and risks providing examples from previous market stress events such as 2008
- Includes exclusive access to the Interest Rate Markets Web site which includes commonly used calculations and trade construction methods
Interest Rate Markets helps readers to understand the structural nature of the rates markets and to develop a framework for thinking about these markets intuitively, rather than focusing on mathematical models
Chapter 1: Tools of the Trade.
Regression – How Good a Fit?
Principal Components Analysis.
Scaling Through Time.
Chapter 2: Introduction to Bonds.
Basics of Bonds.
Risks Embedded in Fixed Income Instruments.
Calculating Profit/Loss (P/L) of a Bond.
Carry and Forward Rates.
Curves and Spreads.
Butterflies and Condors.
Chapter 3: Overview of Fixed Income Markets.
Chapter 4: Introduction to Futures Markets.
Basics of Futures Transactions.
Convexity Bias (or Financing Bias).
Creating Longer Dated Assets Using Eurodollar Futures.
Fed Funds Futures.
Futures Positioning Data.
Chapter 5: Introduction to Swaps.
Duration and Convexity.
Uses of Swaps.
Other Types of Swaps.
Chapter 6: Understanding Drivers of Interest Rates.
Supply and Demand for Borrowing.
Flight to Quality.
Components of Fixed Income Supply and Demand.
Other Sources of Fixed Income Supply.
Fixed Income Demand.
Short Term Yield Drivers.
Chapter 7: Carry and Relative Value Trades.
Carry Trade Set up and Evaluation.
Pitfalls of the Carry Trade.
Carry Efficient Directional Trades.
Relative Value Trades.
Setting Up Relative Value Trades.
Treasury Bond Relative Value—Par Curve.
Other Treasury Relative Value Trades.
Chapter 8: Hedging Risks in Interest Rate Products.
Principles of Hedging.
Choices of Instruments for Hedging.
Calculating Hedge Ratios.
Chapter 9: Trading Swap Spreads.
How Swap Spreads Work.
Why Trade Swap Spreads?
Directionality of Swap Spreads to Yields.
Futures Asset Swaps.
Spread Curve Trades.
Chapter 10: Interest Rate Options and Trading Volatility.
Option Pricing and Fundamentals.
Modifications for the Interest Rate Markets.
Measuring Risks in Option Positions.
Put call parity.
Implied and Realized Volatility.
Interest Rate Options.
Embedded Options and Hedging.
More Exotic Structures.
Yield Curve Spread Options (YCSOs).
Interest Rate Skew.
Volatility Spread Trades.
Caps versus Swaptions.
Chapter 11: Treasury futures basis and rolls.
The Bond Basis.
Calculating the Delivery Option Value.
Option Adjusted and Empirical Duration.
Treasury Futures Rolls.
Chapter 12: Conditional Trades.
Conditional Curve Trades.
Conditional Spread Trades.
About the Author.
About the Website.
Siddhartha Jha is a Senior Analyst with Arrowhawk Capital Partners. Previously, as part of J. P. Morgan's Fixed Income Strategy Team, he covered a wide range of rates marketsfrom municipals to liquid products including Treasuries, swaps, futures, and optionsanalyzing macroeconomic trends as well as short-term technical factors. He spent five years there developing trade ideas, building quantitative models, and discussing market trends with institutional investors. He graduated cum laude with a dual bachelor's and master's in applied mathematics and statistics from Harvard University.
|Charts and Descriptions||168.39 KB||Click to Download|
|Excel File Descriptions||89.68 KB||Click to Download|
|Interest Rate Markets Calculations||217.00 KB||Click to Download|
|Page 255 Bachelier Correction||12.00 KB||Click to Download|
|Correct Formula for Page 34||10.65 KB||Click to Download|
|Taylor Series Formula (page 41)||176.99 KB||Click to Download|
|Figure 6.2, Page 128 Correction
Correction Note for Figure
|17.83 KB||Click to Download|
Do you think you've discovered an error in this book? Please check the list of errata below to see if we've already addressed the error. If not, please submit the error via our Errata Form. We will attempt to verify your error; if you're right, we will post a correction below.
|128||Figure 6.2, Page 128 Correction
See Downloads tab for the PDF file of the correction.
Interest Rate Markets: A Practical Approach to Fixed Income (US $90.00)
Total List Price: US $165.00
Discounted Price: US $123.75 (Save: US $41.25)