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Fixed Income Securities: Valuation, Risk, and Risk Management

January 2010, ©2011
Fixed Income Securities: Valuation, Risk, and Risk Management (EHEP000113) cover image


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 this complexity.

This book provides a thorough discussion of these complex securities, the forces affecting their prices, their risks, and of the appropriate risk management practices. Fixed Income Securities, however, provides a methodology, and not a "shopping list" of all the possible interest rate securities ever been invented. It provides instead examples and methodologies that can be applied quite universally, once the basic concepts have been understood.

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Table of Contents




1 An Introduction to Fixed Income Markets.

2 Basics of Fixed Income Securities.

3 Basics of Interest Rate Risk Management.

4 Basic Refinements in Interest Rate Risk Management.

5 Interest Rate Derivatives: Forwards and Swaps.

6 Interest Rate Derivatives: Futures and Options.

7 Inflation, Monetary Policy, and the Federal Funds Rate.

8 Basics of Residential Mortgage Backed Securities.


9 One Step Binomial Trees.

10 Multi-Step Binomial Trees.

11 Risk Neutral Trees and Derivative Pricing.

12 American Options.

13 Monte Carlo Simulations on Trees.


14 Interest Rate Models in Continuous Time.

15 No Arbitrage and the Pricing of Interest Rate Securities.

16 Dynamic Hedging and Relative Value Trades.

17 Risk Neutral Pricing and Monte Carlo Simulations.

18 The Risk and Return of Interest Rate Securities.

19 No Arbitrage Models and Standard Derivatives.

20 The Market Model for Standard Derivatives.

21 Forward Risk Neutral Pricing and the LIBOR Market Model.

22 Multifactor Models.



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Author Information

Pietro Veronesi is the Roman Family Professor of Finance at the Booth School of Business at The University of Chicago, where he teaches Masters and PhD-level courses in Finance. His research focuses on asset pricing, stock and bond valuation under Bayesian uncertainty and learning, and equilibrium models of return predictability. Dr. Veronesi is a research associate of the National Bureau of Economic Research and a research fellow of the center for Economic and Policy Research. His work has appeared in numerous publications, including the Journal of Political Economy, Journal of Finance, Journal of Financial Economics, and Review of Financial Studies.
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The Wiley Advantage

  • The basics of fixed income pricing, risk and risk management.
  • Introduction to the concept of term structure modeling and no arbitrage strategies.  
  • The Federal Reserve system, and the relation between interest rates, the real economy, and inflation.
  • The analysis of fixed income securities relying on binomial tree models of the term structure.
  • Pricing and hedging by Monte Carlo simulations on binomial trees.
  • More advanced  term structure models that rely on continuous time mathematics.
  • This book aims at clarifying two important issues:
    • First, models have parameters and parameters need data to be estimated.
    • Second, models are “just models”, and they are always an incomplete description of a much more complex real world.
  • All chapters include real-world examples and case studies.
  • End-of-chapter exercises using real-world data and real-world securities cement the important concepts.
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Professor Reviews

"This book is a much needed guide to the complex landscape of modern fixed income securities and derivatives markets. Drawing on a few simple principles, but never neglecting the crucial details of each market, Pietro Veronesi lucidly explains how to model and manage fixed income risks."

--John Y. Campbell, Department Chair, Harvard University Department of Economics


“Pietro Veronesi has given us an instant classic on fixed income markets. This book takes a completely new approach to the subject, combining a rich set of modeling issues with excellent intuition and coverage of institutional details.”

--Darrell Duffie, Dean Witter Distinguished Professor of Finance, Stanford University Graduate School of Business


“Veronesi’s book provides a new standard reference for students of fixed income markets. Veronesi presents his material using easy to follow arguments and prose making the book easily accessible to students who are new to these markets. In addition, Veronesi provides a wonderful set of examples based on real-world data and situations. These examples provide readers with a deeper understanding of both the pricing of fixed income securities and the working of the markets. Even experts in the field will find his examples very insightful. Highly recommended reading!”

--John C. Heaton, Joseph L. Gidwitz Professor of Finance, The University of Chicago Booth School of Business


“This is an extraordinarily comprehensive treatment of the pricing and hedging of fixed-income securities. Professor Veronesi’s masterful blending of theory and practice highlights the growing importance of fixed-income markets in the global economy while making the many complex products and risk management problems fully accessible. It will surely become a “must have” reference for academics and practitioners alike.”

--Kenneth J. Singleton, Adams Distinguished Professor of Management, Stanford University Graduate School of Business


"I just taught a class using this book, and believe there is currently no better fixed income textbook on the market. It has an unmatched combination of rigorous coverage, user-friendly worked examples, and institutional detail, making it a pleasure to teach (and to learn) from."

--Richard Stanton, Professor of Finance and Barbara and Gerson Bakar Faculty Fellow, Haas School of Business, University of California, Berkeley

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Wiley E-Text   
Fixed Income Securities: Valuation, Risk, and Risk Management
ISBN : 978-0-470-58689-1
848 pages
January 2010, ©2011
$71.50   BUY

Fixed Income Securities: Valuation, Risk, and Risk Management
ISBN : 978-0-470-10910-6
848 pages
January 2010, ©2011
$207.95   BUY

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