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Analysing and Interpreting the Yield Curve, 2nd Edition

Moorad Choudhry

ISBN: 978-1-119-14105-1 April 2019 384 Pages

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Understand and interpret the global debt capital markets

Now in a completely updated and expanded edition, this is a technical guide to the yield curve, a key indicator of the global capital markets and the understanding and accurate prediction of which is critical to all market participants. Being able to accurately and timely predict the shape and direction of the curve permits practitioners to consistently outperform the market.

Analysing and Interpreting the Yield Curve, 2nd Edition describes what the yield curve is, explains what it tells participants, outlines the significance of certain shapes that the curve assumes and, most importantly, demonstrates what factors drive it and how it is modelled and used.

  • Covers the FTP curve, the multi-currency curve, CSA, OIS-Libor and 3-curve models
  • Gets you up to speed on the secured curve
  • Describes application of theoretical versus market curve relative value trading
  • Explains the concept of the risk-free rate
  • Accessible demonstration of curve interpolation best-practice using cubic spline, Nelson-Siegel and Svensson 94 models 

This advanced text is essential reading for traders, asset managers, bankers and financial analysts, as well as graduate students in banking and finance.

Foreword ix

Preface xi

Preface to the First Edition xiii

Acknowledgments xv

About the Author xvii

Part 1 Introduction to the Yield Curve 3

Chapter 1 The Yield Curve 5

Chapter 2 A Further Look at Spot and Forward Rates 61

Part 2 Yield Curve Modelling and Post-2008 Yield Curve Analytics 93

Chapter 3 Interest Rate Modelling I: Primer on Basic Concepts 95

Chapter 4 Interest Rate Modelling II: The Dynamic of Asset Prices 115

Chapter 5 Interest Rate Models I 139

Chapter 6 Interest Rate Models II 163

Chapter 7 The Index-Linked Bond Yield Curve 181

Chapter 8 Yield Curve Analytics in the Post-2008 Era 193

Chapter 9 Negative Interest Rate Analytics 219

Part 3 Fitting the Yield Curve 229

Chapter 10 Estimating and Fitting the Yield Curve I 231

Chapter 11 Estimating and Fitting the Yield Curve II 253

Part 4 Yield Curves and Relative Value Trading 277

Chapter 12 Yield Curves and Relative Value 279

Chapter 13 Identifying Relative Value in the US Treasury Market: Acquiring New Benchmark Definitions from an Ancillary Yield Curve 291

Appendix: Bond Yield Measurement 321

Index 353