The Handbook of Fixed Income Securities, 9th Edition
- Length: 1904 pages
- Edition: 9
- Language: English
- Publisher: McGraw-Hill Education
- Publication Date: 2021-07-05
- ISBN-10: 1260473899
- ISBN-13: 9781260473896
- Sales Rank: #532876 (See Top 100 Books)
The definitive guide to fixed income securities―updated and revised with everything you need to succeed in today’s market
The Handbook of Fixed Income Securities has been the most trusted resource for fixed income investing for decades, providing everything sophisticated investors need to analyze, value, and manage fixed income instruments and their derivatives.
But this market has changed dramatically since the last edition was published, so the author has revised and updated his classic guide to put you ahead of the curve. With chapters written by the leading experts in their fields, The Handbook of Fixed Income Securities, Ninth Edition provides expert discussions about:
- Basics of Fixed Income Analytics Treasuries, Agency, Municipal, and Corporate Bonds
- Mortgage-Backed and Asset-Backed Securities
- The Yield Curve and the Term Structure
- Valuation and Relative Value
- Credit Analysis
- Portfolio Management and Strategies
- Derivative Instruments and their Applications
- Performance Attribution Analysis
The Handbook of Fixed Income Securities is the most inclusive, up-to-date source available for fixed income facts and analyses. Its invaluable perspective and insights will help you enhance investment returns and avoid poor performance in the fixed income market.
Cover Title Page Copyright Page Contents Preface Acknowledgments Contributors PART ONE INTRODUCTION Chapter 1 Overview of the Types and Features of Fixed Income Securities Bonds Medium-Term Notes Preferred Stock Residential Mortgage-Backed Securities Commercial Mortgage-Backed Securities Asset-Backed Securities Covered Bonds Beyond Traditional Liquid Fixed Income Instrument Key Points Chapter 2 Risks Associated with Investing in Fixed Income Securities Interest-Rate Risk Reinvestment Risk Call/Prepayment Risk Corporate Credit Risk Sovereign Credit Risk Inflation, or Purchasing-Power, Risk Liquidity Risk Exchange-Rate Risk (Currency Risk) Volatility Risk Political or Legal Risk Event Risk Sector Risk Other Risks Statistical Measures of Portfolio Risk Tracking Error Risk Key Points Chapter 3 The Structure of Interest Rates The Base Interest Rate Risk Premium The Term Structure of Interest Rates Key Points PART TWO BASICS OF FIXED INCOME ANALYTICS Chapter 4 Bond Pricing, Yield Measures, and Total Return Bond Pricing Conventional Yield Measures Total Return Analysis Key Points Chapter 5 Measuring Interest-Rate Risk The Full-Valuation Approach Price Volatility Characteristics of Bonds Duration Modified Duration Versus Effective Duration Convexity Price Value of a Basis Point The Importance of Yield Volatility Key Points Chapter 6 Data Science and the Corporate Credit Markets Defining Data Science Selected Data Science Tools, Techniques, and Uses for Investing Data Science and Investment Efficiency Risk and Performance Why Data Science Is Different in Credit Organization and Planning Key Points PART THREE TREASURY, AGENCY, MUNICIPAL, AND CORPORATE BONDS Chapter 7 U.S. Treasury Securities Types of Securities The Primary Market The Secondary Market Zero-Coupon Treasury Securities Key Points Chapter 8 Agency Debt Securities Agency Debt Market Overview Types of Agency Debt Securities The Primary Market The Secondary Market Agency Debt Issuance Issuing Agencies Large, Active Issuers Smaller, Active Issuers Nonactive Issuers and Recently Retired GSEs Key Points Chapter 9 Municipal Bonds Features of Municipal Securities Types of Municipal Obligations The Commercial Credit Rating of Municipal Bonds Municipal Bond Insurance Valuation Methods Tax Provisions Affecting Municipals Yield Relationships Within the Municipal Bond Market Primary and Secondary Markets Bond Indexes Official Statement Regulation of the Municipal Securities Market Key Points Chapter 10 Corporate Bonds The Corporate Trustee Some Bond Fundamentals Security for Bonds Alternative Mechanisms to Retire Debt Before Maturity Credit Risk Event Risk High-Yield Bonds Default Rates and Recovery Rates Medium-Term Notes Key Points Chapter 11 Leveraged Loans Syndicated Bank Loans Loan Structure Loan Terms Recovery Rates Secondary Market Key Points Chapter 12 Structured Notes and Credit-Linked Notes Structured Notes Credit-Linked Notes Key Points Chapter 13 Commercial Paper Payment Schedule and Price Quotation Primary and Secondary Markets Regulatory Treatment Issuers Investors Default Risk Measurement and Realization CP Rates Maturity Distribution Backup Lines Regulatory Responses to Crises Key Points Chapter 14 Floating-Rate Securities General Features of Floaters and Major Product Types Call and Put Provisions Spread Measures Price Volatility Characteristics of Floaters Portfolio Strategies Demise of LIBOR Key Points Chapter 15 Inflation-Linked Bonds Mechanics and Measurement Marketplace Valuation and Performance Dynamics Investors Issuers Other Issues Key Points Chapter 16 Non-U.S. Sovereign Bonds Size of the Sovereign Bond Market Types of Securities Issued Primary Market for Sovereign Debt Secondary Market Sovereign Credit Risk Sovereign Bond Yield Spreads Sovereign Bonds from the Investor’s Perspective Key Points Chapter 17 The Emerging Markets Debt The Debt Universe External Debt Markets Local Debt Markets The Foreign Investor Base EM Debt Performance Sovereign Debt Sustainability What Do EM Spreads Compensate For? Sovereign Restructurings Derivatives Key Points Chapter 18 Fixed Income Exchange Traded Funds Investment Characteristics Fixed Income ETF Management Fixed Income ETF Characteristics and Mechanics Trading Behavior: A Closer Look at Premiums, Discounts, and Price Discovery Key Points Chapter 19 Nonconvertible Preferred Stock Preferred Stock Issuance Trust Preferred Preferred Stock Ratings Tax Treatment of Dividends Key Points Chapter 20 Private Infrastructure Debt Infrastructure Borrowers Characteristics Pricing Determinants Credit Risk Key Points PART FOUR MORTGAGE-BACKED AND ASSET-BACKED SECURITIES Chapter 21 An Overview of Mortgages and the Mortgage Market Product Definition and Terms The Mortgage Industry The Loan Underwriting Process Generation of Mortgage Lending Rates Risks Associated with Mortgage Products Key Points Chapter 22 Agency Mortgage Passthrough Securities Issuers of Agency Passthroughs Cash-Flow Characteristics Some MBS Analytics Anatomy of the Agency Passthrough Market TBA Coupons Specified Trades Key Points Chapter 23 Agency Collateralized Mortgage Obligations The CMO Market The Reasons Why CMOs Exist CMO Tranche Types Agency Versus Nonagency CMOs Agency CMO Analysis Key Points Chapter 24 Stripped Mortgage-Backed Securities Overview of the SMBS Market Investment Characteristics Key Points Chapter 25 Nonagency Residential Mortgage-Backed Securities: Legacy, RMBS 2.0, and Non-QM Market Overview Collateral Capital Structure Housing Market Relative Value and Risk Analysis Key Points Chapter 26 Covered Bonds Covered Bonds: From Europe to the Rest of the World Understanding Covered Bonds Structure of Covered Bonds Maturity Structure of Covered Bonds Cover Assets and Credit Enhancements Asset/Liability Mismatches and Liquidity Risk Ratings of Covered Bonds Covered Bonds and Securitization Accounting for Covered Bonds Key Points Chapter 27 Commercial Mortgage-Backed Securities The Collateral Pool CMBS Trust Structure Transaction Participants Transaction Features Market Development Modeling Key Points Chapter 28 Credit Card Asset-Backed Securities Securitization of Credit Card Receivables The Credit Card ABS Life Cycle Cash-Flow Allocations Credit and Investment Considerations Key Points Chapter 29 Securities Backed by Auto Loans and Leases, Equipment Loans and Leases, and Student Loans Securitization in Brief Auto Loans and Leases Equipment Loans and Leases Student Loans Key Points Chapter 30 Collateralized Loan Obligations Assets Capital Structure Creation Purpose Credit Structures Market Size, Trading How a CLO is Created Fees Buyers Trading of CLO Collateral Key Points PART FIVE THE YIELD CURVE AND THE TERM STRUCTURE Chapter 31 Overview of Forward Rate Analysis Computation of Par, Spot, and Forward Rates Main Influences on the Yield-Curve Shape Using Forward Rate Analysis in Yield-Curve Trades Key Points Chapter 32 A Framework for Analyzing Yield-Curve Trades Forward Rates and Their Determinants Decomposing Expected Returns of Bond Positions Key Points Chapter 33 Empirical Yield-Curve Dynamics and Yield-Curve Exposure Empirical Analysis of Yield-Curve Dynamics Theoretical Determinants of Yield-Curve Dynamics Yield-Curve Dynamics and Risk Management Key Points Chapter 34 Term Structure Modeling with No-Arbitrage Interest Rate Models Introduction to Models of the Short Rate Binomial Interest Rate Lattices Trinomial Lattice Key Points PART SIX VALUATION AND RELATIVE VALUE Chapter 35 Relative Value Trading What Is Fixed Income Relative Value? Z-Score, Mean Reversion, and Expected Return Market-Based vs. Model-Based Relative Value Scenario and Horizontal Analysis Data and the Future of Relative Value Key Points Chapter 36 Valuation of Bonds with Embedded Options The Interest Rate Lattice Calibrating the Lattice Using the Lattice for Valuation Fixed-Coupon Bonds with Embedded Options Valuation of Two More Exotic Structures Extensions Key Points Chapter 37 Valuation of Mortgage-Backed Securities Static Valuation and Its Limitations Monte Carlo Models for Valuing MBS Mbs Modeling Framework Option-Adjusted Valuation Metrics An Illustrative Example Key Points Chapter 38 Convertible Securities Convertible Note Convertible Note as a Contingent Claim Stages of a Convertible Note Investing in Convertible Securities Convertible Note Valuation Framework Model Outputs: Implieds and Greeks Mandatorily Convertible Securities Trading Convertible Portfolios Delta Trading P&L: A High Volatility Scenario Example Key Points Additional Comments Chapter 39 Risk Neutral Pricing of Convertible Bonds The Model The Default Intensity Specifying the Credit Spread Sensitivities Convertible Bond Arbitrage Key Points PART SEVEN CREDIT ANALYSIS Chapter 40 Credit Analysis for Corporate Bonds Approaches to Credit Analysis Industry Considerations Financial Analysis Combining Financial and Nonfinancial Analysis Indenture Provisions Utilities Finance Companies The Analysis of High-Yield Corporate Bonds Credit Scoring Models Key Points Chapter 41 The Credit Analysis of Municipal General Obligation and Revenue Bonds The Legal Opinion The Need to Know Who Really Is the Issuer On the Financial Advisor and Underwriter General Credit Indicators and Economic Factors in the Credit Analysis Red Flags for the Investor Information Sources for the Analyst Key Points Chapter 42 Credit-Risk Modeling Structural Credit Models Reduced-Form Credit Models Incomplete-Information Credit Models Key Points PART EIGHT PORTFOLIO MANAGEMENT AND STRATEGIES Chapter 43 Introduction to Bond Portfolio Management Overview of Traditional Bond Management Overview of the Core/Satellite Approach Why Choose Indexing? Which Index Should Be Used? Primary Bond Indexing Risk Factors Enhancing Bond Indexing Measuring Success Key Points Chapter 44 Trading in the Bond Market Fixed Income Liquidity Trading Approaches Mechanics of Bond and Foreign Exchange Trading Electronic Trading Key Points Chapter 45 Bond Indexes and Bond Portfolio Management Building a Bond Index Description Bond Index Risk and Return Bond Index Relationship Bond Indexes and Smart Beta Key Points Chapter 46 Quantitative Management of Benchmarked Portfolios Selection and Customization of Benchmarks Diversification Issues in Benchmarks Portfolio Analysis Relative to a Benchmark Quantitative Approaches to Benchmark Replication Controlling Issuer-Specific Risk in the Portfolio Quantitative Methods for Portfolio Optimization Summary: Portfolio Management Tool Set Key Points Chapter 47 Factor Investing in Fixed Income Securities Factor Investing Which Factors? Factors Premiums in Government Bonds Factor Premiums in Corporate Bonds Fixed Income Factors in Multi-Asset Portfolios Key Points Chapter 48 Active Factor Fixed Income Investing Active Quant Fixed Income Active Quant Top Down Active Quant Bottom Up Four-Dimensional Chess Key Points Chapter 49 Introduction to Multifactor Risk Models in Fixed Income and Their Applications Motivation and Structure Underlying Fixed Income Multifactor Risk Models Fixed Income Risk Models Applications of Risk Modeling Key Points Chapter 50 Analyzing Risk from Multifactor Fixed Income Models Approaches Used to Analyze Risk Key Points Chapter 51 Cash-Flow Matching What Is Cash-Flow Matching? The CDI Methodology Future Value Versus Present Value Interest Rate Risk CDI Versus Active Bond Management CDI Versus LDI Key Points Chapter 52 Building Corporate Bond Portfolios Buy-and-Hold Investing Benchmarked Portfolios Key Points Chapter 53 Managing the Spread Risk of Credit Portfolios Using the Duration Times Spread Measure The Need for a New Measure of Credit Spread Exposure Spread Volatility and DTS Risk Projection: Predicting Spread Volatility Hedging: Predicting Sensitivities to Market Spread Changes Replication: Creating Index Tracking Portfolios Expressing Macro Views in Active Portfolios Portfolio Construction: Optimal Diversification of Issuer Risk Modeling: Calibrating Credit Risk Factors The Term Structure of Relative Spread Volatility Key Points Chapter 54 Constructing and Managing High-Yield Bond Portfolios Bottom-Up Credit/Security Analysis Top-Down High-Yield Market Drivers and Macro Considerations Portfolio Considerations Key Points Chapter 55 Corporate Bonds and ESG The Bond Manager Role Managing Risks and Taking Opportunities International Norm-Based Strategies Key Strategies for Managing Climate Impact of Bond Portfolios The Green Bond Dilemma and Future Outlook Key Points Chapter 56 Global Credit Bond Portfolio Management Credit Relative-Value Analysis Total-Return Analysis Primary Market Analysis Liquidity and Trading Analysis Secondary Trade Rationales Spread Analysis Structural Analysis Credit-Curve Analysis Credit Analysis Green Bonds/ESG Compliant Asset Allocation/Sector Rotation Key Points Chapter 57 International Bond Portfolio Management Risks and Returns in International Bond Portfolios A Yield Curve–Based Approach for International Bond Portfolios Currency Allocation and Bond Selection: Portfolio Construction Optimization Technique for Multicurrency Bond Portfolios Risk Management and Additional Tools Performance Measurement and Attribution Key Points Chapter 58 Factor Investing in Sovereign Bond Markets Problems with Existing Bond Benchmarks Benefits and Pitfalls of Factor Investing in Fixed-Income Markets Taxonomy of Fixed Income Factors Level and Slope Factors in Sovereign Bond Markets Value Factor Momentum Factor Key Points Chapter 59 Hedge Fund Fixed Income Strategies Macro Investing Understanding the Components of the Statistics Big Changes Are Very Important The Yield Curve Political Self-Interest Versus Interest of the Sovereign Asset-Backed Credit Strategy Capital Structure Arbitrage Long/Short Credit Strategy Distressed Debt Basis Trading Volatility Trading Cross-Currency Arbitrage Key Points Chapter 60 Financing Positions in the Bond Market Repurchase Agreement Dollar Rolls Margin Buying Securities Lending Key Points PART NINE DERIVATIVE INSTRUMENTS AND THEIR APPLICATIONS Chapter 61 Introduction to Interest-Rate Futures and Options Contracts Basic Characteristics of Futures Contracts Basic Characteristics of Forward Contracts Basic Characteristics of Option Contracts Differences Between Options and Futures (Forward) Contracts Representative Exchange-Traded Interest-Rate Futures Contracts Mechanics of Futures Trading Representative Exchange-Traded Futures Options Contracts OTC Contracts Key Points Chapter 62 Pricing Futures and Portfolio Applications Pricing of Futures Contracts Applications to Portfolio Management Portable Alpha Key Points Chapter 63 Controlling Interest-Rate Risk with Futures and Options Controlling Interest-Rate Risk with Futures Hedging with Options Key Points Chapter 64 Interest-Rate Swaps Interest-Rate Swaps Features of a Generic Swap Interpreting a Swap Position Terminology, Conventions, and Market Quotes Applications Dollar Duration of a Swap Innovations in Swap Markets Asset Swap Termination of Interest-Rate Swaps Key Points Chapter 65 The Valuation of Interest-Rate Swaps and Swaptions Swap Valuation Using the Lattice Approach Forward Start Swaps Valuing Swaptions Valuing Basis Swaps and Non-LIBOR-Based Swaps Factors Affecting Swap Valuation Key Points Chapter 66 The Basics of Interest-Rate Options How Options Work Options Strategies—Reorganizing the Profit/Loss Graph Classic Option Strategies Practical Portfolio Strategies Volatility Key Points Chapter 67 Interest-Rate Caps and Floors Features of Interest-Rate Caps and Floors Pricing of Caps and Floors Interest-Rate Caps Participating Caps Interest-Rate Floors Interest-Rate Collars Interest-Rate Corridors Cap/Floor Parity Termination of Caps and Floors Key Points Chapter 68 Credit Derivatives Evolution of the Credit Derivatives Market The Credit Default Swap CDS Mechanics Credit Events The CDS Settlement Timeline CDS Indices Importance of the CDS Market Key Points Chapter 69 Credit Derivative Valuation and Risk CDS Valuation The CDS–Bond Relationship Model New and Existing Contracts Risk Management CDS Index Valuation Key Points PART TEN PERFORMANCE ATTRIBUTION ANALYSIS Chapter 70 Principles of Performance Attribution Principles of Performance Attribution Mathematics of Performance Attribution Applications of Performance Attribution Key Points Chapter 71 Performance Attribution for Portfolios of Fixed Income Securities Return Splitting Outperformance Breakdown Total Return Model Excess Return Model Fully Analytical Model Selecting an Appropriate Attribution Model Key Points Chapter 72 Advanced Topics in Performance Attribution Multicurrency Attribution Derivatives and Leverage From Theory to Practice Key Points Index
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