9780471487005

Pricing Money : A Beginner's Guide to Money, Bonds, Futures and Swaps

by
  • ISBN13:

    9780471487005

  • ISBN10:

    0471487007

  • Edition: 1st
  • Format: Paperback
  • Copyright: 2001-11-28
  • Publisher: WILEY

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Summary

Pricing Money provides a highly practical introduction to the principles of bonds and fixed income and is aimed at readers who have little prior knowledge. The book is written in a style that is not overly mathematical or theoretical but takes a practical approach focusing on the aspects of pricing and trading fixed-income securities that are most relevant to the day-to-day activities of people working in the markets. Starting at a basic level the author explains the concepts and principles behind fixed income in an informative way using every day examples that can be understood by the layman. It includes a listing of the terms used; the rules and conventions; the techniques for valuation and pricing and a description of the different roles within the industry. This book will be an excellent training tool for new recruits to the financial markets.

Author Biography

<B>J.D.A. WISEMAN </b> is a bond and swap trader at Credit Suisse First Boston, having previously been an analyst there and at J.P. Morgan. The author read mathematics at Queens' College, Cambridge, and lives in London.

Table of Contents

Preface xiii
Acknowledgements xv
Part 1: A Beginner's Toolkit 1(110)
Money markets
3(14)
What is money?
3(1)
Why there is a money market?
4(2)
Choosing a maturity
6(1)
Repo
7(2)
Central-bank money-market operations
9(1)
Two money markets
10(2)
The euro
12(1)
Writing money
13(2)
Settlement details
15(1)
Summary
16(1)
Government bonds
17(18)
Introduction
17(1)
The concept of yield
18(1)
Example yield calculations
19(3)
Coupon and yield
22(1)
The yield curve
23(1)
Primary dealers
24(1)
Government bond markets
24(2)
Repo as part of the government-bond market
26(1)
Accrued interest
27(1)
STRIPS
27(2)
Other tradable government debt
29(2)
Non-government debt
31(1)
Rating agencies
32(1)
Summary
33(2)
Futures
35(16)
The gold miner's problem
35(1)
The gold miner's solution
36(1)
Contract specification
37(1)
Credit and margin
38(1)
Cash settlement
39(1)
Cash-settling other contracts
40(1)
The fixings
41(2)
The 3-month interest rate future
43(1)
Price action
44(2)
The strip and TED spreads
46(1)
Arbitrage
47(1)
Some trading jargon
48(2)
Summary
50(1)
Swaps
51(12)
Introduction
51(2)
An example
53(2)
Asset swaps
55(1)
A typical swap in detail
56(2)
Credit risk in swaps
58(1)
Trading jargon
59(1)
Swaps and interest rate futures
60(1)
Myth and reality
61(1)
Summary
62(1)
Options
63(8)
Introduction
63(1)
Puts and calls
63(2)
What is the option worth?
65(1)
Combinations
66(1)
Underlyings
66(1)
Embedded options
67(1)
Implied volatility
68(1)
Summary
69(2)
Foreign exchange
71(6)
The basic rationale
71(1)
Size and conventions
72(1)
Forwards
72(1)
Shake the dice
73(2)
Summary
75(2)
Players
77(12)
Governments
77(1)
Pseudo-government issuers
78(1)
Non-financial corporations
79(1)
Pension funds
79(2)
Insurers
81(1)
Mutual funds
82(1)
Hedge funds
83(1)
Commercial banks
83(2)
Mortgage lenders
85(1)
Central banks
86(1)
Private investors
87(1)
Summary
87(2)
People
89(8)
Introduction
89(1)
Proprietary traders
89(2)
Market makers
91(1)
Brokers
92(1)
Salespeople
93(1)
Researchers
94(1)
Back office and middle office
94(1)
Investment bankers
94(1)
Summary
95(2)
Price action
97(14)
Why do prices move?
97(2)
Necessity never made a good bargain
99(1)
Stability and leverage
100(1)
Fixed-income prices
101(2)
A stylised crash in fixed income
103(1)
Forwards, zeros and par yields
104(4)
Trading the crash
108(1)
Market irrationality
109(1)
Summary
110(1)
Part 2: More detail 111(58)
Swaps revisited
113(12)
Introduction
113(1)
Credit risk in swaps
113(1)
Reducing the credit risk
114(2)
Cross-currency basis swaps
116(1)
The price of a basis swap
117(1)
A cross-currency issue
118(3)
Reducing credit risk in basis swaps
121(1)
Forward rate agreements
122(1)
Summary
122(3)
Non-government issuance
125(14)
Introduction
125(1)
Bringing a deal to market
126(2)
The syndicate
128(1)
Book-building: taking orders
129(1)
Pricing a swapped deal
130(1)
Pricing an unswapped deal
131(1)
Some legal details
132(2)
Free to trade
134(1)
An example issue
135(1)
Opportunistic reopenings
136(1)
Summary
137(2)
Yield, duration, repo and forward bond prices
139(16)
Measuring risk
139(1)
Yields: compounding frequencies
140(2)
Duration continued
142(2)
Definition of DV01
144(1)
How coupon affects duration and DV01
144(1)
An example yield curve
145(2)
A 3s10s flattener
147(1)
A flattener generates cash
148(1)
A forward flattener
148(1)
What happens if nothing happens?
149(1)
Weighting the forward flattener
150(1)
A barbell
151(1)
Carry and slide
152(1)
Summary
153(2)
Bond futures
155(10)
Introduction
155(1)
Specification
156(1)
Delivery day
157(1)
The delivery process
158(1)
Cheapest to deliver: at par
159(1)
Cheapest to deliver: far from par
160(1)
CTD calculations before delivery
161(1)
Delivery tail
162(1)
Summary
163(2)
Basic fixed-income arithmetic
165(4)
The proportion of a year
165(2)
Yield to price and price to yield
167(1)
Semi to annual: halve and square
167(1)
Forward yield
168(1)
Forward asset swap
168(1)
Summary
168(1)
Index 169

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