Fixed Income Analysis, 2nd Edition

by Frank J. Fabozzi (School of Management, Yale Univ.); Foreword by: Martin L. Leibowitz

• ISBN13: 9780470107843
• ISBN10: 0470107847
• Format: eBook
• Copyright: 2007-03-01
• Publisher: Wiley

Summary

In the Second Edition of Fixed Income Analysis, financial expert Frank Fabozzi and a team of knowledgeable contributors provide complete coverage of the most important issues in fixed income analysis. Now, in Fixed Income Analysis Workbook, Second Edition, Fabozzi offers you a wealth of practical information and exercises that will solidify your understanding of the tools and techniques associated with this discipline. This comprehensive study guide--which parallels the main book chapter by chapter--contains challenging problems and a complete set of solutions as well as concise learning outcome statements and summary overviews. If you want to make the most of your time in the fixed income marketplace, the lessons within this workbook can show you how. Topics reviewed include: The risks associated with investing in fixed income securities The fundamentals of valuation and interest rate risk The features of structured products--such as mortgage-backed securities and asset-backed securities The principles of credit analysis The valuation of fixed income securities with embedded options

Table of Contents

Foreword

Acknowledgments

Introduction

Note on Rounding Differences

Features of Debt Securities

Introduction

Indenture and Covenants

Maturity

Par Value

Coupon Rate

Provisions for Paying Off Bonds

Conversion Privilege

Put Provision

Currency Denomination

Embedded Options

Borrowing Funds to Purchase Bonds

Risks Associated with Investing in Bonds

Introduction

Interest Rate Risk

Yield Curve Risk

Call and Prepayment Risk

Reinvestment Risk

Credit Risk

Liquidity Risk

Exchange Rate or Currency Risk

Inflation or Purchasing Power Risk

Volatility Risk

Event Risk

Sovereign Risk

Overview of Bond Sectors and Instruments

Introduction

Sectors of the Bond Market

Sovereign Bonds

Semi-Government/Agency Bonds

State and Local Governments

Corporate Debt Securities

Asset-Backed Securities

Collateralized Debt Obligations

Primary Market and Secondary Market for Bonds

Understanding Yield Spreads

Introduction

Interest Rate Determination

U.S. Treasury Rates

Yields on Non-Treasury Securities

Non-U.S. Interest Rates

Swap Spreads

Introduction to the Valuation of Debt Securities

Introduction

General Principles of Valuation

Traditional Approach to Valuation

The Arbitrage-Free Valuation Approach

Valuation Models

Yield Measures, Spot Rates, and Forward Rates

Introduction

Sources of Return

Traditional Yield Measures

Theoretical Spot Rates

Forward Rates

Introduction to the Measurement of Interest Rate Risk

Introduction

The Full Valuation Approach

Price Volatility Characteristics of Bonds

Duration

Convexity Adjustment

Price Value of a Basis Point

The Importance of Yield Volatility

Term Structure and Volatility of Interest Rates

Introduction

Historical Look at the Treasury Yield Curve

Treasury Returns Resulting from Yield Curve Movements

Constructing the Theoretical Spot Rate Curve for Treasuries

The Swap Curve (LIBOR Curve)

Expectations Theories of the Term Structure of Interest Rates

Measuring Yield Curve Risk

Yield Volatility and Measurement

Valuing Bonds with Embedded Options

Introduction

Elements of a Bond Valuation Model

Overview of the Bond Valuation Process

Review of How to Value an Option-Free Bond

Valuing a Bond with an Embedded Option Using the Binomial Model

Valuing and Analyzing a Callable Bond

Valuing a Putable Bond

Valuing a Step-Up Callable Note

Valuing a Capped Floater

Analysis of Convertible Bonds

Mortgage-Backed Sector of the Bond Market

Introduction

Residential Mortgage Loans

Mortgage Passthrough Securities

Collateralized Mortgage Obligations

Stripped Mortgage-Backed Securities

Nonagency Residential Mortgage-Backed Securities

Commercial Mortgage-Backed Securities

Asset-Backed Sec

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