Interest Rate, Term Structure, and Valuation Modeling

by Fabozzi, Frank J.

• ISBN13: 9780471220947
• ISBN10: 0471220949
• Format: Hardcover
• Copyright: 2002-11-01
• Publisher: Wiley

Summary

This ultimate guide contains an excellent blend of theory and practiceThis comprehensive guide covers various aspects of model building for fixed income securities and derivatives. Filled with expert advice, valuable insights, and advanced modeling techniques, Interest Rate, Term Structure, and Valuation Modeling is a book that all institutional investors, portfolio managers, and risk professionals should have.John Wiley & Sons, Inc. is proud to be the publisher of the esteemed Frank J. Fabozzi Series. Comprising nearly 100 titles-which include numerous bestsellersThe Frank J. Fabozzi Series is a key resource for finance professionals and academics, strategists and students, and investors. The series is overseen by its eponymous editor, whose expert instruction and presentation of new ideas have been at the forefront of financial publishing for over twenty years. His successful career has provided him with the knowledge, insight, and advice that has led to this comprehensive series.Frank J. Fabozzi, PhD, CFA, CPA, is Editor of the Journal of Portfolio Management, which is read by thousands of institutional investors, as well as editor or author of over 100 books on finance for the professional and academic markets. Currently, Dr. Fabozzi is an adjunct Professor of Finance at Yale University's School of Management and on the board of directors of the Guardian Life family of funds and the Black Rock complex of funds.

Author Biography

FRANK J. FABOZZI, PhD, CFA, is Editor of the Journal of Portfolio Management and an Adjunct Professor of Finance at Yale University’s School of Management. Dr. Fabozzi is on the board of directors of the Guardian Life family of funds and the BlackRock complex of funds. He earned a doctorate in economics from the City University of New York in 1972 and, in 1994, received an honorary doctorate of humane letters from Nova Southeastern University. Dr. Fabozzi is a Fellow of the International Center for Finance at Yale University.

Table of Contents

Preface	ix
Contributing Authors	xii
SECTION ONE Interest Rate and Term Structure Modeling	1	(212)
Interest Rate Models	3	(24)
Oren Cheyette
The Four Faces of an Interest Rate Model	27	(12)
Peter Fitton
James F. McNatt
A Review of No Arbitrage Interest Rate Models	39	(34)
Gerald W. Buetow
Frank J. Fabozzi
James Sochacki
An Introductory Guide to Analyzing and Interpreting the Yield Curve	73	(20)
Moorad Choudhry
Term Structure Modeling	93	(44)
David Audley
Richard Chin
Shrikant Ramamurthy
A Practical Guide to Swap Curve Construction	137	(20)
Uri Ron
Fitting the Term Structure of Interest Rates Using the Cubic Spline Methodology	157	(30)
Rod Pienaar
Moorad Choudhry
Measuring and Forecasting Yield Volatility	187	(26)
Frank J. Fabozzi
Wai Lee
SECTION TWO Modeling Factor Risk	213	(100)
Term Structure Factor Models	215	(26)
Robert C. Kuberek
Multi-Factor Risk Models and Their Applications	241	(54)
Lev Dynkin
Jay Hyman
Measuring Plausibility of Hypothetical Interest Rate Shocks	295	(18)
Bennett W. Golub
Leo M. Tilman
SECTION THREE Valuation Models	313	(186)
Understanding the Building Blocks for OAS Models	315	(30)
Philip O. Obazee
Yield Curves and Valuation Lattices: A Primer	345	(12)
Frank J. Fabozzi
Andrew Kalotay
Michael Dorigan
Using the Lattice Model to Value Bonds with Embedded Options, Floaters, Options, and Caps/Floors	357	(22)
Frank J. Fabozzi
Andrew Kalotay
Michael Dorigan
Using the Lattice Model to Value Forward Start Swaps and Swaptions	379	(42)
Gerald W. Buetow, Jr.
Frank J. Fabozzi
Valuing Path-Dependent Securities	421	(22)
C. Douglas Howard
Monte Carlo Simulation/OAS Approach to Valuing Residential Real Estate-Backed Securities	443	(26)
Frank J. Fabozzi
Scott F. Richard
David S. Horowitz
Mortgage Pricing on Low-Dimensional Grids	469	(20)
Alexander Levin
The Effect of Mean Reversion on the Valuation of Embedded Options and OAS	489	(10)
David Audley
Richard Chin
Index	499