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| Preface | |
| About the Authors | |
| Time Value of Money | |
| Future Value of a Single Cash Flow | |
| Present Value of a Single Cash Flow | |
| Compounding/Discounting When Interest Is Paid More Than Annually | |
| Future and Present Values of an Ordinary Annuity | |
| Yield (Internal Rate of Return) | |
| Concepts Presented in this Chapter | |
| Appendix: Compounding and Discounting in Continuous Time | |
| Questions | |
| Yield Curve Analysis: Spot Rates and Forward Rates | |
| A Bond Is a Package of Zero-Coupon Instruments | |
| Theoretical Spot Rates | |
| Forward Rates | |
| Dynamics of the Yield Curve | |
| Concepts Presented in this Chapter | |
| Questions | |
| Day Count Conventions and Accrued Interest | |
| Day Count Conventions | |
| Computing the Accrued Interest | |
| Concepts Presented in this Chapter | |
| Questions | |
| Valuation of Option-Free Bonds | |
| General Principles of Valuation | |
| Determining a Bond's Value | |
| The Price/Discount Rate Relationship | |
| Time Path of Bond | |
| Valuing a Zero-Coupon Bond | |
| Valuing a Bond Between Coupon Payments | |
| Traditional Approach to Valuation | |
| The Arbitrage-Free Valuation Approach | |
| Concepts Presented in this Chapter | |
| Questions | |
| Yield Measures | |
| Sources of Return | |
| Traditional Yield Measures | |
| Yield to Call | |
| Yield to Put | |
| Yield to Worst | |
| Cash Flow Yield | |
| Portfolio Yield Measures | |
| Yield Measures for U.S. Treasury Bills | |
| Yield Spread Measures Relative to a Spot Rate Curve | |
| Concepts Presented in this Chapter | |
| Appendix: Mathematics of the Internal Rate of Return | |
| Questions | |
| Analysis of Floating-Rate Securities | |
| General Features of Floaters | |
| Valuing a Risky Floater | |
| Valuation of Floaters with Embedded Options | |
| Margin Measures | |
| Concepts Presented in this Chapter | |
| Questions | |
| Valuation of Bonds with Embedded Options | |
| Overview of the Valuation of Bonds with Embedded Options | |
| Option-Adjusted Spread and Option Cost | |
| Lattice Model | |
| Binomial Model | |
| Illustration | |
| Concepts Presented in this Chapter | |
| Questions | |
| Cash Flow for Mortgage-Backed Securities and Amortizing Asset-Backed Securities | |
| Cash Flow of Mortgage-Backed Securities | |
| Amortizing Asset-Backed Securities | |
| Concepts Presented in this Chapter | |
| Questions | |
| Valuation of Mortgage-Backed and Asset-Backed Securities | |
| Static Cash Flow Yield Analysis | |
| Monte Carlo Simulation/OAS | |
| Concepts Presented in this Chapter | |
| Questions | |
| Analysis of Convertible Bonds | |
| General Characteristics of Convertible Bonds | |
| Tools for Analyzing Convertibles | |
| Call and Put Features | |
| Convertible Bond Arbitrage | |
| Other Types of Convertibles | |
| Concepts Presented in this Chapter | |
| Questions | |
| Total Return | |
| Computing the Total Return | |
| OAS-Total Return | |
| Total Return to Maturity | |
| Total Return for a Mortgage-Backed Security | |
| Portfolio Total Return | |
| Total Return Analysis for Multiple Scenarios | |
| Concepts Presented in this Chapter | |
| Questions | |
| Measuring Interest Rate Risk | |
| The Full Valuation Approach | |
| Price Volatility Characteristics of Bonds | |
| Duration | |
| Other Duration Measures | |
| Convexity | |
| Price Value of a Basis Point | |
| The Importance of Yield Volatility | |
| Concepts Presented in this Chapter | |
| Questions | |
| Value-at-Risk Measure and Extensions | |
| Value-at-Risk | |
| Conditional Value at Risk | |
| Concepts Presented in this Chapter | |
| Questions | |
| Analysis of Inflation-Protected Bonds | |
| Breakeven Inflation rate | |
| Valuation of TIPS | |
| Measuring Interest Rate Risk | |
| Concepts Presented in this Chapter | |
| Questions | |
| The Tools of Relative Value Analysis | |
| How Portfolio Managers Add Value | |
| Yield Spreads over Swap and Treasury Curves | |
| Asset Swaps | |
| Credit Default Swaps | |
| Concepts Presented in this Chapter | |
| Questions | |
| Analysis of Interest Rate Swaps | |
| Description of an Interest Rate Swap | |
| Interpreting a Swap Position | |
| Terminology, Conventions, and Market Quotes | |
| Valuing Interest Rate Swaps | |
| Primary Determinants of Swap Spreads | |
| Dollar Duration of a Swap | |
| Concepts Presented in this Chapter | |
| Questions | |
| Estimating Yield Volatility | |
| Historical Volatility | |
| Implied Volatility | |
| Forecasting Yield Volatility | |
| Concepts Presented in this Chapter | |
| Questions | |
| Index | |
| Table of Contents provided by Publisher. All Rights Reserved. |
