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Tables of Contents for Fixed-Income Analysis for the Global Financial Market
Chapter/Section Title
Page #
Page Count
Preface
x
Reader's Guide
xii
Acknowledgments
xvi
Part 1 Short-Term Money Market Instruments
Background and Terminology
Quotations, Bid-Ask Spread, and Transaction Costs
3
4
Trade, Settlement, and Maturity Dates. Accrual Rules
7
4
Long and Short Positions; Short Selling Securities
11
4
Arbitrage-Free Pricing and the Law of One Price
15
3
Euromarket Time Deposits and LIBOR Reference Rate
18
2
Short-Term Discount Securities
20
3
Auctions
23
5
Interest, Discount, and Compounded Yield
Interest Rate, Discount Rate, and Spot Yield
28
4
Compounding and Internal Rate of Return
32
5
U.S. Bond Yield Basis and the Treasury Method
37
3
Inflation and Real Yields
40
3
Yield Spreads on Short-Term Dollar Securities
43
3
The Exponential Notation
The Exponential Notation for Continuous Compounding
46
2
Period Return and Logs of Price Relatives
48
4
Convexity of the Log-Rate Function
52
2
Exponential Rate and Time Series
54
2
Mathematical Appendix
56
3
Spot and Forward Yields: FRAs, Repos, and Futures
Forwards: Arbitrage-Free Pricing and Credit Risk
59
4
Spot and Forward Yields
63
7
Forward Rate Agreements
70
5
Repos and Repo Rates
75
5
Futures
80
4
Futures on Short-Term Interest Rates
84
2
U.S. T-bill Futures and Cash-Futures Arbitrage
86
4
Mathematical Appendix
90
4
Foreign-Exchange Transactions
Spot Transactions, Cross Rates, and Arbitrage-Free Parties
94
3
Forward Transactions, Covered Interest Parity, and Basis Risk
97
6
Foreign Exchange (FX) Swaps
103
2
FX Futures
105
1
Hedging FX Risk and Cross-Currency Hedging
106
5
Settlement Risk (Herstatt Risk)
111
4
Part 2 Long-Term Securities, Futures, and Swaps
Zero-Coupon Bonds
The Development of Zero-Coupon Bonds
115
3
Price-Yield Relationship, Duration, and Convexity
118
9
Spot and Forward Yields
127
4
Hedging, Barbell Trades, and Spread over Benchmark
131
3
Horizon Yield, Expectations, and Risk Premium
134
1
Mathematical Appendix
135
3
Fixed-Interest Coupon Bonds
Introduction
138
2
Yield Analysis
140
4
Yield to Maturity: Operational Details
144
4
Yield Curve Pricing, Yield Spreads, and Par Yield Curve
148
3
Duration, Convexity, and Horizon Yield
151
8
Mathematical Appendix
159
4
Coupon Bonds: Advanced Topics
Simple Duration Pitfalls: The Orange County Case
163
2
Key Rate Duration
165
1
Callable Bonds, Sinking Fund Bonds, and Option-Adjusted Spread
166
5
Extracting the Spot Yield Curve from Coupon Bonds
171
4
Floating-Rate Securities
The Development of Floating-Rate Securities
175
2
Price, Yield, and Spread
177
3
Inverse Floaters and Floating Rate Perpetuities
180
4
Interest-Rate and Currency Swaps
Introduction
184
1
Interest-Rate Swaps: Pricing, Valuation, and Asset Swaps
185
4
Swaps and Comparative Advantage in Funding
189
2
Swap Dealers and Swap Warehousing
191
2
Currency Swaps
193
3
Credit Risk in Swaps
196
3
Futures on Bonds and Notes
U.S. T-bond Futures Analytics and the Cheapest-to-Deliver Bond
199
6
Hedging and Pricing
205
1
Other Important Bond Futures
206
3
Appendix
209
4
Part 3 Options
An Introduction to Options
Introduction
213
3
Standard Terminology
216
3
Payoff at Maturity of Puts and Calls
219
2
Time Value and Early Exercise of American Options
221
3
Payoff at Maturity of Options Strategies
224
7
Put-Call Parity and the Box
231
5
Butterfly Spread and Arrow Debreu Securities
236
2
Fixed-Income Options, Bonds with Optionlike Features
Exchange-Traded Options and Futures Options
238
2
Caps, Floors, Collars, and Swaptions
240
2
Mortgage-Backed Securities and Collateralized Mortgage Obligations
242
6
Basic Statistical Tools
Variance, Standard Deviation, and Expected Value
248
4
Extracting Volatilities from Time Series
252
2
The Binomial Distribution
254
4
The Normal Distribution
258
2
Normal Distribution and Time-Series Volatility
260
2
The Standard Normal Distribution
262
3
Mathematical Appendix
265
3
Stochastic Models
Introduction, Random Drawings from a Binomial Distribution
268
1
The Cox, Ross, and Rubinstein (CRR) Approach
269
5
The Symmetric Probabilities Implementation
274
1
Random Drawings from a Normal Distribution
275
2
The Lognormal Distribution
277
4
Tuning the Probability Structure of a CRR Binomial Tree
281
3
Binomial Option Pricing: An Introduction
Arbitrage-Free Option Pricing and Models of Stock Prices
284
3
The One-Step Binomial Model and Arbitrage-Free Pricing
287
4
Risk-Neutral Pricing
291
1
European Put Options
292
4
Extending the Binomial Model
Multistep Models
296
2
Early Exercise of American Puts
298
4
Dividends
302
2
Options on Foreign Exchange
304
2
Options on Futures
306
3
The Black-Scholes and Other Option-Pricing Models
The Black-Scholes Model
309
4
The Greek Letters
313
5
Implied Volatility; the Volatility Smile and Skew
318
3
Variations on the Black-Scholes Equation
321
2
Monte Carlo Simulation
323
4
Modeling the Yield Curve
Introduction
327
3
Arbitrage-Free Pricing
330
5
The Problem with Spot Yields Correlation
335
2
The Ho and Lee One-Factor Model
337
2
The Black, Derman, and Toy One-Factor Model
339
3
Mathematical Appendix
342
3
Selected Bibliography
345
4
Index
349