[...]... office banking and fund management staff involved to some extent with fixed- income securities will also find value here Corporate xv xvi Preface and local authority treasurers, bank auditors and consultants, risk managers, and legal department staff may also find the book useful Fixed- Income Securities and Derivatives Handbook builds on the content of the author’s earlier book, Bond Market Securities (FT... outstanding volume estimated at more than $10 trillion Fixed- Income Securities and Derivatives Handbook provides a concise and accessible description of the main elements of the markets, concentrating on the instruments used and their applications As it has been designed to be both succinct and concise, the major issues are introduced and described, and where appropriate certain applications are also... that about FixedIncome Securities and Derivatives Handbook, this is certainly not a book to read once and then leave to gather dust in the attic The only fitting place for it is within arms’ reach Given the volume of accessible material about the market, it takes something special for a single book to find a permanent home at the desk and become a first point of reference for both practitioners and students... “Selected Cash and Derivative Instruments,” has an analysis of various instruments including callable bonds that feature embedded options There is also a discussion of mortgage-backed securities, techniques used in the analysis of U.S Treasury TIPS securities, and a section on the use and applications of credit derivatives by participants in the fixedincome markets Finally, Part Three, “Selected Market... structural and product innovations Suleman Baig Research Partner, YieldCurve.com xiii This page is intentionally blank PREFACE T he market in bond market securities, also known as the fixedincome market, is incredibly large and diverse, and one that plays an irreplaceable part in global economic development The vast majority of securities in the world today are debt instruments, with outstanding volume... for example, and fewer proofs This has not, in the author’s opinion, impaired the analysis as the reader is still left with an understanding of the techniques required in the context of market instruments Website and Further Market Research For the latest market research on fixed- income securities from Moorad Choudhry visit www.YieldCurve.com, which also contains conference presentations and educational... It is less so when you are dealing with the debt of corporate and lowerrated sovereign borrowers The valuation and analysis of bonds carrying default risk, however, are based on those of default-free government securities Essentially, the yield investors demand from borrowers whose credit standing is not risk-free is the yield on government securities plus some credit risk premium The Time Value of Money... teaching aids written by the author and other YieldCurve.com associates Acknowledgments The author thanks the following for their help during the writing of this book: Serj Walia and Maj Haque at KBC Financial Products and Paul Kerlogue and Andrew Lipton at Moody’s Thanks also to Suleman Baig for writing the Foreword F IXED -I NCOME S ECURITIES AND D ERIVATIVES H ANDBOOK This page is intentionally... describes fixed -income market analysis and the basic concepts relating to bond instruments The analytic building blocks are generic and thus applicable to any market The analysis is simplest when applied to plain vanilla default-free bonds; as the instruments analyzed become more complex, additional techniques and assumptions are required The first two chapters of this section discuss bond pricing and yields,... including pricing and yield analytics This includes modified duration and convexity Chapters also cover the concept of spot (zero-coupon) and forward rates, and the rates implied by market bond prices and yields; yield-curve fitting techniques; an account of spline fitting using regression techniques; and an introductory discussion of term structure models Part Two, “Selected Cash and Derivative Instruments,” . Moorad. Fixed- income securities and derivatives handbook : analysis and valuation / Moorad Choudhry. p. cm. Includes bibliographical references and index. ISBN 1-57660-164-1 (alk. paper) 1. Fixed- income. Attention: Director of Special Markets, or phone 609-279-4600. FIXED- INCOME SECURITIES AND DERIVATIVES HANDBOOK Analysis and Valuation Moorad Choudhry BLOOM BER G PRESS p r i n c e t o n ©. alt="" FIXED- INCOME SECURITIES AND DERIVATIVES HANDBOOK Also available from Bloomberg Press Inside the Yield Book: The Classic That Created the Science of Bond Analysis by Sidney Homer and Martin