Analysing and Interpreting the Yield Curve, 2nd Edition

Analysing and Interpreting the Yield Curve, 2nd Edition

by Moorad Choudhry
Released June 2019
Publisher(s): Wiley
ISBN: 9781119141044

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Book description

Understand and interpret the global debt capital markets

Now in a completely updated and expanded edition, this is a technical guide to the yield curve, a key indicator of the global capital markets and the understanding and accurate prediction of which is critical to all market participants. Being able to accurately and timely predict the shape and direction of the curve permits practitioners to consistently outperform the market.

Analysing and Interpreting the Yield Curve, 2nd Edition describes what the yield curve is, explains what it tells participants, outlines the significance of certain shapes that the curve assumes and, most importantly, demonstrates what factors drive it and how it is modelled and used.

  • Covers the FTP curve, the multi-currency curve, CSA, OIS-Libor and 3-curve models
  • Gets you up to speed on the secured curve
  • Describes application of theoretical versus market curve relative value trading
  • Explains the concept of the risk-free rate
  • Accessible demonstration of curve interpolation best-practice using cubic spline, Nelson-Siegel and Svensson 94 models 

This advanced text is essential reading for traders, asset managers, bankers and financial analysts, as well as graduate students in banking and finance.

Table of contents

  1. Cover
  2. Foreword
  3. Preface
  4. Preface to the First Edition
  5. Acknowledgments
  6. About the Author
  7. PART I: Introduction to the Yield Curve
    1. CHAPTER 1: The Yield Curve
      1. THE YIELD CURVE FOR BEGINNERS
      2. YIELD TO MATURITY YIELD CURVE
      3. THE COUPON YIELD CURVE
      4. THE PAR YIELD CURVE
      5. THE ZERO‐COUPON (OR SPOT) YIELD CURVE
      6. USING SPOT RATES IN BOND ANALYSIS
      7. THE FORWARD YIELD CURVE
      8. ANALYSING AND INTERPRETING THE YIELD CURVE
      9. AN INTRODUCTION TO FITTING THE YIELD CURVE
      10. SPOT AND FORWARD RATES IN THE MARKET
      11. THE INTEREST‐RATE SWAP CURVE AND THE SOVEREIGN BOND CURVE
      12. APPENDIX: CUBIC SPLINE INTERPOLATION
      13. SELECTED BIBLIOGRAPHY AND REFERENCES
      14. NOTES
    2. CHAPTER 2: A Further Look at Spot and Forward Rates
      1. ZERO‐COUPON BONDS
      2. COUPON BONDS
      3. BOND PRICE IN CONTINUOUS TIME
      4. INTRODUCTION TO BOND ANALYSIS USING SPOT RATES AND FORWARD RATES IN CONTINUOUS TIME
      5. APPENDICES
      6. SELECTED BIBLIOGRAPHY AND REFERENCES
      7. NOTES
  8. PART II: Yield Curve Modelling and Post‐2008 Yield Curve Analytics
    1. CHAPTER 3: Interest Rate Modelling I: Primer on Basic Concepts
      1. THE DYNAMICS OF THE YIELD CURVE
      2. TERM STRUCTURE MODELLING
      3. BASIC CONCEPTS
      4. ITÔ'S LEMMA
      5. APPROACHES TO MODELLING
      6. ONE‐FACTOR, TWO‐FACTOR AND MULTI‐FACTOR MODELS
      7. THE SHORT‐TERM RATE AND THE YIELD CURVE
      8. APPENDICES
      9. SELECTED BIBLIOGRAPHY AND REFERENCES
      10. NOTES
    2. CHAPTER 4: Interest Rate Modelling II: The Dynamic of Asset Prices
      1. THE BEHAVIOUR OF ASSET PRICES
      2. STOCHASTIC PROCESSES
      3. WIENER PROCESS OR BROWNIAN MOTION
      4. THE MARTINGALE PROPERTY
      5. GENERALISED WIENER PROCESS
      6. A MODEL OF THE DYNAMICS OF ASSET PRICES
      7. STOCHASTIC CALCULUS MODELS: BROWNIAN MOTION AND ITÔ CALCULUS
      8. BROWNIAN MOTION
      9. STOCHASTIC CALCULUS
      10. UNCERTAINTY OF INTEREST RATES
      11. APPENDICES
      12. SELECTED BIBLIOGRAPHY AND REFERENCES
      13. NOTES
    3. CHAPTER 5: Interest Rate Models I
      1. INTEREST RATE MODELS
      2. INTEREST RATE PROCESSES
      3. ONE‐FACTOR MODELS
      4. THE VASICEK MODEL
      5. THE MERTON MODEL
      6. THE COX–INGERSOLL–ROSS MODEL
      7. ARBITRAGE‐FREE MODELS
      8. THE HO AND LEE MODEL
      9. THE HULL–WHITE MODEL
      10. THE BLACK–DERMAN–TOY MODEL
      11. FITTING THE MODEL
      12. SUMMARY
      13. SELECTED BIBLIOGRAPHY AND REFERENCES
    4. CHAPTER 6: Interest Rate Models II
      1. MULTI‐FACTOR TERM STRUCTURE MODELS
      2. THE MULTI‐FACTOR HEATH–JARROW–MORTON MODEL
      3. JUMP MODELS
      4. ASSESSING ONE‐FACTOR AND MULTI‐FACTOR MODELS
      5. CHOOSING A TERM STRUCTURE MODEL
      6. IMPORTANCE OF PRACTICALITY
      7. SELECTED BIBLIOGRAPHY AND REFERENCES
      8. REFERENCES ON ESTIMATION METHOD
      9. NOTES
    5. CHAPTER 7: The Index‐Linked Bond Yield Curve
      1. INDEX‐LINKED BONDS AND REAL YIELDS
      2. THE REAL TERM STRUCTURE OF INTEREST RATES
      3. THE TERM STRUCTURE OF IMPLIED FORWARD INFLATION RATES
      4. ESTIMATING THE REAL TERM STRUCTURE
      5. FITTING THE DISCOUNT FUNCTION
      6. DERIVING THE TERM STRUCTURE OF INFLATION EXPECTATIONS
      7. APPLICATION
      8. SELECTED BIBLIOGRAPHY AND REFERENCES
      9. NOTES
    6. CHAPTER 8: Yield Curve Analytics in the Post‐2008 Era
      1. OVERNIGHT INDEX SWAP (OIA) YIELD CURVE
      2. POST‐CRASH DISCOUNTING PRINCIPLES FOR YIELD‐CURVE CONSTRUCTION
      3. FOUR CURVES: SOVEREIGN, LIBOR, OIS, AND INTERNAL FUNDING CURVE
      4. APPENDIX
      5. REFERENCES
      6. NOTES
    7. CHAPTER 9: Negative Interest Rate Analytics
      1. THE DISCOUNT FACTOR
      2. EXAMPLE ILLUSTRATIONS
      3. THE YIELD TO MATURITY
      4. SELECTED BIBLIOGRAPHY AND REFERENCES
      5. NOTE
  9. PART III: Fitting the Yield Curve
    1. CHAPTER 10: Estimating and Fitting the Yield Curve I
      1. YIELD CURVE SMOOTHING
      2. SMOOTHING TECHNIQUES
      3. USING A CUBIC POLYNOMIAL
      4. NON‐PARAMETRIC METHODS
      5. SPLINE‐BASED METHODS
      6. NELSON AND SIEGEL CURVES
      7. COMPARING CURVES
      8. APPENDICES
      9. SELECTED BIBLIOGRAPHY AND REFERENCES
      10. NOTES
    2. CHAPTER 11: Estimating and Fitting the Yield Curve II
      1. RECAP: BOND MARKET INFORMATION
      2. ESTIMATING YIELD CURVE FUNCTIONS
      3. CURVE‐FITTING TECHNIQUES: PARAMETRIC
      4. PARAMETRIC TECHNIQUES
      5. PARAMETERISED YIELD CURVES
      6. THE CUBIC SPLINE METHOD FOR ESTIMATING AND FITTING THE YIELD CURVE
      7. USING A CUBIC SPLINE: THE WAGGONER MODEL
      8. THE ANDERSON–SLEATH MODEL
      9. APPLICATIONS
      10. THE ANDERSON–SLEATH EVALUATION
      11. REPO AND ESTIMATING THE SHORT END OF THE YIELD CURVE
      12. APPENDIX 11.1 THE MCCULLOCH CUBIC SPLINE MODEL
      13. SELECTED BIBLIOGRAPHY AND REFERENCES
      14. NOTES
  10. PART IV: Yield Curves and Relative Value Trading
    1. CHAPTER 12: Yield Curves and Relative Value
      1. THE DETERMINANTS OF GOVERNMENT BOND YIELDS
      2. CHARACTERISING THE COMPLETE TERM STRUCTURE
      3. IDENTIFYING RELATIVE VALUE IN GOVERNMENT BONDS
      4. YIELD SPREAD TRADES
      5. BOND SPREAD WEIGHTING
      6. TYPES OF BOND SPREADS
      7. NOTES
    2. CHAPTER 13: Identifying Relative Value in the US Treasury Market: Acquiring New Benchmark Definitions from an Ancillary Yield Curve
      1. THE NATURE OF THE UNDERLYING OPTIMISATION: CONVERTING THE PRESENT VALUE APPARATUS INTO A MULTINOMIAL POLYNOMIAL OPTIMISATION
      2. AN APPROACH TO TREATING UNCERTAINTY QUANTIFICATION
      3. TWO COALESCING YIELD CURVES PRODUCING POSSIBLE TRADING OPPORTUNITIES ON OCTOBER 18, 2017
      4. IMPLICATIONS FOR YIELD SPREAD TRADES
      5. A PROPOSED BUTTERFLY TRADE WITH THE SHORT POSITION STEMMING FROM THE ANCILLARY BOND: 01.868 TABLE 13.4
      6. WHAT TO EXPECT WHEN BILLS ARE EXCLUDED FROM THE FITTING COMPUTATIONS
      7. APPENDIX: GEOMETRIC PROGRAMMING
      8. WEBSITE
      9. ADDENDUM: EXPERIMENTS FROM 17/12/2018
      10. SELECTED BIBLIOGRAPHY AND REFERENCES
      11. NOTES
  11. APPENDIX: Bond Yield Measurement
    1. CURRENT YIELD
    2. SIMPLE YIELD TO MATURITY
    3. YIELD TO MATURITY
    4. MODIFYING BOND YIELDS
    5. CONVERTING BOND YIELDS
    6. SUMMARY
    7. NOTES
  12. Index
  13. End User License Agreement

Product information

  • Title: Analysing and Interpreting the Yield Curve, 2nd Edition
  • Author(s): Moorad Choudhry
  • Release date: June 2019
  • Publisher(s): Wiley
  • ISBN: 9781119141044