Fixed Income Securities, 4th Edition

Fixed Income Securities, 4th Edition

by Bruce Tuckman, Angel Serrat
Released September 2022
Publisher(s): Wiley
ISBN: 9781119835554

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Book description

Build or brush up on the foundation you need to be a sophisticated fixed income professional with this proven book 

Fixed Income Securities: Tools for Today’s Markets has been a valued resource for practitioners and students for over 25 years. Clearly written, and drawing on a myriad of real market examples, it presents an overview of fixed income markets; explains the conceptual frameworks and quantitative tool kits used in the industry for pricing and hedging; and examines a wide range of fixed income instruments and markets, including: government bonds; interest rate swaps; repurchase agreements; interest rate futures; note and bond futures; bond options and swaptions; corporate bonds; credit default swaps; and mortgages and mortgage-backed securities. 

Appearing a decade after its predecessor, this long-awaited Fourth Edition is comprehensively revised with: 

  • An up-to-date overview, including monetary policy with abundant reserves and the increasing electronification of market 
  • All new examples, applications, and case studies, including lessons from market upheavals through the pandemic 
  • New material on fixed income asset management
  • The global transition from LIBOR to SOFR and other rates

Table of contents

  1. Cover
  2. Title Page
  3. Copyright
  4. Preface
    1. EXTENDED EXAMPLES, APPLICATIONS, AND CASES
  5. List of Acronyms
  6. CHAPTER 0: Overview
    1. 0.1 GLOBAL FIXED INCOME MARKETS
    2. 0.2 US MARKETS
    3. 0.3 US MARKET PARTICIPANTS
    4. 0.4 MONETARY POLICY WITH ABUNDANT RESERVES
    5. 0.5 NEGATIVE RATES AND QE IN EUROPE AND JAPAN
    6. 0.6 TRADING AND LIQUIDITY
    7. NOTES
  7. CHAPTER 1: Prices, Discount Factors, and Arbitrage
    1. 1.1 GOVERNMENT COUPON BONDS
    2. 1.2 DISCOUNT FACTORS
    3. 1.3 THE LAW OF ONE PRICE
    4. 1.4 ARBITRAGE AND THE LAW OF ONE PRICE
    5. 1.5 APPLICATION: IDIOSYNCRATIC PRICING OF TREASURY STRIPS
    6. 1.6 ACCRUED INTEREST
    7. 1.7 DAY‐COUNT CONVENTIONS
    8. NOTES
  8. CHAPTER 2: Swap, Spot, and Forward Rates
    1. 2.1 INTEREST RATE QUOTATIONS
    2. 2.2 INTEREST RATE SWAPS
    3. 2.3 PRICING INTEREST RATE SWAPS
    4. 2.4 SPOT RATES
    5. 2.5 FORWARD RATES
    6. 2.6 RELATIONSHIPS BETWEEN SWAP, SPOT, AND FORWARD RATES
  9. CHAPTER 3: Returns, Yields, Spreads, and P&L Attribution
    1. 3.1 REALIZED RETURNS
    2. 3.2 YIELD TO MATURITY
    3. 3.3 YIELD AND RETURN
    4. 3.4 YIELD AND RELATIVE VALUE
    5. 3.5 SPREADS
    6. 3.6 APPLICATION: SPREADS OF HIGH‐COUPON TREASURIES
    7. 3.7 UNCHANGED RATE SCENARIOS FOR P&L ATTRIBUTION
    8. 3.8 P&L ATTRIBUTION
    9. NOTES
  10. CHAPTER 4: DV01, Duration, and Convexity
    1. 4.1 PRICE–RATE CURVES
    2. 4.2 DV01
    3. 4.3 HEDGING A CENTURY BOND: PART I
    4. 4.4 DURATION
    5. 4.5 CONVEXITY
    6. 4.6 HEDGING A CENTURY BOND: PART II
    7. 4.7 YIELD‐BASED DV01, DURATION, AND CONVEXITY
    8. 4.8 THE BARBELL VERSUS THE BULLET
    9. NOTES
  11. CHAPTER 5: Key‐Rate, Partial, and Forward‐Bucket '01s and Durations
    1. 5.1 KEY RATES: MOTIVATION
    2. 5.2 KEY RATES: OVERVIEW
    3. 5.3 KEY RATES: SHIFTS
    4. 5.4 KEY RATES: '01S, DURATIONS, AND HEDGING
    5. 5.5 PARTIAL '01S AND PV01
    6. 5.6 FORWARD‐BUCKET '01S
    7. 5.7 MULTI‐FACTOR EXPOSURES AND PORTFOLIO VOLATILITY
    8. NOTES
  12. CHAPTER 6: Regression Hedging and Principal Component Analysis
    1. 6.1 SINGLE‐VARIABLE REGRESSION HEDGING
    2. 6.2 TWO‐VARIABLE REGRESSION HEDGING
    3. 6.3 LEVEL VERSUS CHANGE REGRESSIONS
    4. 6.4 REVERSE REGRESSIONS
    5. 6.5 PRINCIPAL COMPONENT ANALYSIS
    6. NOTES
  13. CHAPTER 7: Arbitrage Pricing with Term Structure Models
    1. 7.1 RATE AND PRICE TREES
    2. 7.2 ARBITRAGE PRICING OF DERIVATIVES
    3. 7.3 RISK‐NEUTRAL PRICING
    4. 7.4 ARBITRAGE PRICING IN A MULTI‐PERIOD SETTING
    5. 7.5 PRICING A CONSTANT‐MATURITY TREASURY SWAP
    6. 7.6 OPTION‐ADJUSTED SPREAD
    7. 7.7 PROFIT AND LOSS ATTRIBUTION WITH AN OAS
    8. 7.8 REDUCING THE TIME STEP
    9. 7.9 FIXED INCOME VERSUS EQUITY DERIVATIVES
    10. NOTE
  14. CHAPTER 8: Expectations, Risk Premium, Convexity, and the Shape of the Term Structure
    1. 8.1 EXPECTATIONS
    2. 8.2 VOLATILITY AND CONVEXITY
    3. 8.3 AN ANALYTICAL DECOMPOSITION OF FORWARD RATES
    4. NOTE
  15. CHAPTER 9: The Vasicek and Gauss+ Models
    1. 9.1 THE VASICEK MODEL
    2. 9.2 THE GAUSS+ MODEL
    3. 9.3 A PRACTICAL ESTIMATION METHOD
    4. 9.4 RELATIVE VALUE AND MACRO‐STYLE TRADING WITH THE GAUSS+ MODEL
    5. NOTES
  16. CHAPTER 10: Repurchase Agreements and Financing
    1. 10.1 REPURCHASE AGREEMENTS
    2. 10.2 USES OF REPURCHASE AGREEMENTS
    3. 10.3 MARKET STRUCTURE AND SIZE
    4. 10.4 SOFR
    5. 10.5 GC AND SPECIAL REPO RATES
    6. 10.6 LIQUIDITY MANAGEMENT AND CURRENT REGULATORY ISSUES
    7. 10.7 CASE STUDY: MF GLOBAL'S REPO‐TO‐MATURITY TRADES
    8. NOTES
  17. CHAPTER 11: Note and Bond Futures
    1. 11.1 FORWARD CONTRACTS AND FORWARD PRICES
    2. 11.2 FORWARD BOND YIELD
    3. 11.3 THE INTEREST RATE SENSITIVITY OF A FORWARD CONTRACT
    4. 11.4 MECHANICS OF US TREASURY NOTE AND BOND FUTURES
    5. 11.5 PRICING AND HEDGING IMPLICATIONS OF DAILY SETTLEMENT
    6. 11.6 COST OF DELIVERY AND THE FINAL SETTLEMENT PRICE
    7. 11.7 MOTIVATIONS FOR A DELIVERY BASKET AND CONVERSION FACTORS
    8. 11.8 THE QUALITY OPTION AT EXPIRATION
    9. 11.9 GROSS AND NET BASIS AND BASIS TRADES
    10. 11.10 IMPLIED REPO RATES
    11. 11.11 FUTURES PRICE AND THE QUALITY OPTION BEFORE EXPIRATION
    12. 11.12 THE TIMING, END‐OF‐MONTH, AND WILD‐CARD OPTIONS
    13. 11.13 CASE STUDY: BASIS TRADES IN MARCH 2020
    14. NOTES
  18. CHAPTER 12: Short‐Term Rates and Their Derivatives
    1. 12.1 SHORT‐TERM RATES AND THE TRANSITION FROM LIBOR
    2. 12.2 ONE‐MONTH SOFR FUTURES
    3. 12.3 FED FUND FUTURES
    4. 12.4 THREE‐MONTH SOFR FUTURES
    5. 12.5 EURIBOR FORWARD RATE AGREEMENTS AND FUTURES
    6. 12.6 THE FUTURES‐FORWARD DIFFERENCE
    7. NOTES
  19. CHAPTER 13: Interest Rate Swaps
    1. 13.1 MARKET SIZE AND PARTICIPANTS
    2. 13.2 IRS CASH FLOWS AND ANALYTICS
    3. 13.3 USES OF INTEREST RATE SWAPS
    4. 13.4 COUNTERPARTY CREDIT RISK
    5. 13.5 CLEARING AND CENTRAL COUNTERPARTIES
    6. 13.6 BASIS SWAPS
    7. NOTES
  20. CHAPTER 14: Corporate Debt and Credit Default Swaps
    1. 14.1 CORPORATE BONDS AND LOANS
    2. 14.2 DEFAULT RATES, RECOVERY RATES, AND CREDIT LOSSES
    3. 14.3 CREDIT SPREADS
    4. 14.4 CREDIT RISK PREMIUM
    5. 14.5 CREDIT DEFAULT SWAPS
    6. 14.6 CDS UPFRONT AMOUNTS
    7. 14.7 CDS‐EQUIVALENT BOND SPREAD
    8. 14.8 CDS‐BOND BASIS
    9. 14.9 HAZARD‐ADJUSTED DURATION AND DV01
    10. 14.10 SPREAD DURATION AND DV01
    11. 14.11 CDS SETTLEMENT AUCTIONS
    12. 14.12 OPPORTUNISTIC CDS STRATEGIES
    13. 14.13 CASE STUDY: THE LONDON WHALE
    14. NOTES
  21. CHAPTER 15: Mortgages and Mortgage‐Backed Securities
    1. 15.1 THE MORTGAGE MARKET IN THE UNITED STATES
    2. 15.2 FIXED‐RATE MORTGAGE LOANS
    3. 15.3 ADJUSTABLE‐RATE MORTGAGES
    4. 15.4 PREPAYMENTS
    5. 15.5 MORTGAGE POOLS
    6. 15.6 PREPAYMENT MODELING
    7. 15.7 MORTGAGE PRICING, SPREADS, AND DURATION
    8. 15.8 TBA AND SPECIFIED POOLS MARKETS
    9. 15.9 RISK FACTORS AND HEDGING AGENCY MBS
    10. 15.10 DOLLAR ROLLS
    11. 15.11 OTHER MBS
    12. 15.12 CREDIT RISK TRANSFER SECURITIES
    13. NOTES
  22. CHAPTER 16: Fixed Income Options
    1. 16.1 EMBEDDED BOND CALL OPTIONS
    2. 16.2 EURIBOR FUTURES OPTIONS
    3. 16.3 BOND FUTURES OPTIONS
    4. 16.4 CAPS AND FLOORS
    5. 16.5 SWAPTIONS
    6. 16.6 SWAPTION SKEW
    7. NOTES
  23. APPENDIX TO CHAPTER 1: Prices, Discount Factors, and Arbitrage
    1. A1.1 DERIVING REPLICATING PORTFOLIOS
    2. A1.2 THE EQUIVALENCE OF DISCOUNTING AND ARBITRAGE PRICING
  24. APPENDIX TO CHAPTER 2: Swap, Spot, and Forward Rates
    1. A2.1 CONTINUOUS COMPOUNDING
    2. A2.2 RELATIONSHIPS BETWEEN SWAP OR PAR, SPOT, AND FORWARD RATES
  25. APPENDIX TO CHAPTER 3: Returns, Yields, Spreads, and P&L Attribution
    1. A3.1 YIELD TO MATURITY FOR SETTLEMENT DATES OTHER THAN COUPON PAYMENT DATES
    2. A3.2 YIELD TO MATURITY AND EX‐POST RETURNS
    3. A3.3 REALIZED FORWARD SCENARIO
  26. APPENDIX TO CHAPTER 4: DV01, Duration, and Convexity
    1. A4.1 DV01, DURATION, AND CONVEXITY OF PORTFOLIOS
    2. A4.2 ESTIMATING PRICE CHANGE WITH DURATION AND CONVEXITY
  27. APPENDIX TO CHAPTER 6: Regression Hedging and Principal Component Analysis
    1. A6.1 REGRESSION HEDGES AND P&L VARIANCE
    2. A6.2 CONSTRUCTION OF PRINCIPAL COMPONENTS
    3. A6.3 CONSTRUCTION OF PC: MATHEMATICAL DETAILS
    4. NOTE
  28. APPENDIX TO CHAPTER 8: Expectations, Risk Premium, Convexity and the Shape of the Term Structure
    1. NOTE
  29. APPENDIX TO CHAPTER 9: The Vasicek and Gauss+ Models
    1. A9.1 THE VASICEK MODEL IN A BINOMIAL TREE
    2. A9.2 THE GAUSS+ MODEL
    3. NOTES
  30. APPENDIX TO CHAPTER 11: Note and Bond Futures
    1. A11.1 FORWARD DROP APPROXIMATELY EQUALS CASH CARRY
    2. A11.2 FORWARD VERSUS FUTURES PRICES IN A TERM STRUCTURE MODEL
    3. A11.3 THE FUTURES‐FORWARD DIFFERENCE
    4. A11.4 FUTURES DELIVERY OPTIONS IN A TERM STRUCTURE MODEL
  31. APPENDIX TO CHAPTER 12: Short‐Term Rates and Their Derivatives
  32. APPENDIX TO CHAPTER 13: Interest Rate Swaps
    1. A13.1 PRICING A EURIBOR SWAP AS OF FEBRUARY 24, 2022
    2. A13.2 TWO‐CURVE PRICING
  33. APPENDIX TO CHAPTER 14: Corporate Debt and Credit Default Swaps
    1. A14.1 CUMULATIVE DEFAULT AND SURVIVAL RATES
    2. A14.2 UPFRONT AMOUNTS
    3. A14.3 AN APPROXIMATION FOR CDS SPREADS
    4. A14.4 CDS‐EQUIVALENT BOND SPREADS
    5. A14.5 BOND SPREAD WITH MARKET RECOVERY
  34. APPENDIX TO CHAPTER 15: Mortgages and Mortgage‐Backed Securities
    1. A15.1 MONTH‐END BALANCES
    2. A15.2 PRICING MBS WITH TERM STRUCTURE MODELS
    3. NOTE
  35. APPENDIX TO CHAPTER 16: Fixed Income Options
    1. A16.1 THEORETICAL FOUNDATIONS FOR APPLYING BLACK‐SCHOLES‐MERTON (BSM) TO SELECTED FIXED INCOME OPTIONS
    2. A16.2 NUMERAIRES, PRICING MEASURES, AND THE MARTINGALE PROPERTY
    3. A16.3 CHOOSING THE NUMERAIRE AND BSM PRICING
    4. A16.4 EXPECTATIONS FOR BLACK‐SCHOLES‐MERTON STYLE OPTION PRICING
    5. A16.5 FUTURES PRICES ARE MARTINGALES WITH THE MONEY MARKET ACCOUNT AS A NUMERAIRE
  36. About the Website
  37. Index
  38. End User License Agreement

Product information

  • Title: Fixed Income Securities, 4th Edition
  • Author(s): Bruce Tuckman, Angel Serrat
  • Release date: September 2022
  • Publisher(s): Wiley
  • ISBN: 9781119835554