Fixed Income Securities Tools for Today's Markets, University Edition

Angel Serrat holds a PhD in finance from MIT. Prior to joining the industry, he was a member of the finance faculty at The University of Chicago's Graduate School of Business. He has published in journals including The Review of Economic Studies, The Review of Financial Studies, and Econometrica. He was an executive director of strategy groups at Goldman Sachs and Credit Suisse, and later became a managing director at JPMorgan's global proprietary positioning business as a portfolio manager and head of strategy. He is currently a partner at Capula Investment Management, a fixed income asset management firm.

Acknowledgments xiii

An Overview of Global Fixed Income Markets 1

PART ONE The Relative Pricing of Securities with Fixed Cash Flows 47

CHAPTER 1 Prices, Discount Factors, and Arbitrage 51

CHAPTER 2 Spot, Forward, and Par Rates 69

CHAPTER 3 Returns, Spreads, and Yields 95

PART TWO Measures of Interest Rate Risk and Hedging 119

CHAPTER 4 One-Factor Risk Metrics and Hedges 123

CHAPTER 5 Multi-Factor Risk Metrics and Hedges 153

CHAPTER 6 Empirical Approaches to Risk Metrics and Hedging 171

PART THREE Term Structure Models 201

CHAPTER 7 The Science of Term Structure Models 207

CHAPTER 8 The Evolution of Short Rates and the Shape of the Term Structure 229

CHAPTER 9 The Art of Term Structure Models: Drift 251

CHAPTER 10 The Art of Term Structure Models: Volatility and Distribution 275

CHAPTER 11 The Gauss+ and LIBOR Market Models 287

PART FOUR Selected Securities and Topics 325

CHAPTER 12 Repurchase Agreements and Financing 327

CHAPTER 13 Forwards and Futures: Preliminaries 351

CHAPTER 14 Note and Bond Futures 373

CHAPTER 15 Short-Term Rates and Their Derivatives 401

CHAPTER 16 Swaps 435

CHAPTER 17 Arbitrage with Financing and Two-Curve Discounting 457

CHAPTER 18 Fixed Income Options 483

CHAPTER 19 Corporate Bonds and Credit Default Swaps 527

CHAPTER 20 Mortgages and Mortgage-Backed Securities 563

CHAPTER 21 Curve Construction 591

References 607

Exercises 609

Index 623

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