Introduction to Bond Markets provides a comprehensive, authoritative description of the bond markets and how bonds work.

The contents describe and define bonds within the context of the capital markets and the different types of bonds that are traded.

The Fourth Edition has been completely updated to reflect the many changes in the industry as a result of the financial crisis. In addition, four new chapters feature the causes of the financial crisis and the implications for bond investors, risk, return and diversification, securitization, and credit derivatives.

Ideal for traders, fund managers, and students in the field.

TABLE OF CONTENTS

1 INTRODUCTION TO BONDS.

Description.

Outline of market participants.

Bond analysis.

Financial arithmetic: the time value of money.

Present value and discounting.

Discount factors and boot-strapping the discount function.

Bond pricing and yield: the traditional approach.

Bond pricing.

Bond yield.

Accrued interest.

Clean and dirty bond prices.

Day-count conventions.

Illustrating bond yield using Excel spreadsheets.

Bibliography.

2 THE YIELD CURVE, SPOT AND FORWARD YIELDS.

The yield curve.

Yield-to-maturity yield curve.

The par yield curve.

The zero-coupon (or spot) yield curve.

The forward yield curve.

Theories of the yield curve.

Spot rates.

Discount factors and the discount function.

The boot-strapping method: deriving the theoretical zero-coupon (spot) rate curve.

Mathematical relationship.

Implied forward rates.

Understanding forward rates.

The term structure of interest rates.

Bibliography.

Published: September 10