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2020 | Buch

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Fixed Income Analytics

Bonds in High and Low Interest Rate Environments

verfasst von: Dr. Wolfgang Marty

Verlag: Springer International Publishing

Enthalten in: Springer Professional "Wirtschaft+Technik" , Springer Professional "Wirtschaft"

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Über dieses Buch

This book analyses and discusses bonds and bond portfolios. Different yields and duration measures are investigated for negative and positive interest rates. The transition from a single bond to a bond portfolio leads to the equation for the internal rate of return. Its solution is analysed and compared to different approaches proposed in the financial industry. The impact of different yield scenarios on a model bond portfolio is illustrated. Market and credit risk are introduced as independent sources of risk. Different concepts for assessing credit markets are described. Lastly, an overview of the benchmark industry is offered and an introduction to convertible bonds is given. This second edition also includes a chapter on multi-currency portfolios as well as a discussion on currency hedging. This book is a valuable resource not only for students and researchers but also for professionals in the financial industry.

Inhaltsverzeichnis

Frontmatter

1. Introduction

Abstract

A fixed-income security is a financial obligation of an entity that promises to pay a specified sum of money at specified future dates. The entity can be a government, a company, or an individual and is called an issuer. The investor lends a specified amount of money to the issuer. A bond is a legal engagement between the issuer and an investor.

Wolfgang Marty

2. The Time Value of Money

Abstract

In this chapter, we introduce the basic notions and methods for assessing fixed-income instruments. The subject of this chapter is the connection between time and the value of money.

Wolfgang Marty

3. The Flat Yield Curve Concept

Abstract

Starting point are basic notions for assessing a single bonds. We define and discuss the flat yield concept. The non-linearity of the price and the yield of the Bond is examined. We discuss the Macaulay duration of a single bond in detail, including negative interest rates. We consider the transition from a single bond to a bond portfolio.

Wolfgang Marty

4. The Internal Rate of Return for a Bond Portfolio

Abstract

We consider a portfolio of bonds and discuss different yields. We examine the internal rate of return of a bond portfolio and its approximations used in the industry. Our analysis is based on power series. The here presented material is illustrated by numerical examples.

Wolfgang Marty

5. The Term Structure of Interest Rate

Abstract

We depart from the flat yield concept. The flat yield concept allows different discount factors for different bonds although cash flow occurs at the same time in the future. The concept of time value of money does not allow this situation and spot curves avoid this deficiency. We discuss the transition from yield curves to spot curves and spot curves to forward curves.

Wolfgang Marty

6. Spread Analysis

Abstract

We depart from bonds that are considered as riskless. Riskless in this context here means that the investor receives his initial capital back at the time to maturity and gets periodically coupon payments.

Wolfgang Marty

7. Different Fixed Income Instruments

Abstract

We consider different segments of the yield curve and discuss some instruments that are different from a straight bond. Some analytics of these instruments is included.

Wolfgang Marty

8. Fixed-Income Benchmarks

Abstract

Starting point is a general introduction in the benchmark industry followed by considering different benchmark bonds in different markets. We discuss fixed income as an asset class and give descriptions of benchmarks portfolio used in the financial industry. A study of the return distribution of some benchmark portfolio is included.

Wolfgang Marty

9. Convertible

Abstract

We describe the basic concepts of convertibles. These instruments are particular interesting for a fixed income investor in a low interest rate environment because they have an equity component. We include some aspects of price modelling and hedging properties of a convertible. For more in-depth information we refer to the text books at the end of the chapter.

Wolfgang Marty

10. Multi-Currency Portfolio

Abstract

We address the portfolio manager of a multicurrency fixed income portfolio. The here presented material is an extension of the first edition ‘Fixed Income Analytics’. Starting with some concepts in currency management, we proceed with multi-currency performance attribution.

Wolfgang Marty

Backmatter

Titel: Fixed Income Analytics
verfasst von: Dr. Wolfgang Marty
Verlag: Springer International Publishing
Electronic ISBN: 978-3-030-47158-3
Print ISBN: 978-3-030-47157-6
DOI: https://doi.org/10.1007/978-3-030-47158-3