The handbook of fixed income securities.

Cover
Title Page
Copyright Page
Contents
Preface
Acknowledgments
Contributors
PART ONE INTRODUCTION
	Chapter 1 Overview of the Types and Features of Fixed Income Securities
		Bonds
		Medium-Term Notes
		Preferred Stock
		Residential Mortgage-Backed Securities
		Commercial Mortgage-Backed Securities
		Asset-Backed Securities
		Covered Bonds
		Beyond Traditional Liquid Fixed Income Instrument
		Key Points
	Chapter 2 Risks Associated with Investing in Fixed Income Securities
		Interest-Rate Risk
		Reinvestment Risk
		Call/Prepayment Risk
		Corporate Credit Risk
		Sovereign Credit Risk
		Inflation, or Purchasing-Power, Risk
		Liquidity Risk
		Exchange-Rate Risk (Currency Risk)
		Volatility Risk
		Political or Legal Risk
		Event Risk
		Sector Risk
		Other Risks
		Statistical Measures of Portfolio Risk
		Tracking Error Risk
		Key Points
	Chapter 3 The Structure of Interest Rates
		The Base Interest Rate
		Risk Premium
		The Term Structure of Interest Rates
		Key Points
PART TWO BASICS OF FIXED INCOME ANALYTICS
	Chapter 4 Bond Pricing, Yield Measures, and Total Return
		Bond Pricing
		Conventional Yield Measures
		Total Return Analysis
		Key Points
	Chapter 5 Measuring Interest-Rate Risk
		The Full-Valuation Approach
		Price Volatility Characteristics of Bonds
		Duration
		Modified Duration Versus Effective Duration
		Convexity
		Price Value of a Basis Point
		The Importance of Yield Volatility
		Key Points
	Chapter 6 Data Science and the Corporate Credit Markets
		Defining Data Science
		Selected Data Science Tools, Techniques, and Uses for Investing
		Data Science and Investment Efficiency
		Risk and Performance
		Why Data Science Is Different in Credit
		Organization and Planning
		Key Points
PART THREE TREASURY, AGENCY, MUNICIPAL, AND CORPORATE BONDS
	Chapter 7 U.S. Treasury Securities
		Types of Securities
		The Primary Market
		The Secondary Market
		Zero-Coupon Treasury Securities
		Key Points
	Chapter 8 Agency Debt Securities
		Agency Debt Market Overview
		Types of Agency Debt Securities
		The Primary Market
		The Secondary Market
		Agency Debt Issuance
		Issuing Agencies
		Large, Active Issuers
		Smaller, Active Issuers
		Nonactive Issuers and Recently Retired GSEs
		Key Points
	Chapter 9 Municipal Bonds
		Features of Municipal Securities
		Types of Municipal Obligations
		The Commercial Credit Rating of Municipal Bonds
		Municipal Bond Insurance
		Valuation Methods
		Tax Provisions Affecting Municipals
		Yield Relationships Within the Municipal Bond Market
		Primary and Secondary Markets
		Bond Indexes
		Official Statement
		Regulation of the Municipal Securities Market
		Key Points
	Chapter 10 Corporate Bonds
		The Corporate Trustee
		Some Bond Fundamentals
		Security for Bonds
		Alternative Mechanisms to Retire Debt Before Maturity
		Credit Risk
		Event Risk
		High-Yield Bonds
		Default Rates and Recovery Rates
		Medium-Term Notes
		Key Points
	Chapter 11 Leveraged Loans
		Syndicated Bank Loans
		Loan Structure
		Loan Terms
		Recovery Rates
		Secondary Market
		Key Points
	Chapter 12 Structured Notes and Credit-Linked Notes
		Structured Notes
		Credit-Linked Notes
		Key Points
	Chapter 13 Commercial Paper
		Payment Schedule and Price Quotation
		Primary and Secondary Markets
		Regulatory Treatment
		Issuers
		Investors
		Default Risk Measurement and Realization
		CP Rates
		Maturity Distribution
		Backup Lines
		Regulatory Responses to Crises
		Key Points
	Chapter 14 Floating-Rate Securities
		General Features of Floaters and Major Product Types
		Call and Put Provisions
		Spread Measures
		Price Volatility Characteristics of Floaters
		Portfolio Strategies
		Demise of LIBOR
		Key Points
	Chapter 15 Inflation-Linked Bonds
		Mechanics and Measurement
		Marketplace
		Valuation and Performance Dynamics
		Investors
		Issuers
		Other Issues
		Key Points
	Chapter 16 Non-U.S. Sovereign Bonds
		Size of the Sovereign Bond Market
		Types of Securities Issued
		Primary Market for Sovereign Debt
		Secondary Market
		Sovereign Credit Risk
		Sovereign Bond Yield Spreads
		Sovereign Bonds from the Investor’s Perspective
		Key Points
	Chapter 17 The Emerging Markets Debt
		The Debt Universe
		External Debt Markets
		Local Debt Markets
		The Foreign Investor Base
		EM Debt Performance
		Sovereign Debt Sustainability
		What Do EM Spreads Compensate For?
		Sovereign Restructurings
		Derivatives
		Key Points
	Chapter 18 Fixed Income Exchange Traded Funds
		Investment Characteristics
		Fixed Income ETF Management
		Fixed Income ETF Characteristics and Mechanics
		Trading Behavior: A Closer Look at Premiums, Discounts, and Price Discovery
		Key Points
	Chapter 19 Nonconvertible Preferred Stock
		Preferred Stock Issuance
		Trust Preferred
		Preferred Stock Ratings
		Tax Treatment of Dividends
		Key Points
	Chapter 20 Private Infrastructure Debt
		Infrastructure Borrowers
		Characteristics
		Pricing Determinants
		Credit Risk
		Key Points
PART FOUR MORTGAGE-BACKED AND ASSET-BACKED SECURITIES
	Chapter 21 An Overview of Mortgages and the Mortgage Market
		Product Definition and Terms
		The Mortgage Industry
		The Loan Underwriting Process
		Generation of Mortgage Lending Rates
		Risks Associated with Mortgage Products
		Key Points
	Chapter 22 Agency Mortgage Passthrough Securities
		Issuers of Agency Passthroughs
		Cash-Flow Characteristics
		Some MBS Analytics
		Anatomy of the Agency Passthrough Market
		TBA Coupons
		Specified Trades
		Key Points
	Chapter 23 Agency Collateralized Mortgage Obligations
		The CMO Market
		The Reasons Why CMOs Exist
		CMO Tranche Types
		Agency Versus Nonagency CMOs
		Agency CMO Analysis
		Key Points
	Chapter 24 Stripped Mortgage-Backed Securities
		Overview of the SMBS Market
		Investment Characteristics
		Key Points
	Chapter 25 Nonagency Residential Mortgage-Backed Securities: Legacy, RMBS 2.0, and Non-QM
		Market Overview
		Collateral
		Capital Structure
		Housing Market
		Relative Value and Risk Analysis
		Key Points
	Chapter 26 Covered Bonds
		Covered Bonds: From Europe to the Rest of the World
		Understanding Covered Bonds
		Structure of Covered Bonds
		Maturity Structure of Covered Bonds
		Cover Assets and Credit Enhancements
		Asset/Liability Mismatches and Liquidity Risk
		Ratings of Covered Bonds
		Covered Bonds and Securitization
		Accounting for Covered Bonds
		Key Points
	Chapter 27 Commercial Mortgage-Backed Securities
		The Collateral Pool
		CMBS Trust Structure
		Transaction Participants
		Transaction Features
		Market Development
		Modeling
		Key Points
	Chapter 28 Credit Card Asset-Backed Securities
		Securitization of Credit Card Receivables
		The Credit Card ABS Life Cycle
		Cash-Flow Allocations
		Credit and Investment Considerations
		Key Points
	Chapter 29 Securities Backed by Auto Loans and Leases, Equipment Loans and Leases, and Student Loans
		Securitization in Brief
		Auto Loans and Leases
		Equipment Loans and Leases
		Student Loans
		Key Points
	Chapter 30 Collateralized Loan Obligations
		Assets
		Capital Structure
		Creation Purpose
		Credit Structures
		Market Size, Trading
		How a CLO is Created
		Fees
		Buyers
		Trading of CLO Collateral
		Key Points
PART FIVE THE YIELD CURVE AND THE TERM STRUCTURE
	Chapter 31 Overview of Forward Rate Analysis
		Computation of Par, Spot, and Forward Rates
		Main Influences on the Yield-Curve Shape
		Using Forward Rate Analysis in Yield-Curve Trades
		Key Points
	Chapter 32 A Framework for Analyzing Yield-Curve Trades
		Forward Rates and Their Determinants
		Decomposing Expected Returns of Bond Positions
		Key Points
	Chapter 33 Empirical Yield-Curve Dynamics and Yield-Curve Exposure
		Empirical Analysis of Yield-Curve Dynamics
		Theoretical Determinants of Yield-Curve Dynamics
		Yield-Curve Dynamics and Risk Management
		Key Points
	Chapter 34 Term Structure Modeling with No-Arbitrage Interest Rate Models
		Introduction to Models of the Short Rate
		Binomial Interest Rate Lattices
		Trinomial Lattice
		Key Points
PART SIX VALUATION AND RELATIVE VALUE
	Chapter 35 Relative Value Trading
		What Is Fixed Income Relative Value?
		Z-Score, Mean Reversion, and Expected Return
		Market-Based vs. Model-Based Relative Value
		Scenario and Horizontal Analysis
		Data and the Future of Relative Value
		Key Points
	Chapter 36 Valuation of Bonds with Embedded Options
		The Interest Rate Lattice
		Calibrating the Lattice
		Using the Lattice for Valuation
		Fixed-Coupon Bonds with Embedded Options
		Valuation of Two More Exotic Structures
		Extensions
		Key Points
	Chapter 37 Valuation of Mortgage-Backed Securities
		Static Valuation and Its Limitations
		Monte Carlo Models for Valuing MBS
		Mbs Modeling Framework
		Option-Adjusted Valuation Metrics
		An Illustrative Example
		Key Points
	Chapter 38 Convertible Securities
		Convertible Note
		Convertible Note as a Contingent Claim
		Stages of a Convertible Note
		Investing in Convertible Securities
		Convertible Note Valuation Framework
		Model Outputs: Implieds and Greeks
		Mandatorily Convertible Securities
		Trading Convertible Portfolios
		Delta Trading P&L: A High Volatility Scenario Example
		Key Points
		Additional Comments
	Chapter 39 Risk Neutral Pricing of Convertible Bonds
		The Model
		The Default Intensity
		Specifying the Credit Spread
		Sensitivities
		Convertible Bond Arbitrage
		Key Points
PART SEVEN CREDIT ANALYSIS
	Chapter 40 Credit Analysis for Corporate Bonds
		Approaches to Credit Analysis
		Industry Considerations
		Financial Analysis
		Combining Financial and Nonfinancial Analysis
		Indenture Provisions
		Utilities
		Finance Companies
		The Analysis of High-Yield Corporate Bonds
		Credit Scoring Models
		Key Points
	Chapter 41 The Credit Analysis of Municipal General Obligation and Revenue Bonds
		The Legal Opinion
		The Need to Know Who Really Is the Issuer
		On the Financial Advisor and Underwriter
		General Credit Indicators and Economic Factors in the Credit Analysis
		Red Flags for the Investor
		Information Sources for the Analyst
		Key Points
	Chapter 42 Credit-Risk Modeling
		Structural Credit Models
		Reduced-Form Credit Models
		Incomplete-Information Credit Models
		Key Points
PART EIGHT PORTFOLIO MANAGEMENT AND STRATEGIES
	Chapter 43 Introduction to Bond Portfolio Management
		Overview of Traditional Bond Management
		Overview of the Core/Satellite Approach
		Why Choose Indexing?
		Which Index Should Be Used?
		Primary Bond Indexing Risk Factors
		Enhancing Bond Indexing
		Measuring Success
		Key Points
	Chapter 44 Trading in the Bond Market
		Fixed Income Liquidity
		Trading Approaches
		Mechanics of Bond and Foreign Exchange Trading
		Electronic Trading
		Key Points
	Chapter 45 Bond Indexes and Bond Portfolio Management
		Building a Bond Index
		Description
		Bond Index Risk and Return
		Bond Index Relationship
		Bond Indexes and Smart Beta
		Key Points
	Chapter 46 Quantitative Management of Benchmarked Portfolios
		Selection and Customization of Benchmarks
		Diversification Issues in Benchmarks
		Portfolio Analysis Relative to a Benchmark
		Quantitative Approaches to Benchmark Replication
		Controlling Issuer-Specific Risk in the Portfolio
		Quantitative Methods for Portfolio Optimization
		Summary: Portfolio Management Tool Set
		Key Points
	Chapter 47 Factor Investing in Fixed Income Securities
		Factor Investing
		Which Factors?
		Factors Premiums in Government Bonds
		Factor Premiums in Corporate Bonds
		Fixed Income Factors in Multi-Asset Portfolios
		Key Points
	Chapter 48 Active Factor Fixed Income Investing
		Active Quant Fixed Income
		Active Quant Top Down
		Active Quant Bottom Up
		Four-Dimensional Chess
		Key Points
	Chapter 49 Introduction to Multifactor Risk Models in Fixed Income and Their Applications
		Motivation and Structure Underlying Fixed Income Multifactor Risk Models
		Fixed Income Risk Models
		Applications of Risk Modeling
		Key Points
	Chapter 50 Analyzing Risk from Multifactor Fixed Income Models
		Approaches Used to Analyze Risk
		Key Points
	Chapter 51 Cash-Flow Matching
		What Is Cash-Flow Matching?
		The CDI Methodology
		Future Value Versus Present Value
		Interest Rate Risk
		CDI Versus Active Bond Management
		CDI Versus LDI
		Key Points
	Chapter 52 Building Corporate Bond Portfolios
		Buy-and-Hold Investing
		Benchmarked Portfolios
		Key Points
	Chapter 53 Managing the Spread Risk of Credit Portfolios Using the Duration Times Spread Measure
		The Need for a New Measure of Credit Spread Exposure
		Spread Volatility and DTS
		Risk Projection: Predicting Spread Volatility
		Hedging: Predicting Sensitivities to Market Spread Changes
		Replication: Creating Index Tracking Portfolios
		Expressing Macro Views in Active Portfolios
		Portfolio Construction: Optimal Diversification of Issuer Risk
		Modeling: Calibrating Credit Risk Factors
		The Term Structure of Relative Spread Volatility
		Key Points
	Chapter 54 Constructing and Managing High-Yield Bond Portfolios
		Bottom-Up Credit/Security Analysis
		Top-Down High-Yield Market Drivers and Macro Considerations
		Portfolio Considerations
		Key Points
	Chapter 55 Corporate Bonds and ESG
		The Bond Manager Role
		Managing Risks and Taking Opportunities
		International Norm-Based Strategies
		Key Strategies for Managing Climate Impact of Bond Portfolios
		The Green Bond Dilemma and Future Outlook
		Key Points
	Chapter 56 Global Credit Bond Portfolio Management
		Credit Relative-Value Analysis
		Total-Return Analysis
		Primary Market Analysis
		Liquidity and Trading Analysis
		Secondary Trade Rationales
		Spread Analysis
		Structural Analysis
		Credit-Curve Analysis
		Credit Analysis
		Green Bonds/ESG Compliant
		Asset Allocation/Sector Rotation
		Key Points
	Chapter 57 International Bond Portfolio Management
		Risks and Returns in International Bond Portfolios
		A Yield Curve–Based Approach for International Bond Portfolios
		Currency Allocation and Bond Selection: Portfolio Construction
		Optimization Technique for Multicurrency Bond Portfolios
		Risk Management and Additional Tools
		Performance Measurement and Attribution
		Key Points
	Chapter 58 Factor Investing in Sovereign Bond Markets
		Problems with Existing Bond Benchmarks
		Benefits and Pitfalls of Factor Investing in Fixed-Income Markets
		Taxonomy of Fixed Income Factors
		Level and Slope Factors in Sovereign Bond Markets
		Value Factor
		Momentum Factor
		Key Points
	Chapter 59 Hedge Fund Fixed Income Strategies
		Macro Investing
		Understanding the Components of the Statistics
		Big Changes Are Very Important
		The Yield Curve
		Political Self-Interest Versus Interest of the Sovereign
		Asset-Backed Credit Strategy
		Capital Structure Arbitrage
		Long/Short Credit Strategy
		Distressed Debt
		Basis Trading
		Volatility Trading
		Cross-Currency Arbitrage
		Key Points
	Chapter 60 Financing Positions in the Bond Market
		Repurchase Agreement
		Dollar Rolls
		Margin Buying
		Securities Lending
		Key Points
PART NINE DERIVATIVE INSTRUMENTS AND THEIR APPLICATIONS
	Chapter 61 Introduction to Interest-Rate Futures and Options Contracts
		Basic Characteristics of Futures Contracts
		Basic Characteristics of Forward Contracts
		Basic Characteristics of Option Contracts
		Differences Between Options and Futures (Forward) Contracts
		Representative Exchange-Traded Interest-Rate Futures Contracts
		Mechanics of Futures Trading
		Representative Exchange-Traded Futures Options Contracts
		OTC Contracts
		Key Points
	Chapter 62 Pricing Futures and Portfolio Applications
		Pricing of Futures Contracts
		Applications to Portfolio Management
		Portable Alpha
		Key Points
	Chapter 63 Controlling Interest-Rate Risk with Futures and Options
		Controlling Interest-Rate Risk with Futures
		Hedging with Options
		Key Points
	Chapter 64 Interest-Rate Swaps
		Interest-Rate Swaps
		Features of a Generic Swap
		Interpreting a Swap Position
		Terminology, Conventions, and Market Quotes
		Applications
		Dollar Duration of a Swap
		Innovations in Swap Markets
		Asset Swap
		Termination of Interest-Rate Swaps
		Key Points
	Chapter 65 The Valuation of Interest-Rate Swaps and Swaptions
		Swap Valuation Using the Lattice Approach
		Forward Start Swaps
		Valuing Swaptions
		Valuing Basis Swaps and Non-LIBOR-Based Swaps
		Factors Affecting Swap Valuation
		Key Points
	Chapter 66 The Basics of Interest-Rate Options
		How Options Work
		Options Strategies—Reorganizing the Profit/Loss Graph
		Classic Option Strategies
		Practical Portfolio Strategies
		Volatility
		Key Points
	Chapter 67 Interest-Rate Caps and Floors
		Features of Interest-Rate Caps and Floors
		Pricing of Caps and Floors
		Interest-Rate Caps
		Participating Caps
		Interest-Rate Floors
		Interest-Rate Collars
		Interest-Rate Corridors
		Cap/Floor Parity
		Termination of Caps and Floors
		Key Points
	Chapter 68 Credit Derivatives
		Evolution of the Credit Derivatives Market
		The Credit Default Swap
		CDS Mechanics
		Credit Events
		The CDS Settlement Timeline
		CDS Indices
		Importance of the CDS Market
		Key Points
	Chapter 69 Credit Derivative Valuation and Risk
		CDS Valuation
		The CDS–Bond Relationship
		Model
		New and Existing Contracts
		Risk Management
		CDS Index Valuation
		Key Points
PART TEN PERFORMANCE ATTRIBUTION ANALYSIS
	Chapter 70 Principles of Performance Attribution
		Principles of Performance Attribution
		Mathematics of Performance Attribution
		Applications of Performance Attribution
		Key Points
	Chapter 71 Performance Attribution for Portfolios of Fixed Income Securities
		Return Splitting
		Outperformance Breakdown
		Total Return Model
		Excess Return Model
		Fully Analytical Model
		Selecting an Appropriate Attribution Model
		Key Points
	Chapter 72 Advanced Topics in Performance Attribution
		Multicurrency Attribution
		Derivatives and Leverage
		From Theory to Practice
		Key Points
Index