Fixed–Income Analysis for the Global Financial Market: Money Market, Foreign Exchange, Securities, and Derivatives

Global fixed–income markets, both securities and their derivatives, have registered phenomenal growth over the past two decades, yet many instruments and strategies are often misunderstood and, as a result, mishandled for the purposes of effective risk management.

This comprehensive new book explains and clarifies the essential building blocks underlying the pricing and risk analysis of fixed–income securities and derivatives–using mathematics lightly, to make things easier, not harder. The emphasis throughout is on how–to–do, on building operational knowledge from the ground up. There are more than 300 examples and exhibits based on current market data.

The international dimension is also an integral part of the analysis. A true global financial village has emerged, heavily dependent for its operations on real–time international telecommunications networks. The focus of this book is on instruments which can be freely traded internationally, generally without controls, taxes, or other restrictions. You will find essential information on:
∗ The global money market
∗ Foreign exchange transactions and foreign exchange derivatives
∗ Bonds and zero coupon bonds–including a risk management–driven discussion
of duration and convexity
∗ Interest rate swaps, currency swaps, and exchange–traded futures
∗ Stochastic models and option pricing
∗ Stochastic models of the yield curve

Written for a wide range of finance professionals and packed with a wealth of exhibits, this is the ideal resource for anyone seeking a firmer grasp of this important topic.

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Partial table of contents:

SHORT–TERM MONEY MARKET INSTRUMENTS.

Background and Terminology.

Interest, Discount, Compounded Yield.

Foreign–Exchange Transactions.

LONG–TERM SECURITIES, FUTURES, AND SWAPS.

Zero–Coupon Bonds.

Fixed– Interest Coupon Bonds.

Futures on Bonds and Notes.

OPTIONS.

An Introduction to Options.

Fixed–Income Options, Bonds with Optionlike Features.

Modeling the Yield Curve.

Selected Bibliography.

Index.

GIORGIO S. QUESTA is a senior consultant at Pareto Partners, a quantitative institutional asset management firm with operations in the U.K., the U.S., and Australia. He teaches a number of graduate courses in finance, both in the U.S. and Europe. Previously, he was the CEO of IMI International, an investment banking and asset management firm with operations in New York, London, Frankfurt, and Luxembourg. He has also worked with Procter & Gamble and Andersen Consulting.