Analysing and Interpreting the Yield Curve

Understand and interpret the global debt capital markets

Now in a completely updated and expanded edition, this is a technical guide to the yield curve, a key indicator of the global capital markets and the understanding and accurate prediction of which is critical to all market participants. Being able to accurately and timely predict the shape and direction of the curve permits practitioners to consistently outperform the market.

Analysing and Interpreting the Yield Curve, 2nd Edition describes what the yield curve is, explains what it tells participants, outlines the significance of certain shapes that the curve assumes and, most importantly, demonstrates what factors drive it and how it is modelled and used.

• Covers the FTP curve, the multi-currency curve, CSA, OIS-Libor and 3-curve models

• Gets you up to speed on the secured curve

• Describes application of theoretical versus market curve relative value trading

• Explains the concept of the risk-free rate

• Accessible demonstration of curve interpolation best-practice using cubic spline, Nelson-Siegel and Svensson 94 models

This advanced text is essential reading for traders, asset managers, bankers and financial analysts, as well as graduate students in banking and finance.

Autorentext

DR. MOORAD CHOUDHRY is Head of Asset-Liability Management at Cambridge & Counties Bank in Leicester. He previously worked as a sovereign bond trader at ABN Amro Hoare Govett Limited and Hambros Bank Limited, a structured finance repo trader at KBC Financial Products, and was latterly Treasurer, Corporate Banking Division at The Royal Bank of Scotland.
Moorad is a Fellow of the Chartered Institute for Securities & Investment, a Fellow of the London Institute of Banking and Finance, a Fellow of the Institute of Directors, and a Freeman of the Worshipful Company of International Bankers.

Klappentext

Praise for Analysing and Interpreting the Yield Curve Second Edition "Analysing and modeling the yield curve are key issues for anyone involved in fixed income, including investors, fund managers and risk managers in banks and insurance firms. However, mastering interest rates is challenging, as the last decades have seen the development of a profusion of theoretical models and approaches. The value of Professor Choudhry's text is that it provides in a unique, gradual and intuitive manner, all key insights in concepts and techniques needed by practitioners to understand the yield curve." Joel Bessis, Professor of Finance, HEC Paris "A true masterpiece! Moorad Choudhry has managed to produce a very complete and balanced book on interest rates, which are key to developing a comprehensive banking ALM system for practitioners and researchers alike, especially for all of us in the field of FTP design." Antonio Mota Pizarro, Director Financiero en Globalcaja, Madrid "As worthy of our interest and study now as it was when the first edition was published All Those Years Ago. Bravo, Brother Moorad!" Mohamoud Dualeh, Head of Product Development, Alizz Islamic Bank, Muscat "Moorad Choudhry is an experienced and expert market practitioner who provides a splendid combination of theory and practice on this topic. Analysing and Interpreting the Yield Curve, in its second edition, is an indispensable guide for professionals and students alike." Rafael Hurtado, Market, Liquidity and ALM Risk Manager, Banco de Crédito del Perú, Lima "A superb book for market participants to understand the complexities and latest techniques required to dissect the yield curve, from an author who is a recognised expert banking practitioner. Written in his usual easy-to-read style, this book is essential for both the fund manager and the academic." Stuart Turner, EMEA Head of Clearing Collateral Management, Société Générale, London

Zusammenfassung
Understand and interpret the global debt capital markets

Now in a completely updated and expanded edition, this is a technical guide to the yield curve, a key indicator of the global capital markets and the understanding and accurate prediction of which is critical to all market participants. Being able to accurately and timely predict the shape and direction of the curve permits practitioners to consistently outperform the market.

Analysing and Interpreting the Yield Curve, 2nd Edition describes what the yield curve is, explains what it tells participants, outlines the significance of certain shapes that the curve assumes and, most importantly, demonstrates what factors drive it and how it is modelled and used.

• Covers the FTP curve, the multi-currency curve, CSA, OIS-Libor and 3-curve models
• Gets you up to speed on the secured curve
• Describes application of theoretical versus market curve relative value trading
• Explains the concept of the risk-free rate
• Accessible demonstration of curve interpolation best-practice using cubic spline, Nelson-Siegel and Svensson 94 models
  This advanced text is essential reading for traders, asset managers, bankers and financial analysts, as well as graduate students in banking and finance.

Inhalt

Foreword ix

Preface xi

Preface to the First Edition xiii

Acknowledgments xv

About the Author xvii

Part 1 Introduction to the Yield Curve 3

Chapter 1 The Yield Curve 5

Chapter 2 A Further Look at Spot and Forward Rates 61

Part 2 Yield Curve Modelling and Post-2008 Yield Curve Analytics 93

Chapter 3 Interest Rate Modelling I: Primer on Basic Concepts 95

Chapter 4 Interest Rate Modelling II: The Dynamic of Asset Prices 115

Chapter 5 Interest Rate Models I 139

Chapter 6 Interest Rate Models II 163

Chapter 7 The Index-Linked Bond Yield Curve 181

Chapter 8 Yield Curve Analytics in the Post-2008 Era 193

Chapter 9 Negative Interest Rate Analytics 219

Part 3 Fitting the Yield Curve 229

Chapter 10 Estimating and Fitting the Yield Curve I 231

Chapter 11 Estimating and Fitting the Yield Curve II 253

Part 4 Yield Curves and Relative Value Trading 277

Chapter 12 Yield Curves and Relative Value 279

Chapter 13 Identifying Relative Value in the US Treasury Market: Acquiring New Benchmark Definitions from an Ancillary Yield Curve 291

Appendix: Bond Yield Measurement 321

Index 353