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    Interest Rate Markets - Siddhartha Jha

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    Nipun Dua
    This document provides an overview and table of contents for a book on interest rate markets. The book contains 12 chapters that cover fundamental concepts like bonds, interest rate derivatives, drivers of rates, and trading strategies. It discusses tools for analyzing rates, the mechanics of bonds and various fixed income assets, interest rate futures, swaps, hedging, and volatility trading. The goal is to provide a practical guide to the fixed income markets and different approaches for participating in them.

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    Interest Rate Markets - Siddhartha Jha

    Uploaded by

    Nipun Dua
    2K views6 pages
    This document provides an overview and table of contents for a book on interest rate markets. The book contains 12 chapters that cover fundamental concepts like bonds, interest rate derivatives, drivers of rates, and trading strategies. It discusses tools for analyzing rates, the mechanics of bonds and various fixed income assets, interest rate futures, swaps, hedging, and volatility trading. The goal is to provide a practical guide to the fixed income markets and different approaches for participating in them.

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    Interest Rate Markets

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    This document provides an overview and table of contents for a book on interest rate markets. The book contains 12 chapters that cover fundamental concepts like bonds, interest rate derivatives, drivers of rates, and trading strategies. It discusses tools for analyzing rates, the mechanics of bonds and various fixed income assets, interest rate futures, swaps, hedging, and volatility trading. The goal is to provide a practical guide to the fixed income markets and different approaches for participating in them.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    2K views6 pages

    Interest Rate Markets - Siddhartha Jha

    Uploaded by

    Nipun Dua
    This document provides an overview and table of contents for a book on interest rate markets. The book contains 12 chapters that cover fundamental concepts like bonds, interest rate derivatives, drivers of rates, and trading strategies. It discusses tools for analyzing rates, the mechanics of bonds and various fixed income assets, interest rate futures, swaps, hedging, and volatility trading. The goal is to provide a practical guide to the fixed income markets and different approaches for participating in them.

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    You are on page 1of 6

    Interest Rate

    Markets
    A Practical Approach to
    Fixed Income

    SIDDHARTHA JHA

    WILEY
    John Wiley & Sons, Inc.

    Contents
    Acknowledgments

    xiii

    Introduction
    CHAPTER 1 Tools of the Trade

    xv
    ''

    Basic Statistics
    Regression: The Fundamentals
    Regression: How Good a Fit? }
    Principal Components Analysis
    Scaling through Time
    Backtesting Strategies
    Summary

    2
    6
    11
    14
    15
    16
    17

    CHAPTER 2 Bonds

    19

    Basics of Bonds
    Risks Embedded in Fixed Income Instruments
    Discounting i
    Bond Pricing
    Yield Curve
    Duration
    Convexity
    Repo Markets
    Bid Offer
    Calculating Profit/Loss of a Bond
    Carry

    19
    22
    27
    28
    32
    34
    37
    42
    44
    45
    45

    Vill

    Forward Rates
    Roildown/Slide
    Curves and Spreads
    Butterfly Trades
    Summary

    CONTENTS

    47
    51
    53
    55
    56

    .
    .
    i

    if

    CHAPTER 3 Fixed Income Markets 1


    Federal Reserve
    Treasuries
    STRIPS
    TIPS
    Mortgages
    Agency Debt
    Corporate Bonds
    Municipal Bonds
    Summary

    59
    60
    67
    70
    71
    73
    77
    ; 79
    82
    84

    CHAPTER 4 Interest Rate Futures

    85

    Basics of Futures Transactions


    Eurodollar Futures
    Convexity (or Financing) Bias
    Creating Longer-Dated Assets Using
    Eurodollar Futures
    Treasury Futures
    Fed Funds Futures
    Futures Positioning Data
    Summary

    86
    89
    92
    93
    94
    101
    104
    105

    CHAPTER 5 Interest Rate Swaps

    107

    Basic Principles
    Duration and Convexity
    Uses of Swaps
    Counterparty Risk
    Other Types of Swaps
    Summary

    108
    111
    112
    115
    115
    124

    Contents

    ix

    CHAPTER 6 Understanding Drivers of


    Interest Rates
    _.

    125

    Supply and Demand for Borrowing


    '
    Components of Fixed Income Supply and Demand
    Treasury Supply
    ,
    '
    Other Sources of Fixed Income Supply
    Fixed Income Demand
    -,Short-Term Yield Drivers
    Summary

    126
    141
    141
    145
    148
    157
    172

    CHAPTER 7 Carry and Relative Value Trades

    173

    Carry Trades
    Carry Trade Setup and Evaluation
    Pitfalls of the Carry Trade
    Carry-Efficient Directional Trades
    Relative Value Trades
    Setting Up Relative Value Trades
    Treasury Bond Relative ValuePar Curve
    Other Treasury Relative Value Trades
    Summary

    173
    175
    178
    182
    183
    185
    191
    193
    194

    CHAPTER 8 Hedging Risks- in Interest


    ' Rate Products

    197

    Principles of Hedging
    Choices of Instruments for Hedging
    Calculating Hedge Ratios
    Yield Betas
    Convexity Hedging
    Summary

    198
    202
    210
    215
    218
    223

    CHAPTER 9

    Trading Swap Spreads

    How Swap Spreads Work


    Why Trade Swap Spreads?
    Directionality of Swap Spreads to Yields
    Futures Asset Swaps

    225
    225
    230
    240
    241

    CONTENTS

    Spread Curve Trades

    243

    Summary

    245

    CHAPTER 10 Interest Rate Options and


    Trading Volatility

    247

    Option Pricing and Fundamentals

    249

    Modifications for the Interest Rate Markets

    254

    Quoting Volatility

    256

    Measuring Risks in Option Positions

    257

    Put/Call Parity

    266

    Implied and Realized Volatility

    268

    Skew

    270

    Delta Hedging

    270

    Interest Rate Options

    275

    Embedded Options and Hedging

    280

    More Exotic Structures

    283

    Yield Curve Spread Options

    284

    Forward Volatility

    285

    Volatility Trading

    286

    Interest Rate Skew

    293

    Volatility Spread Trades


    Caps versus Swaptions

    294
    ,

    297

    Summary '

    298

    CHAPTER 11 Treasury Futures Basis


    and Rolls

    299

    The Futures Delivery Option

    299

    Calculating the Delivery Option Value

    309

    Option-Adjusted and Empirical Duration

    311

    Treasury Futures Rolls

    313

    Summary

    318

    Contents

    xi

    CHAPTER 12 Conditional Trades


    Conditional Curve Trades
    Conditional Spread Trades
    Summary

    References

    319
    320
    324
    328

    329

    About the Author

    331

    About the Web Site

    333

    Index

    335

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