The first edition of Bond Markets, Analysis, and Strategies was published in 1989. The objective was to provide coverage of the products, analytical techniques for valuing bonds and quantifying their exposure to changes in interest rates, and portfolio strategies for achieving a client's objectives In the three editions subsequently published and in the current edition, the coverage of each of these areas has been updated. In the product area, the updating has been primarily for the latest developments in mortgage-backed securities and asset-backed securities. The updating of analytical techniques has been in the valuation of bonds with embedded options and measures for assessing the interest rate risk of complex instruments. Strategies for accomplishing investment objectives, particularly employing derivative instruments, have been updated in each edition.
Each edition has benefited from the feedback of readers and instructors using the book at universities and training programs. Many discussions with portfolio managers and analysts, as well as my experiences serving on the board of directors of several funds and consulting assignments, have been invaluable in improving the content of the book. Moreover, my fixed income course at Yale's School of Management and various presentations to institutional investor groups throughout the world provided me with the testing ground for new material.
The changes made to the fourth edition are as follows. Major revisions were made to the following chapters: Treasury and Agency Securities Markets (Chapter 6) and Non-U.S. Bonds (Chapter 9). There is expanded coverage of the (1) factors considered by rating agencies inrating corporate bonds (Chapter 7), asset classes securitized (Chapter 14), tracking error and active portfolio strategies (Chapter 19), and valuation of interest rate swaps and caps/floors (Chapter 25). In the fifth edition three chapters were added:
Chapter 13: Commercial Mortgage-Backed Securities Chapter 15: Collateralized Debt Obligations Chapter 26: Credit Derivatives
I am indebted to the following individuals who shared with me their views on various topics covered in this book: Scott Amero (B1ackRock Financial Management), Mark Anson (Ca1PERS), Anand Bhattacharya (Countrywide Securities), John Carlson (Fidelity Management and Research), Moorad Choudry (JP Morgan Chase), Dwight Churchill (Fidelity Management and Research), Sylvan Feldstein (Guardian Life), Michael Ferri (George Mason University), Gifford Fong (Gifford Fong Associates), Laurie Goodman (UBS Warburg), Joseph Guagliardo (FNX), David Horowitz (Miller, Anderson & Sherrerd), Frank Jones (San Jose State University), Andrew Kalotay (Andrew Kalotay Associates), Dragomir Krgin, Martin Leibowitz (TIAA-CREF), Jack Malvey (Lehman Brothers), Steven Mann (University of South Carolina), Jan Mayle (TIPS), William McLelland, Franco Modigliani (MIT), Ed Murphy (Merchants Mutual Insurance), Mark Pitts (White Oak Capital Management), Chuck Ramsey (Mortgage Risk Assessment Corporation), Scott Richard (Miller, Anderson & Sherrerd), Ron Ryan (Ryan Labs), Dexter Senft (Lehman Brothers), Richard Wilson, Ben Wolkowitz (Morgan Stanley), David' Yuen (Franklin Advisors), Paul Zhao (TIAA-CREF), and Yu Zhu.
I also received extremely helpful comments from a number of colleagues using the text in an academic setting. These individuals helped me refine previous editions and I am sincerely appreciative of their suggestions. They are:
- Russell R. Wermers, University of Colorado at Boulder
- John H. Spitzer, University of Iowa
- John Edmunds, Babson College
I am confident that the fifth edition continues the tradition of providing up-to-date information about the bond market and the tools for managing bond portfolios.
Frank J. Fabozzi
