Fixed-Income Securities: Dynamic Methods for Interest Rate Risk Pricing and Hedging

Overview

Fixed-Income Securities is essential reading for those involved with and requiring a detailed understanding of fixed-income securities. Combining theory with an abundance of practical examples and illustrations, this book provides a comprehensive treatment of the subject. The first part of the book is devoted to the question of hedging and pricing certain cash-flows in the presence of interest rate risk. The level of mathematical sophistication involved for a good understanding of that material is relatively ...

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Overview

Fixed-Income Securities is essential reading for those involved with and requiring a detailed understanding of fixed-income securities. Combining theory with an abundance of practical examples and illustrations, this book provides a comprehensive treatment of the subject. The first part of the book is devoted to the question of hedging and pricing certain cash-flows in the presence of interest rate risk. The level of mathematical sophistication involved for a good understanding of that material is relatively limited, and essentially includes basic notions of calculus and statistics. Hence, this first part should be accessible to those with no background in the theory of stochastic processes. The second part of the book is devoted to the question of hedging and pricing uncertain cash-flows, such as cash-flows generated by any fixed-income contingent claim, in the presence of interest rate risk. It involves more sophisticated mathematical tools, especially those borrowed from stochastic calculus, which are introduced in an Appendix. As such, this second part is more suited to students and professionals with exposure to, or at least appetite for, a more quantitative treatment of financial concepts.

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Editorial Reviews

From the Publisher
"This is the first book I have seen to carefully cover such a wide set of topics in both theoretical and applied fixed-income modelling, ranging from the use of market information to obtain yield curves, to the pricing and hedging of bonds and fixed-income derivatives, to the currently active topic of defaultable yield-curve modelling. It will be particularly useful to practitioners." - Darrell Duffie, Stanford University
"This is the most comprehensive theoretical treatment of the subject I've ever seen." - Mark Rubinstein, Haas School of Business, University of California
"An excellent review of interest rate models and of the pricing and hedging principles in the fixed-income area. " - Oldrich Alfons Vasicek, KMV Corporation
Booknews
A reference for those involved with fixed-income securities, combining theory with practical examples. Early chapters are devoted to the question of hedging and pricing certain cash-flows in the presence of interest rate risk. This material assumes knowledge of basic notions of calculus and statistics. Later chapters deal with hedging and pricing uncertain cash-flows, such as cash-flows generated by any fixed-income contingent claim, in the presence of interest rate risk. These chapters involve more sophisticated mathematical tools, especially those borrowed from stochastic calculus, which are introduced in an appendix. Martellini teaches finance at the University of Southern California. Annotation c. Book News, Inc., Portland, OR (booknews.com)
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Product Details

  • ISBN-13: 9780471495024
  • Publisher: Wiley
  • Publication date: 2/16/2001
  • Series: Frontiers in Finance Series
  • Edition number: 1
  • Pages: 276
  • Product dimensions: 6.32 (w) x 9.45 (h) x 0.85 (d)

Meet the Author

Lionel Martellini is an Assistant Professor of Finance at the Marshall School of Business, University of Southern California. He holds Master's degrees in Business Administration, Economics, Statistics, and Mathematics, and a PhD in Finance (U.C. Berkeley). He conducts active research in derivatives pricing, credit risk analysis, and quantitative portfolio management and has served as a consultant in these fields for various other financial institutions, in particular ACT Financial Systems. Philippe Priaulet is the Head of Fixed Income Research at Credit Commercial de France (CCF — Direction of Research and Innovation), member of HSBC group, where he is particularly involved in the bank's risk management process. His expertise is related to quantitative finance in general and term structure models in particular. He holds a Master's degree in Business Administration, and a PhD in Financial Economics (Universite Paris-IX Dauphine). He also teaches quantitative methods to students in economics and finance at Universite Paris-IX Dauphine.

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Table of Contents

Introduction.

Acknowledgments.

Standard Notation.

PRICING AND HEDGING CERTAIN CASH-FLOWS

Deriving the Current Zero-Coupon Rate Curve.

Basic Assets Pricing and Hedging.

PRICING AND HEDGING UNCERTAIN CASH-FLOWS.

Modelling the Zero-Coupon Yield Curve Dynamics.

Pricing and Hedging Fixed-Income Derivatives.

MATHEMATICAL APPENDICES.

Appendix A: An Introduction to Stochastic Processes in Continuous Time.

Appendix B: Numerical Methods.

References.

Index.

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