{"product_id":"handbook-of-fixed-income-securities-isbn-9781118709191","title":"Handbook of Fixed-Income Securities","description":"\u003cp\u003e\u003cb\u003eA comprehensive guide to the current theories and methodologies intrinsic to fixed-income securities\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eWritten by well-known experts from a cross section of academia and finance, \u003ci\u003eHandbook of Fixed-Income Securities \u003c\/i\u003efeatures a compilation of the most up-to-date fixed-income securities techniques and methods. The book presents crucial topics of fixed income in an accessible and logical format. Emphasizing empirical research and real-life applications, the book explores a wide range of topics from the risk and return of fixed-income investments, to the impact of monetary policy on interest rates, to the post-crisis new regulatory landscape. \u003c\/p\u003e Well organized to cover critical topics in fixed income, \u003ci\u003eHandbook of Fixed-Income Securities \u003c\/i\u003eis divided into eight main sections that feature: \u003cbr\u003e\u003cbr\u003e• An introduction to fixed-income markets such as Treasury bonds, inflation-protected securities, money markets, mortgage-backed securities, and the basic analytics that characterize them \u003cbr\u003e\u003cbr\u003e• Monetary policy and fixed-income markets, which highlight the recent empirical evidence on the central banks’ influence on interest rates, including the recent quantitative easing experiments\u003cbr\u003e\u003cbr\u003e• Interest rate risk measurement and management with a special focus on the most recent techniques and methodologies for asset-liability management under regulatory constraints\u003cbr\u003e\u003cbr\u003e• The predictability of bond returns with a critical discussion of the empirical evidence on time-varying bond risk premia, both in the United States and abroad, and their sources, such as liquidity and volatility \u003cbr\u003e\u003cbr\u003e• Advanced topics, with a focus on the most recent research on term structure models and econometrics, the dynamics of bond illiquidity, and the puzzling dynamics of stocks and bonds \u003cbr\u003e\u003cbr\u003e• Derivatives markets, including a detailed discussion of the new regulatory landscape after the financial crisis and an introduction to no-arbitrage derivatives pricing \u003cbr\u003e\u003cbr\u003e• Further topics on derivatives pricing that cover modern valuation techniques, such as Monte Carlo simulations, volatility surfaces, and no-arbitrage pricing with regulatory constraints \u003cbr\u003e\u003cbr\u003e• Corporate and sovereign bonds with a detailed discussion of the tools required to analyze default risk, the relevant empirical evidence, and a special focus on the recent sovereign crises \u003cbr\u003e\u003cbr\u003eA complete reference for practitioners in the fields of finance, business, applied statistics, econometrics, and engineering, \u003cp\u003e\u003ci\u003eHandbook of Fixed-Income Securities \u003c\/i\u003eis also a useful supplementary textbook for graduate and MBA-level courses on fixed-income securities, risk management, volatility, bonds, derivatives, and financial markets.\u003cbr\u003e\u003cbr\u003e\u003cb\u003ePietro Veronesi, PhD, \u003c\/b\u003eis Roman Family Professor of Finance at the University of Chicago Booth School of Business, where he teaches Masters and PhD-level courses in fixed income, risk management, and asset pricing. Published in leading academic journals and honored by numerous awards, his research focuses on stock and bond valuation, return predictability, bubbles and crashes, and the relation between asset prices and government policies. \u003c\/p\u003e \u003cp\u003eNotes on Contributors xix\u003c\/p\u003e \u003cp\u003ePreface xxv\u003c\/p\u003e \u003cp\u003e\u003cb\u003ePart I Fixed Income Markets 1\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003e1 Fixed Income Markets: An Introduction 3\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e1.1 Introduction 3\u003c\/p\u003e \u003cp\u003e1.2 U.S. Treasury Bills, Notes, and Bonds 7\u003c\/p\u003e \u003cp\u003e1.3 Interest Rates, Yields, and Discounting 8\u003c\/p\u003e \u003cp\u003e1.4 The Term Structure of Interest Rates 9\u003c\/p\u003e \u003cp\u003e1.4.1 The Economics of the Nominal Yield Curve 9\u003c\/p\u003e \u003cp\u003e1.4.2 The Expectations Hypothesis 13\u003c\/p\u003e \u003cp\u003e1.4.3 Forward Rates as Expectation of Future Interest Rates? 16\u003c\/p\u003e \u003cp\u003e1.4.4 Interpreting a Steepening of the Yield Curve 17\u003c\/p\u003e \u003cp\u003e1.5 Pricing Coupon Notes and Bonds 17\u003c\/p\u003e \u003cp\u003e1.5.1 Estimating the Zero-Coupon Discount Function 18\u003c\/p\u003e \u003cp\u003e1.5.2 Data and Bond Illiquidity 19\u003c\/p\u003e \u003cp\u003e1.6 Inflation-Protected Securities 19\u003c\/p\u003e \u003cp\u003e1.7 Floating Rate Notes 22\u003c\/p\u003e \u003cp\u003e1.8 Conclusion 24\u003c\/p\u003e \u003cp\u003eReferences 24\u003c\/p\u003e \u003cp\u003e\u003cb\u003e2 Money Market Instruments 25\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e2.1 Overview of the Money Market 25\u003c\/p\u003e \u003cp\u003e2.2 U.S. Treasury Bills 26\u003c\/p\u003e \u003cp\u003e2.3 Commercial Paper 27\u003c\/p\u003e \u003cp\u003e2.3.1 General Facts about Commercial Paper 27\u003c\/p\u003e \u003cp\u003e2.3.2 Nonasset-Backed Commercial Paper 27\u003c\/p\u003e \u003cp\u003e2.3.3 Asset-Backed Commercial Paper 28\u003c\/p\u003e \u003cp\u003e2.4 Discount Window 29\u003c\/p\u003e \u003cp\u003e2.5 Eurodollars 29\u003c\/p\u003e \u003cp\u003e2.5.1 Eurodollar Futures 31\u003c\/p\u003e \u003cp\u003e2.6 Repurchase Agreements 32\u003c\/p\u003e \u003cp\u003e2.6.1 Types of Repos and Haircuts 32\u003c\/p\u003e \u003cp\u003e2.6.2 Basic Forms of Repo Collateral 33\u003c\/p\u003e \u003cp\u003e2.6.3 Repo Rates and Collateral Value Risks 34\u003c\/p\u003e \u003cp\u003e2.6.4 The Run on Repo During the Financial Crisis 34\u003c\/p\u003e \u003cp\u003e2.7 Interbank Loans 35\u003c\/p\u003e \u003cp\u003e2.7.1 Federal Funds 35\u003c\/p\u003e \u003cp\u003e2.7.2 Libor 37\u003c\/p\u003e \u003cp\u003e2.7.3 Overnight Index Swaps and LIBOR–OIS Spreads 38\u003c\/p\u003e \u003cp\u003e2.7.4 A Model of LIBOR–OIS Spreads 38\u003c\/p\u003e \u003cp\u003e2.8 Conclusion 40\u003c\/p\u003e \u003cp\u003eReferences 40\u003c\/p\u003e \u003cp\u003e\u003cb\u003e3 Inflation-Adjusted Bonds and the Inflation Risk Premium 41\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e3.1 Inflation-Indexed Bonds 41\u003c\/p\u003e \u003cp\u003e3.1.1 Mechanics of TIPS 42\u003c\/p\u003e \u003cp\u003e3.1.2 Valuing an Inflation-Indexed Bond 42\u003c\/p\u003e \u003cp\u003e3.2 Inflation Derivatives 42\u003c\/p\u003e \u003cp\u003e3.2.1 Constructing a Synthetic Nominal Treasury Bond with Inflation Swaps 42\u003c\/p\u003e \u003cp\u003e3.3 No-Arbitrage Pricing 43\u003c\/p\u003e \u003cp\u003e3.3.1 Zero-Coupon Bonds 43\u003c\/p\u003e \u003cp\u003e3.4 Inflation Risk Premium 43\u003c\/p\u003e \u003cp\u003e3.4.1 Determinants of the Inflation Risk Premium 44\u003c\/p\u003e \u003cp\u003e3.5 A Look at the Data 45\u003c\/p\u003e \u003cp\u003e3.5.1 Break-Even Rates 45\u003c\/p\u003e \u003cp\u003e3.5.2 Inflation Swap Rates 46\u003c\/p\u003e \u003cp\u003e3.5.3 Inflation Risk Premium 49\u003c\/p\u003e \u003cp\u003e3.6 Conclusion 50\u003c\/p\u003e \u003cp\u003e3.7 Appendix 50\u003c\/p\u003e \u003cp\u003e3.7.1 Breeden–Lucas–Rubinstein Example 50\u003c\/p\u003e \u003cp\u003e3.7.2 Disaster Risk 51\u003c\/p\u003e \u003cp\u003e3.8 Data Appendix 51\u003c\/p\u003e \u003cp\u003eReferences 52\u003c\/p\u003e \u003cp\u003e\u003cb\u003e4 Mortgage-Related Securities (MRSs) 53\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e4.1 Purpose of the Chapter 53\u003c\/p\u003e \u003cp\u003e4.2 Introduction to MRSs 54\u003c\/p\u003e \u003cp\u003e4.2.1 Mortgage and Securitization 54\u003c\/p\u003e \u003cp\u003e4.2.2 The Cash Flows of Mortgage Pools 55\u003c\/p\u003e \u003cp\u003e4.3 Valuation Overview 57\u003c\/p\u003e \u003cp\u003e4.3.1 OAS, OAD, and Negative Convexity 58\u003c\/p\u003e \u003cp\u003e4.3.2 Modeling Prepayment and Default 60\u003c\/p\u003e \u003cp\u003e4.4 Analyzing an MRS 62\u003c\/p\u003e \u003cp\u003e4.4.1 Modeling Prepayment and Default 62\u003c\/p\u003e \u003cp\u003e4.4.2 Freddie Mac’s STACR 67\u003c\/p\u003e \u003cp\u003e4.4.3 Analyzing the STACR Series 2013-DN1 71\u003c\/p\u003e \u003cp\u003e4.5 Summary 72\u003c\/p\u003e \u003cp\u003eReferences 73\u003c\/p\u003e \u003cp\u003e\u003cb\u003ePart II Monetary Policy and Fixed Income Markets 75\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003e5 Bond Markets and Monetary Policy 77\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e5.1 Introduction 77\u003c\/p\u003e \u003cp\u003e5.2 High-Frequency Identification of Monetary Policy Shocks 78\u003c\/p\u003e \u003cp\u003e5.2.1 Learning About Monetary Policy Surprises 79\u003c\/p\u003e \u003cp\u003e5.2.2 The Impact on Treasury Bond Yields 81\u003c\/p\u003e \u003cp\u003e5.2.3 The Timing of Expected Fed Interventions 82\u003c\/p\u003e \u003cp\u003e5.3 Target Versus Path Shocks 84\u003c\/p\u003e \u003cp\u003e5.3.1 The Economics of FOMC Meetings and Bond Yields 86\u003c\/p\u003e \u003cp\u003e5.4 Conclusions 90\u003c\/p\u003e \u003cp\u003eReferences 91\u003c\/p\u003e \u003cp\u003e\u003cb\u003e6 Bond Markets and Unconventional Monetary Policy 93\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e6.1 Introduction 93\u003c\/p\u003e \u003cp\u003e6.2 Unconventional Policies: The Fed, ECB, and BOE 94\u003c\/p\u003e \u003cp\u003e6.2.1 Federal Reserve Operations 94\u003c\/p\u003e \u003cp\u003e6.2.2 Bank of England Operations 96\u003c\/p\u003e \u003cp\u003e6.2.3 European Central Bank Operations 97\u003c\/p\u003e \u003cp\u003e6.3 Unconventional Policies: A Theoretical Framework 101\u003c\/p\u003e \u003cp\u003e6.3.1 Portfolio Balance (Duration) Channel 102\u003c\/p\u003e \u003cp\u003e6.3.2 Signaling Channel 103\u003c\/p\u003e \u003cp\u003e6.3.3 Credit and Capital Constraint Channel 103\u003c\/p\u003e \u003cp\u003e6.3.4 Preferred Habitat and Asset Scarcity Channel 104\u003c\/p\u003e \u003cp\u003e6.4 Unconventional Policies: The Empirical Evidence 104\u003c\/p\u003e \u003cp\u003e6.4.1 The Treasury Bond Market 104\u003c\/p\u003e \u003cp\u003e6.4.2 The MBS Market 113\u003c\/p\u003e \u003cp\u003e6.4.3 How Persistent is the Effect? 115\u003c\/p\u003e \u003cp\u003e6.5 Conclusions 115\u003c\/p\u003e \u003cp\u003eReferences 116\u003c\/p\u003e \u003cp\u003e\u003cb\u003ePart III Interest Rate Risk Management 117\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003e7 Interest Rate Risk Management and Asset Liability Management 119\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e7.1 Introduction 119\u003c\/p\u003e \u003cp\u003e7.2 Literature Review 120\u003c\/p\u003e \u003cp\u003e7.3 Interest Rate Risk Measures 120\u003c\/p\u003e \u003cp\u003e7.3.1 Duration 121\u003c\/p\u003e \u003cp\u003e7.3.2 Convexity 122\u003c\/p\u003e \u003cp\u003e7.3.3 Key Rate Duration 123\u003c\/p\u003e \u003cp\u003e7.3.4 Principal Component Analysis and Factor Duration 123\u003c\/p\u003e \u003cp\u003e7.4 Application to Asset Liability Management 127\u003c\/p\u003e \u003cp\u003e7.4.1 Nature of Liabilities 127\u003c\/p\u003e \u003cp\u003e7.4.2 Cash Flow Matching 128\u003c\/p\u003e \u003cp\u003e7.4.3 Classic Immunization and Duration Matching 130\u003c\/p\u003e \u003cp\u003e7.4.4 Key Rate Duration Matching 133\u003c\/p\u003e \u003cp\u003e7.4.5 Factor Duration Matching 137\u003c\/p\u003e \u003cp\u003e7.5 Backtesting ALM Strategies 141\u003c\/p\u003e \u003cp\u003e7.6 Liability Hedging and Portfolio Construction 142\u003c\/p\u003e \u003cp\u003e7.7 Conclusions 144\u003c\/p\u003e \u003cp\u003e7.8 Appendix: The Implementation of Principal Component Analysis 145\u003c\/p\u003e \u003cp\u003eReferences 146\u003c\/p\u003e \u003cp\u003e\u003cb\u003e8 Optimal Asset Allocation in Asset Liability Management 147\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e8.1 Introduction 147\u003c\/p\u003e \u003cp\u003e8.2 Yield Smoothing 150\u003c\/p\u003e \u003cp\u003e8.3 ALM Problem 151\u003c\/p\u003e \u003cp\u003e8.3.1 Return and Yield Dynamics 152\u003c\/p\u003e \u003cp\u003e8.3.2 Preferences 153\u003c\/p\u003e \u003cp\u003e8.3.3 Constraints 154\u003c\/p\u003e \u003cp\u003e8.3.4 Data Description and Estimation 155\u003c\/p\u003e \u003cp\u003e8.4 Method 155\u003c\/p\u003e \u003cp\u003e8.5 Single-Period Portfolio Choice 156\u003c\/p\u003e \u003cp\u003e8.5.1 ALM with a VaR Constraint 156\u003c\/p\u003e \u003cp\u003e8.5.2 ALM with AFCs 158\u003c\/p\u003e \u003cp\u003e8.6 Dynamic Portfolio Choice 160\u003c\/p\u003e \u003cp\u003e8.6.1 Welfare and Portfolio Implications of Yield Smoothing 160\u003c\/p\u003e \u003cp\u003e8.6.2 Hedging Demands and Regulatory Constraints 161\u003c\/p\u003e \u003cp\u003e8.7 Conclusion 164\u003c\/p\u003e \u003cp\u003e8.8 Appendix: Return Model Parameter Estimates 165\u003c\/p\u003e \u003cp\u003e8.9 Appendix: Benchmark Without Liabilities 165\u003c\/p\u003e \u003cp\u003eReferences 166\u003c\/p\u003e \u003cp\u003e\u003cb\u003ePart IV the Predictability of Bond Returns 169\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003e9 International Bond Risk Premia 171\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e9.1 Introduction 171\u003c\/p\u003e \u003cp\u003e9.2 Literature Review 172\u003c\/p\u003e \u003cp\u003e9.3 Notation and International Bond Market Data 174\u003c\/p\u003e \u003cp\u003e9.3.1 Notation 174\u003c\/p\u003e \u003cp\u003e9.3.2 International Bond Market Data 174\u003c\/p\u003e \u003cp\u003e9.4 Unconditional Risk Premia 174\u003c\/p\u003e \u003cp\u003e9.4.1 A Long-Term Perspective 174\u003c\/p\u003e \u003cp\u003e9.4.2 More Recent Evidence 176\u003c\/p\u003e \u003cp\u003e9.5 Conditional Risk Premia 177\u003c\/p\u003e \u003cp\u003e9.5.1 Local Predictors of Returns 178\u003c\/p\u003e \u003cp\u003e9.5.2 Global Predictors of Returns 182\u003c\/p\u003e \u003cp\u003e9.6 Understanding Bond Risk Premia 185\u003c\/p\u003e \u003cp\u003e9.6.1 Links to Economic Growth 185\u003c\/p\u003e \u003cp\u003e9.6.2 State Dependency 187\u003c\/p\u003e \u003cp\u003e9.7 Conclusion and Outlook 187\u003c\/p\u003e \u003cp\u003eReferences 189\u003c\/p\u003e \u003cp\u003e\u003cb\u003e10 Return Predictability in the Treasury Market: Real Rates, Inflation, and Liquidity 191\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e10.1 Introduction 191\u003c\/p\u003e \u003cp\u003e10.2 Brief Literature Review 192\u003c\/p\u003e \u003cp\u003e10.3 Bond Data and Definitions 193\u003c\/p\u003e \u003cp\u003e10.3.1 Bond Notation and Definitions 193\u003c\/p\u003e \u003cp\u003e10.3.2 Yield Data 194\u003c\/p\u003e \u003cp\u003e10.4 Estimating the Liquidity Differential Between Inflation-Indexed and Nominal Bond Yields 194\u003c\/p\u003e \u003cp\u003e10.4.1 Estimation Strategy 196\u003c\/p\u003e \u003cp\u003e10.4.2 Data on Liquidity and Inflation Expectation Proxies 197\u003c\/p\u003e \u003cp\u003e10.4.3 Estimating Differential Liquidity 197\u003c\/p\u003e \u003cp\u003e10.5 Bond Excess Return Predictability 201\u003c\/p\u003e \u003cp\u003e10.5.1 Economic Significance of Bond Risk Premia 205\u003c\/p\u003e \u003cp\u003e10.6 Conclusion 206\u003c\/p\u003e \u003cp\u003eReferences 208\u003c\/p\u003e \u003cp\u003e\u003cb\u003e11 U.S. Treasury Market: The High-Frequency Evidence 210\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e11.1 Introduction 210\u003c\/p\u003e \u003cp\u003e11.2 The U.S. Treasury Markets During the Financial Crisis 211\u003c\/p\u003e \u003cp\u003e11.2.1 Yields 211\u003c\/p\u003e \u003cp\u003e11.2.2 Volatility 212\u003c\/p\u003e \u003cp\u003e11.2.3 Off-the-Run\/On-the-Run Yield Spread 213\u003c\/p\u003e \u003cp\u003e11.2.4 Trading Volume and Price Impact 214\u003c\/p\u003e \u003cp\u003e11.2.5 Fails 215\u003c\/p\u003e \u003cp\u003e11.2.6 Intraday Evidence on March 18, 2009 215\u003c\/p\u003e \u003cp\u003e11.2.7 Summary 216\u003c\/p\u003e \u003cp\u003e11.3 The Reaction of Bond Prices and Interest Rates to Macroeconomic News 217\u003c\/p\u003e \u003cp\u003e11.3.1 Level Effects 217\u003c\/p\u003e \u003cp\u003e11.3.2 The Impact of Monetary Policy 218\u003c\/p\u003e \u003cp\u003e11.3.3 Realized-Volatility Patterns 219\u003c\/p\u003e \u003cp\u003e11.3.4 Macro News and Option-Implied Volatilities 220\u003c\/p\u003e \u003cp\u003e11.3.5 ARCH and GARCH Effects 222\u003c\/p\u003e \u003cp\u003e11.3.6 Jumps 224\u003c\/p\u003e \u003cp\u003e11.3.7 Summary 227\u003c\/p\u003e \u003cp\u003e11.4 Market-Microstructure Effects 228\u003c\/p\u003e \u003cp\u003e11.4.1 Microstructure Effects in the Cash Market 228\u003c\/p\u003e \u003cp\u003e11.4.2 Joint Microstructure Effects in the Cash Market and Futures Markets 231\u003c\/p\u003e \u003cp\u003e11.4.3 Summary 232\u003c\/p\u003e \u003cp\u003e11.5 Bond Risk Premia 232\u003c\/p\u003e \u003cp\u003e11.5.1 Daily Evidence 232\u003c\/p\u003e \u003cp\u003e11.5.2 Intraday Evidence 233\u003c\/p\u003e \u003cp\u003e11.5.3 Summary 234\u003c\/p\u003e \u003cp\u003e11.6 The Impact of High-Frequency Trading 234\u003c\/p\u003e \u003cp\u003e11.6.1 The Effects of HFT on Liquidity, Volatility, and Risk Premia 234\u003c\/p\u003e \u003cp\u003e11.6.2 Summary 236\u003c\/p\u003e \u003cp\u003e11.7 Conclusions 236\u003c\/p\u003e \u003cp\u003eReferences 236\u003c\/p\u003e \u003cp\u003e\u003cb\u003ePart V Advanced Topics on Term Structure Models and Their Estimation 239\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003e12 Structural Affine Models for Yield Curve Modeling 241\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e12.1 Purpose and Structure of This Chapter 241\u003c\/p\u003e \u003cp\u003e12.2 Structural Models 242\u003c\/p\u003e \u003cp\u003e12.3 A Simple Taxonomy 242\u003c\/p\u003e \u003cp\u003e12.4 Why do we Need No-Arbitrage Models After All? 243\u003c\/p\u003e \u003cp\u003e12.5 Affine Models and the Drivers of The Yield Curve 244\u003c\/p\u003e \u003cp\u003e12.5.1 Expectations 244\u003c\/p\u003e \u003cp\u003e12.5.2 Term (Risk) Premia 244\u003c\/p\u003e \u003cp\u003e12.5.3 Convexity 246\u003c\/p\u003e \u003cp\u003e12.6 Introducing No-Arbitrage 247\u003c\/p\u003e \u003cp\u003e12.7 Which Variables Should One use? 247\u003c\/p\u003e \u003cp\u003e12.8 Risk Premia Implied by Affine Models with Constant Market Price of Risk 249\u003c\/p\u003e \u003cp\u003e12.9 Testable Predictions: Constant Market Price of Risk 251\u003c\/p\u003e \u003cp\u003e12.10 What Do We Know About Excess Returns? 251\u003c\/p\u003e \u003cp\u003e12.11 Understanding the Empirical Results on term Premia 252\u003c\/p\u003e \u003cp\u003e12.12 Enriching the First-Generation Affine Models 254\u003c\/p\u003e \u003cp\u003e12.13 Latent Variables: The D’Amico, Kim, and Wei Model 254\u003c\/p\u003e \u003cp\u003e12.14 From Linear Regressors to Affine Models: the ACM Approach 255\u003c\/p\u003e \u003cp\u003e12.15 Affine Models using Principal Components as Factors 256\u003c\/p\u003e \u003cp\u003e12.16 The Predictions from the “Modern” Models 258\u003c\/p\u003e \u003cp\u003e12.17 Conclusions 261\u003c\/p\u003e \u003cp\u003e12.17.1 Models as Enforcers of Parsimony and Builders of Confidence 261\u003c\/p\u003e \u003cp\u003e12.17.2 Models as Enforcers of Cross-Sectional Restrictions 262\u003c\/p\u003e \u003cp\u003e12.17.3 Models as Revealers of Forward-Looking Informations 262\u003c\/p\u003e \u003cp\u003e12.17.4 Models as Enhancers of Understanding 262\u003c\/p\u003e \u003cp\u003eReferences 263\u003c\/p\u003e \u003cp\u003e\u003cb\u003e13 The Econometrics of Fixed-Income Markets 265\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e13.1 Introduction 265\u003c\/p\u003e \u003cp\u003e13.2 Different Types of Term Structure Models 266\u003c\/p\u003e \u003cp\u003e13.2.1 Factor Models 266\u003c\/p\u003e \u003cp\u003e13.2.2 Observable Factors 267\u003c\/p\u003e \u003cp\u003e13.2.3 Latent Factors: Filtering versus Indirect Observation 267\u003c\/p\u003e \u003cp\u003e13.2.4 Macroeconomic Models 267\u003c\/p\u003e \u003cp\u003e13.2.5 Affine Models 268\u003c\/p\u003e \u003cp\u003e13.2.6 Yield-Based Models 268\u003c\/p\u003e \u003cp\u003e13.2.7 Forward-Based Models 269\u003c\/p\u003e \u003cp\u003e13.3 Parametric Estimation Methods 269\u003c\/p\u003e \u003cp\u003e13.3.1 GMM 270\u003c\/p\u003e \u003cp\u003e13.3.2 Maximum Likelihood 270\u003c\/p\u003e \u003cp\u003e13.3.3 QML 271\u003c\/p\u003e \u003cp\u003e13.3.4 Efficient Method of Moments 271\u003c\/p\u003e \u003cp\u003e13.3.5 Estimation Bias in Mean-Reversion Parameters 272\u003c\/p\u003e \u003cp\u003e13.4 Maximum Likelihood Estimation 272\u003c\/p\u003e \u003cp\u003e13.4.1 Observed State Variables 272\u003c\/p\u003e \u003cp\u003e13.4.2 Latent State Variables 273\u003c\/p\u003e \u003cp\u003e13.5 Constructing the Likelihood Function: Expansion of the Transition Density 275\u003c\/p\u003e \u003cp\u003e13.5.1 Reducibility 276\u003c\/p\u003e \u003cp\u003e13.5.2 The Irreducible Case 277\u003c\/p\u003e \u003cp\u003e13.6 Concluding Remarks 278\u003c\/p\u003e \u003cp\u003eReferences 279\u003c\/p\u003e \u003cp\u003e\u003cb\u003e14 Recent Advances in Old Fixed-Income Topics: Liquidity, Learning, and the Lower Bound 282\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e14.1 Introduction 282\u003c\/p\u003e \u003cp\u003e14.2 Liquidity 283\u003c\/p\u003e \u003cp\u003e14.2.1 Bills, Notes, and Bonds 283\u003c\/p\u003e \u003cp\u003e14.2.2 Market Liquidity and Short-Selling Costs 284\u003c\/p\u003e \u003cp\u003e14.2.3 Hedging Demand 286\u003c\/p\u003e \u003cp\u003e14.2.4 Risky Arbitrage 287\u003c\/p\u003e \u003cp\u003e14.2.5 Segmented Markets and Preferred Habitats 287\u003c\/p\u003e \u003cp\u003e14.2.6 Funding Risk 288\u003c\/p\u003e \u003cp\u003e14.2.7 Implication for Term Structure Models 290\u003c\/p\u003e \u003cp\u003e14.3 Learning 291\u003c\/p\u003e \u003cp\u003e14.3.1 Yield Survey Forecasts 292\u003c\/p\u003e \u003cp\u003e14.3.2 Affine Term Structure Models 293\u003c\/p\u003e \u003cp\u003e14.3.3 Spanning Survey Forecasts 297\u003c\/p\u003e \u003cp\u003e14.3.4 Adaptive Learning and Survey Forecasts 299\u003c\/p\u003e \u003cp\u003e14.3.5 Equilibrium Models of the Term Structure 300\u003c\/p\u003e \u003cp\u003e14.4 Lower Bound 301\u003c\/p\u003e \u003cp\u003e14.4.1 Square-Root and Autoregressive Gamma Models 301\u003c\/p\u003e \u003cp\u003e14.4.2 Black (1995) – Tobin (1958) 303\u003c\/p\u003e \u003cp\u003e14.4.3 No-Dominance Term Structure Models 305\u003c\/p\u003e \u003cp\u003e14.4.4 Recent Empirical Results 306\u003c\/p\u003e \u003cp\u003e14.5 Conclusion 309\u003c\/p\u003e \u003cp\u003e14.6 Appendix: Moments of Truncated Bivariate Distribution 310\u003c\/p\u003e \u003cp\u003eReferences 311\u003c\/p\u003e \u003cp\u003e\u003cb\u003e15 The Economics of the Comovement of Stocks and Bonds 313\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e15.1 Introduction 313\u003c\/p\u003e \u003cp\u003e15.2 A Brief Literature Survey 313\u003c\/p\u003e \u003cp\u003e15.3 The Stock–Bond Covariance and Learning about Fundamentals 315\u003c\/p\u003e \u003cp\u003e15.3.1 Investors’ Beliefs About Composite Regimes 316\u003c\/p\u003e \u003cp\u003e15.3.2 Valuations and the “Fed Model” 316\u003c\/p\u003e \u003cp\u003e15.3.3 Explaining the Time Variation in the Stock–Bond Covariance 318\u003c\/p\u003e \u003cp\u003e15.4 Beliefs from Surveys and from the Model 319\u003c\/p\u003e \u003cp\u003e15.5 Survey and Model Beliefs and the Stock–Bond Covariance 319\u003c\/p\u003e \u003cp\u003e15.6 Some International Evidence 322\u003c\/p\u003e \u003cp\u003e15.7 Summary 325\u003c\/p\u003e \u003cp\u003eReferences 325\u003c\/p\u003e \u003cp\u003e\u003cb\u003ePart VI Derivatives: Markets and Pricing 327\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003e16 Interest Rate Derivatives Products and Recent Market Activity in the New Regulatory Framework 329\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e16.1 Introduction 329\u003c\/p\u003e \u003cp\u003e16.2 Background on the New Derivatives Regulatory Framework 331\u003c\/p\u003e \u003cp\u003e16.2.1 Clearing 332\u003c\/p\u003e \u003cp\u003e16.2.2 Execution 333\u003c\/p\u003e \u003cp\u003e16.2.3 Reporting 333\u003c\/p\u003e \u003cp\u003e16.3 Exchange-Traded Derivatives 335\u003c\/p\u003e \u003cp\u003e16.3.1 Major Products 335\u003c\/p\u003e \u003cp\u003e16.3.2 Execution 336\u003c\/p\u003e \u003cp\u003e16.3.3 Clearing 336\u003c\/p\u003e \u003cp\u003e16.3.4 Market Activity 339\u003c\/p\u003e \u003cp\u003e16.4 Noncleared Swaps 341\u003c\/p\u003e \u003cp\u003e16.4.1 Major Products 341\u003c\/p\u003e \u003cp\u003e16.4.2 Execution 342\u003c\/p\u003e \u003cp\u003e16.4.3 Credit Risk Mitigation 345\u003c\/p\u003e \u003cp\u003e16.4.4 Market Activity 351\u003c\/p\u003e \u003cp\u003e16.5 Cleared Swaps 354\u003c\/p\u003e \u003cp\u003e16.5.1 Major Products 354\u003c\/p\u003e \u003cp\u003e16.5.2 Market Activity 355\u003c\/p\u003e \u003cp\u003e16.6 Comparative Market Activity Across Execution Venues 360\u003c\/p\u003e \u003cp\u003e16.6.1 OTC versus Exchange-Traded Interest Rate Derivatives 360\u003c\/p\u003e \u003cp\u003e16.6.2 Bilateral versus SEF Execution of OTC Interest Rate Derivatives 363\u003c\/p\u003e \u003cp\u003e16.7 Liquidity Fragmentation in Nondollar Swaps 366\u003c\/p\u003e \u003cp\u003e16.8 Prospects for the Future 368\u003c\/p\u003e \u003cp\u003e16.8.1 Cleared Swaps and Exchange-Traded Interest Rate Derivatives 369\u003c\/p\u003e \u003cp\u003e16.8.2 Swap Futures 370\u003c\/p\u003e \u003cp\u003e16.8.3 Noncleared Swaps and End Users 370\u003c\/p\u003e \u003cp\u003e16.9 Appendix: The New Regulatory Framework for Interest Rate Derivatives in the United States and European Union 371\u003c\/p\u003e \u003cp\u003e16.9.1 Classifications of Market Participants 371\u003c\/p\u003e \u003cp\u003e16.9.2 Clearing 373\u003c\/p\u003e \u003cp\u003e16.9.3 Execution 375\u003c\/p\u003e \u003cp\u003e16.9.4 Reporting 376\u003c\/p\u003e \u003cp\u003e16.9.5 Margin Requirements for Noncleared Swaps 377\u003c\/p\u003e \u003cp\u003e16.9.6 Capital Requirements for Noncleared Swaps 379\u003c\/p\u003e \u003cp\u003e16.9.7 Cross-Border and Extraterritoriality Issues 381\u003c\/p\u003e \u003cp\u003eReferences 385\u003c\/p\u003e \u003cp\u003e\u003cb\u003e17 Risk-Neutral Pricing: Trees 389\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e17.1 Introduction 389\u003c\/p\u003e \u003cp\u003e17.2 Binomial Trees 389\u003c\/p\u003e \u003cp\u003e17.2.1 One-Step Binomial Trees 389\u003c\/p\u003e \u003cp\u003e17.2.2 The Market Price of Risk 393\u003c\/p\u003e \u003cp\u003e17.3 Risk-Neutral Pricing on Multistep Trees 394\u003c\/p\u003e \u003cp\u003e17.3.1 Calibration of Risk-Neutral Trees to the Yield Curve 395\u003c\/p\u003e \u003cp\u003e17.3.2 The Pricing of European Options 397\u003c\/p\u003e \u003cp\u003e17.3.3 The Pricing of American Options 400\u003c\/p\u003e \u003cp\u003e17.4 From Diffusion Models to Binomial Trees 403\u003c\/p\u003e \u003cp\u003e17.4.1 The Hull and White Model 405\u003c\/p\u003e \u003cp\u003e17.5 Trinomial Trees 406\u003c\/p\u003e \u003cp\u003e17.5.1 Calibration to the Yield Curve 407\u003c\/p\u003e \u003cp\u003e17.5.2 Pricing Bermudan Contracts Using the Trinomial Tree 410\u003c\/p\u003e \u003cp\u003e17.5.3 Calibration to the Volatility Curve 412\u003c\/p\u003e \u003cp\u003eReferences 413\u003c\/p\u003e \u003cp\u003e\u003cb\u003e18 Discounting and Derivative Pricing Before and After the Financial Crisis: An Introduction 414\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e18.1 Introduction 414\u003c\/p\u003e \u003cp\u003e18.2 Forward Rate Agreements (FRAs) 415\u003c\/p\u003e \u003cp\u003e18.2.1 Forward Rates 417\u003c\/p\u003e \u003cp\u003e18.2.2 Forward Rates after the Crisis 418\u003c\/p\u003e \u003cp\u003e18.2.3 A Simple Explanation for the “Arbitrage” 420\u003c\/p\u003e \u003cp\u003e18.3 Overnight Index Swaps (OISs) 422\u003c\/p\u003e \u003cp\u003e18.3.1 OIS Discount Curve 424\u003c\/p\u003e \u003cp\u003e18.4 LIBOR-Based Swaps 424\u003c\/p\u003e \u003cp\u003e18.4.1 LIBOR Discount Curve with Single-Curve Pricing 426\u003c\/p\u003e \u003cp\u003e18.5 The Crisis and the Double-Curve Pricing of LIBOR-Based Swaps 426\u003c\/p\u003e \u003cp\u003e18.5.1 Extracting FRA Rates from Swap Quotes 428\u003c\/p\u003e \u003cp\u003e18.5.2 Extracting the Discount Curve from FRA Rates 428\u003c\/p\u003e \u003cp\u003e18.5.3 Summing Up 429\u003c\/p\u003e \u003cp\u003e18.6 The Pricing of LIBOR-Based Interest Rate Options 430\u003c\/p\u003e \u003cp\u003e18.6.1 Black’s Option Pricing Formula 430\u003c\/p\u003e \u003cp\u003e18.6.2 Caps and Floors before and after the Crisis 431\u003c\/p\u003e \u003cp\u003e18.6.3 Swaptions before and after the Crisis 432\u003c\/p\u003e \u003cp\u003e18.7 Conclusions 433\u003c\/p\u003e \u003cp\u003eReferences 433\u003c\/p\u003e \u003cp\u003e\u003cb\u003ePart VII Advanced Topics in Derivatives Pricing 435\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003e19 Risk-Neutral Pricing: Monte Carlo Simulations 437\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e19.1 Introduction 437\u003c\/p\u003e \u003cp\u003e19.2 Risk-Neutral Pricing 437\u003c\/p\u003e \u003cp\u003e19.2.1 Interest Rate Models 440\u003c\/p\u003e \u003cp\u003e19.2.2 The Market Price of Risk 441\u003c\/p\u003e \u003cp\u003e19.2.3 Valuation under P and under Q 441\u003c\/p\u003e \u003cp\u003e19.2.4 Multifactor Models 442\u003c\/p\u003e \u003cp\u003e19.3 Risk-Neutral Pricing: Monte Carlo Simulations 446\u003c\/p\u003e \u003cp\u003e19.3.1 Discretization of the Vasicek Model 447\u003c\/p\u003e \u003cp\u003e19.3.2 Discretization of the Cox–Ingersoll–Ross Model 448\u003c\/p\u003e \u003cp\u003e19.3.3 Interest Rate Modeling at the Zero Lower Bound 451\u003c\/p\u003e \u003cp\u003e19.4 Valuation by Monte Carlo Simulation 451\u003c\/p\u003e \u003cp\u003e19.4.1 Valuation of Securities with Payoff at Fixed Date 452\u003c\/p\u003e \u003cp\u003e19.4.2 mc Valuation of Callable Bonds 455\u003c\/p\u003e \u003cp\u003e19.4.3 mc Valuation of Securities with American or Bermudan Exercise Style 456\u003c\/p\u003e \u003cp\u003e19.5 Monte Carlo Simulations in Multifactor Models 461\u003c\/p\u003e \u003cp\u003e19.5.1 Discretization Procedure of the Affine Factor Models 462\u003c\/p\u003e \u003cp\u003e19.5.2 mc Simulations for Callable Securities in Multifactor Models 462\u003c\/p\u003e \u003cp\u003e19.6 Conclusion 467\u003c\/p\u003e \u003cp\u003eReferences 467\u003c\/p\u003e \u003cp\u003e\u003cb\u003e20 Interest Rate Derivatives and Volatility 469\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e20.1 Introduction 469\u003c\/p\u003e \u003cp\u003e20.2 Markets and the Institutional Context 469\u003c\/p\u003e \u003cp\u003e20.2.1 Market Size 469\u003c\/p\u003e \u003cp\u003e20.2.2 OTC IRD Trading and Volatility 471\u003c\/p\u003e \u003cp\u003e20.2.3 Exchange-Listed IRD Trading and Volatility 472\u003c\/p\u003e \u003cp\u003e20.2.4 Recent Developments in the IRD Market 473\u003c\/p\u003e \u003cp\u003e20.3 Dissecting the Instruments 473\u003c\/p\u003e \u003cp\u003e20.3.1 Government Bonds 474\u003c\/p\u003e \u003cp\u003e20.3.2 Time Deposits 476\u003c\/p\u003e \u003cp\u003e20.3.3 Forwards Rate Agreements and Interest Rate Swaps 476\u003c\/p\u003e \u003cp\u003e20.3.4 Caps, Floors, and Swaptions 478\u003c\/p\u003e \u003cp\u003e20.4 Evaluation Paradigms 479\u003c\/p\u003e \u003cp\u003e20.4.1 Models of the Short-term Rate 479\u003c\/p\u003e \u003cp\u003e20.4.2 No-Arbitrage Models 481\u003c\/p\u003e \u003cp\u003e20.4.3 Volatility 485\u003c\/p\u003e \u003cp\u003e20.5 Pricing and Trading Volatility 487\u003c\/p\u003e \u003cp\u003e20.5.1 Standard Volatility Trading Practice 488\u003c\/p\u003e \u003cp\u003e20.5.2 An Introduction to Interest Rate Variance Swaps 489\u003c\/p\u003e \u003cp\u003e20.5.3 Pricing Volatility in Three Markets 497\u003c\/p\u003e \u003cp\u003e20.5.4 Current Forward-Looking Indexes of IRV 502\u003c\/p\u003e \u003cp\u003e20.5.5 Products on IRV Indexes 505\u003c\/p\u003e \u003cp\u003e20.6 Conclusions 507\u003c\/p\u003e \u003cp\u003e20.7 Appendix 508\u003c\/p\u003e \u003cp\u003eReferences 512\u003c\/p\u003e \u003cp\u003e\u003cb\u003e21 Nonlinear Valuation under Margining and Funding Costs with Residual Credit Risk: A Unified Approach 514\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e21.1 Introduction 514\u003c\/p\u003e \u003cp\u003e21.2 Collateralized Credit and Funding Valuation Adjustments 516\u003c\/p\u003e \u003cp\u003e21.2.1 Trading under Collateralization and Closeout Netting 517\u003c\/p\u003e \u003cp\u003e21.2.2 Trading under Funding Risk 520\u003c\/p\u003e \u003cp\u003e21.3 General Pricing Equation Under Credit, Collateral, and Funding 522\u003c\/p\u003e \u003cp\u003e21.3.1 Discrete-Time Solution 523\u003c\/p\u003e \u003cp\u003e21.3.2 Continuous-Time Solution 524\u003c\/p\u003e \u003cp\u003e21.4 Numerical Results: Extending the Black–Scholes Analysis 527\u003c\/p\u003e \u003cp\u003e21.4.1 Monte Carlo Algorithm 527\u003c\/p\u003e \u003cp\u003e21.4.2 Market, Credit, and Funding Risk Specification 529\u003c\/p\u003e \u003cp\u003e21.4.3 Preliminary Analysis without Credit Risk and with Symmetric Funding Rates 529\u003c\/p\u003e \u003cp\u003e21.4.4 Full Analysis with Credit Risk, Collateral, and Funding Costs 531\u003c\/p\u003e \u003cp\u003e21.4.5 Nonlinearity Valuation Adjustment 533\u003c\/p\u003e \u003cp\u003e21.5 Extensions 535\u003c\/p\u003e \u003cp\u003e21.6 Conclusions: Bilateral Prices or Nonlinear Values? 536\u003c\/p\u003e \u003cp\u003eReferences 537\u003c\/p\u003e \u003cp\u003e\u003cb\u003ePart VIII Corporate and Sovereign Bonds 539\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003e22 Corporate Bonds 541\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e22.1 Introduction 541\u003c\/p\u003e \u003cp\u003e22.2 Market and Data 542\u003c\/p\u003e \u003cp\u003e22.2.1 Data on Bond Characteristics 542\u003c\/p\u003e \u003cp\u003e22.2.2 Data on Market Prices 542\u003c\/p\u003e \u003cp\u003e22.2.3 Understanding Market Data from TRACE 543\u003c\/p\u003e \u003cp\u003e22.3 A Very Simple Model 544\u003c\/p\u003e \u003cp\u003e22.3.1 The Credit Spread Arising from Expected Loss 545\u003c\/p\u003e \u003cp\u003e22.3.2 Adding a Risk Premium 545\u003c\/p\u003e \u003cp\u003e22.4 Structural Models 546\u003c\/p\u003e \u003cp\u003e22.4.1 Merton’s Model with Beta 546\u003c\/p\u003e \u003cp\u003e22.4.2 Bankruptcy Costs 549\u003c\/p\u003e \u003cp\u003e22.4.3 Early Default 550\u003c\/p\u003e \u003cp\u003e22.5 Reduced-form Models 550\u003c\/p\u003e \u003cp\u003e22.5.1 A Useful Approximation 552\u003c\/p\u003e \u003cp\u003e22.5.2 Closed-Form Solutions 553\u003c\/p\u003e \u003cp\u003e22.6 Risk Premia in Intensity Models 554\u003c\/p\u003e \u003cp\u003e22.7 Dealing with Portfolios 556\u003c\/p\u003e \u003cp\u003e22.8 Illiquidity as a Source of Spreads 557\u003c\/p\u003e \u003cp\u003e22.9 Some Additional Readings 558\u003c\/p\u003e \u003cp\u003e22.10 Conclusion 559\u003c\/p\u003e \u003cp\u003eReferences 559\u003c\/p\u003e \u003cp\u003e\u003cb\u003e23 Sovereign Credit Risk 561\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e23.1 Introduction 561\u003c\/p\u003e \u003cp\u003e23.2 Literature Review 563\u003c\/p\u003e \u003cp\u003e23.3 Modeling Sovereign Default 564\u003c\/p\u003e \u003cp\u003e23.3.1 Risk-Neutral Pricing 564\u003c\/p\u003e \u003cp\u003e23.3.2 Pricing Sovereign Credit Default Swaps 567\u003c\/p\u003e \u003cp\u003e23.3.3 Pricing in a Lognormal Model 568\u003c\/p\u003e \u003cp\u003e23.4 Credit Risk Premia 568\u003c\/p\u003e \u003cp\u003e23.5 Estimating Intensity Models 569\u003c\/p\u003e \u003cp\u003e23.6 Application to Emerging Markets 570\u003c\/p\u003e \u003cp\u003e23.6.1 Credit Markets of Emerging Economies 571\u003c\/p\u003e \u003cp\u003e23.6.2 Credit Risk Premia in Emerging Credit Markets 572\u003c\/p\u003e \u003cp\u003e23.7 Application to the European Debt Crisis 575\u003c\/p\u003e \u003cp\u003e23.7.1 Credit Risk Premia in the Eurozone 578\u003c\/p\u003e \u003cp\u003e23.8 Conclusion 580\u003c\/p\u003e \u003cp\u003e23.9 Appendix: No Arbitrage Pricing 580\u003c\/p\u003e \u003cp\u003e23.9.1 The Risk-Neutral Default Intensity 583\u003c\/p\u003e \u003cp\u003eReferences 584\u003c\/p\u003e \u003cp\u003eIndex 587\u003c\/p\u003e \u003cp\u003e\u003cb\u003ePietro Veronesi, PhD, \u003c\/b\u003eis Roman Family Professor of Finance at the University of Chicago Booth School of Business, where he teaches Masters and PhD-level courses in fixed income, risk management, and asset pricing. Published in leading academic journals and honored by numerous awards, his research focuses on stock and bond valuation, return predictability, bubbles and crashes, and the relation between asset prices and government policies. \u003c\/p\u003e \u003cp\u003eWritten by well-known experts from a cross section of academia and finance, \u003ci\u003eHandbook of Fixed-Income Securities \u003c\/i\u003efeatures a compilation of the most up-to-date fixed-income securities techniques and methods. The book presents crucial topics of fixed income in an accessible and logical format. Emphasizing empirical research and real-life applications, the book explores a wide range of topics from the risk and return of fixed-income investments, to the impact of monetary policy on interest rates, to the post-crisis new regulatory landscape. \u003c\/p\u003e \u003cp\u003eWell organized to cover critical topics in fixed income, \u003ci\u003eHandbook of Fixed-Income Securities \u003c\/i\u003eis divided into eight main sections that feature: \u003c\/p\u003e \u003cp\u003e• An introduction to fixed-income markets such as Treasury bonds, inflation-protected securities, money markets, mortgage-backed securities, and the basic analytics that characterize them\u003c\/p\u003e \u003cp\u003e• Monetary policy and fixed-income markets, which highlight the recent empirical evidence on the central banks’ influence on interest rates, including the recent quantitative easing experiments\u003c\/p\u003e \u003cp\u003e• Interest rate risk measurement and management with a special focus on the most recent techniques and methodologies for asset-liability management under regulatory constraints\u003c\/p\u003e \u003cp\u003e• The predictability of bond returns with a critical discussion of the empirical evidence on time-varying bond risk premia, both in the United States and abroad, and their sources, such as liquidity and volatility\u003c\/p\u003e \u003cp\u003e• Advanced topics, with a focus on the most recent research on term structure models and econometrics, the dynamics of bond illiquidity, and the puzzling dynamics of stocks and bonds\u003c\/p\u003e \u003cp\u003e• Derivatives markets, including a detailed discussion of the new regulatory landscape after the financial crisis and an introduction to no-arbitrage derivatives pricing\u003c\/p\u003e \u003cp\u003e• Further topics on derivatives pricing that cover modern valuation techniques, such as Monte Carlo simulations, volatility surfaces, and no-arbitrage pricing with regulatory constraints\u003c\/p\u003e \u003cp\u003e• Corporate and sovereign bonds with a detailed discussion of the tools required to analyze default risk, the relevant empirical evidence, and a special focus on the recent sovereign crises\u003c\/p\u003e \u003cp\u003eA complete reference for practitioners in the fields of finance, business, applied statistics, econometrics, and engineering, \u003ci\u003eHandbook of Fixed-Income Securities \u003c\/i\u003eis also a useful supplementary textbook for graduate and MBA-level courses on fixed-income securities, risk management, volatility, bonds, derivatives, and financial markets. \u003c\/p\u003e","brand":"Wiley","offers":[{"title":"Default Title","offer_id":47989331591397,"sku":"NP9781118709191","price":163.95,"currency_code":"USD","in_stock":false}],"thumbnail_url":"\/\/cdn.shopify.com\/s\/files\/1\/1842\/7735\/files\/9781118709191.jpg?v=1761783697","url":"https:\/\/k12savings.com\/es\/products\/handbook-of-fixed-income-securities-isbn-9781118709191","provider":"K12savings","version":"1.0","type":"link"}