By Moorad Choudhry
The bond markets are an integral part of the realm economic climate. The fourth variation of Professor Moorad Choudhry's benchmark reference textual content An creation to Bond Markets brings readers brand new with most recent advancements and industry perform, together with the effect of the monetary drawback and problems with relevance for traders. This booklet bargains a close but obtainable examine bond tools, and is aimed in particular at newbies to the marketplace or these strange with sleek fastened source of revenue items. the writer capitalises on his wealth of expertise within the fastened source of revenue markets to offer this concise but in-depth assurance of bonds and linked derivatives.
Topics coated include:
- Bond pricing and yield
- Duration and convexity
- Eurobonds and convertible bonds
- Structured finance securities
- Interest-rate derivatives
- Credit derivatives
- Relative price trading
Related themes equivalent to the money markets and ideas of danger administration also are brought as precious heritage for college students and practitioners. The booklet is vital studying for all those that require an advent to the monetary markets.
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Extra resources for An Introduction to Bond Markets
6 Example: comparing yields to maturity. 89%. 96%. Which bond has the higher yield to maturity in practice? The effective annual yield of the Treasury is: rma ¼ ð1 þ 12 � 0:0489Þ2 � 1 ¼ 4:9498% Comparing the securities using the same calculation basis reveals that the European government bond does indeed have the higher yield. 25% 2007 as at 29 November 2005. P. All rights reserved. Used with permission. The market convention is sometimes simply to double the semi annual yield to obtain the annualised yields, despite the fact that this produces an inaccurate result.
Liquidity refers to the ease with which bonds can be bought and sold by market participants. 4 AN INTRODUCTION TO BOND MARKETS investor. The banks and securities houses that facilitate trading in bonds in both the primary and secondary markets are also often observed to be both borrowers and investors in bonds. The bond markets in developed countries are large and liquid, a term used to describe the ease with which it is possible to buy and sell bonds. In emerging markets a debt market usually develops ahead of an equity market, led by trading in government bills and bonds.
Remember that in any market a number of bonds exist with different issuers, coupons and terms to maturity. It is their yields that are compared, not their prices. The yield on any investment is the discount rate that will make the present value of its cash ﬂows equal its initial cost or price. 20): P¼ N X Cn M nþ ð1 þ rÞ ð1 þ rÞn n¼1 ð1:20Þ 24 AN INTRODUCTION TO BOND MARKETS Other types of yield measure, however, are used in the market for different purposes. The simplest is the current yield, also known as the ﬂat, interest or running yield.
An Introduction to Bond Markets by Moorad Choudhry