Demystifying Fixed Income Analytics: A Practical Guide
by Kedar Nath Mukherjee  (Author)

About the Author
Kedar Nath Mukherjee is Assistant Professor at National Institute of Bank Management, Pune, Maharashtra, India. He has extensive experience in providing training to senior and middle-level executives in treasury and risk management departments of commercial, investment, and cooperative banks, primary dealers, insurance companies, pension funds, public sector undertakings, corporate treasuries, etc., on the topics of fixed income securities, bond portfolio management, investment management, risk management, and financial derivatives. Besides professional training, he also teaches courses in PGDM programmes and undertakes consultancy activities. He has published research papers in various journals, and the monograph Fixed Income Securities: Valuation, Risk and Risk Management.

About this Book
This book discusses important aspects of fixed income securities in emerging economies.

Key features

• Clarifies all conceptual and analytical aspects of fixed income securities and bonds, and covers important interest rate and credit derivative instruments in a simple and practical way.
• Examines topics such as classifications of fixed income instruments; related risk-return measures; yield curve and term structure of interest rates; interest rate derivatives (forwards, futures and swaps), credit derivatives (credit default swaps); and trading strategies and risk management.
• Provides step-by-step explanation of fixed income products by including real-life examples, scenarios and cases, especially in the context of emerging markets.
• Presents consistent reference of actual market practices to make the chapters practice oriented while maintaining a lucid style complemented by adequate reading inputs and clear learning outcomes.
• Includes complete solutions of numericals and cases for all chapters as an eResource on the Routledge website to aid understanding.
  

The book will serve as a ready guide to both professionals from banking and finance industry (fixed income/bond dealers; fund/investment/portfolio managers; investment bankers; financial analysts/consultants; risk management specialists), and those in academics, including students, research scholars, and teachers in the fields of business management, banking, insurance, finance, financial economics, business economics, and risk management.

Brief Contents
1 Fixed income securities market: an overview 1
    Fixed income securities market – an introduction 1
    Global debt markets – a review 2
    Debt markets in India 9
    Issuance and settlement of debt securities in India 20
    Various participants in the debt securities market 26
2 Fixed income instruments: various classifcations 37
    Basic features of fxed income security 37
    Debt market instruments: classifcation 46
    Self-learning exercise 66
3 Basic statistics 69
    Measures of central tendency 69
    Measures of dispersion 74
    Skewness and kurtosis 80
    Correlation and regression 82
    Probability distribution 88
    Test of hypothesis 94
    Self-learning exercise 101
4 Risk and return measures 103
    Risk and return in bonds: meaning and linkages 103
    Risks associated with fxed income securities 104
    Return measures for fxed income securities 115
    Limitations of different yield measures 125
    Self-learning exercise 127
5 Term structures of interest rates 129
    Interest rates: meaning and different types 129
    Some important interest rates in Indian debt market 130
    Major determinants of bond yields 132
    Term structure of interest rates: different types 139
    Theories of interest rate term structure 156
    Self-learning exercise 162
6 Pricing and valuation techniques 165
    Valuation of bond: meaning 165
    Valuation of a bond: broader steps 166
    Valuation of bond: important issues 174
    Valuation of foating rate bond 182
    Valuation of bond with embedded options 186
    Valuation of FI securities: RBI-FIMMDA guidelines 189
    Self-learning exercise 194
7 Interest rate sensitivity measures 197
    Bond price sensitivity to interest rates: meaning 197
    Price/yield relationship 200
    Various interest rate sensitivity measures 203
    Limitations of duration/m-duration/PV01 210
    Convexity: a supplement to m-duration 212
    Self-learning exercise 217
8 Financial derivative contracts 220
    Financial derivatives: meaning & types of contracts 220
    Financial derivatives market: worldwide & in India 226
    Participants in fnancial derivatives market 230
    Application of fnancial derivatives 232
    Self-learning exercise 234
9 Interest rate futures 236
    Interest rate futures contract: meaning & product structure 236
    Interest rate futures market in India 238
    Important features of IRF contract 240
    Interest rate futures contract: product structures in India 245
    Pricing of interest rate futures 250
    Method of settlement 252
    Market participants 254
    Advantage/usefulness of IRF contract 257
    Self-learning exercise 278
10 Forward rate agreement and interest rate swaps 281
    FRA & IRS: meaning & product structure 282
    FRA and IRS market in India 286
    Pricing of forward rate agreement 287
    Settlement of an FRA deal 289
    Different types of interest rate swaps 290
    Important structures of IRS in India 291
    Theory of comparative advantage in IRS 298
    Pricing and valuation of interest rate swap 301
    Settlement of periodical interest in IRS contracts 310
    Offsetting/premature unwinding/cancellation of FRA/ IRS 314
    Usefulness of FRA/interest rate swap 317
    Risk in FRA/interest rate swap 327
    Documentation for FRA/interest rate swap 329
    Self-learning exercise 335
11 Interest rate options and structured products 337
    Interest rate options: meaning & structures 337
    Pricing of interest rate options 339
    Pricing models for interest rate options 342
    Interest rate caps, foors, and collar: meaning & structures 347
    Self-learning exercise 350
12 Credit default swaps 351
    Meaning and defnition of credit derivatives 351
    History and growth of credit default swaps 353
    Different types of credit default swaps 355
    Features of credit default swaps 358
    Current scope and future challenges for CDS in India 362
    Self-learning exercise 364
13 Trading and management strategies 366
    Bond portfolio management: meaning 366
    Passive management strategies 372
    Active management strategies 380
    Yield curve shifts and different types of active management strategies 386
    Strengths and weaknesses for active management 397
    Bond portfolio optimization 398
    Self-learning exercise 401
14 Risk management (focus: market risk) 405
    Risk management and Basel accord: an overview 405
    Measuring risk in fxed income securities 409
    Value at risk: a risk measurement tool 411
    Expected shortfall: a risk measure beyond VaR 418
    Back testing VaR & ES estimates 420
    Market risk capital charge on fxed income portfolio of a bank 423
    Self-learning exercise 434
Glossary 437
Index 452

Publisher : Routledge India; 1st edition (July 30, 2020)
Language : English
Pages : 490
ISBN-10 : 1138358819
ISBN-13 : 978-1138358812