Kienitz Interest Rate Derivatives Explained

Volume 1: Products and Markets
2014
ISBN: 978-1-137-36007-6
Verlag: Palgrave Macmillan UK
Format: PDF
Kopierschutz: 1 - PDF Watermark

E-Book, Englisch, 219 Seiten

Reihe: Financial Engineering Explained

Aimed at practitioners who need to understand the current fixed income markets and learn the techniques necessary to master the fundamentals, this book provides a thorough but concise description of fixed income markets, looking at the business, products and structures and advanced modeling of interest rate instruments.

Autoren/Hrsg.

Kienitz, J.

Inhaltsverzeichnis

1;Cover;1
2;Half-Title;2
3;Series;3
4;Title;4
5;Copyright;5
6;Dedication;6
7;Contents;8
8;List of Figures;11
9;List of Tables;14
10;Introduction Goals of this Book and Global overview;16
10.1;I.1 Introduction and management summary;16
10.2;I.2 Short overview;17
10.3;I.3 Use of the book;19
10.4;I.4 Credits;19
11;Part I Markets and Linear Products;20
11.1;1 Clearing, Collateral, Pricing;21
11.1.1;1.1 Introduction and objectives;21
11.1.2;1.2 Netting and collateral;21
11.1.3;1.3 Clearing;24
11.1.3.1;1.3.1 What is central clearing?;24
11.1.3.2;1.3.2 Clearing members;27
11.1.3.3;1.3.3 Resume;28
11.1.4;1.4 Counterparty credit risk;28
11.1.5;1.5 General pricing theory;31
11.1.5.1;1.5.1 Numeraire;36
11.2;2 Rates;38
11.2.1;2.1 Introduction and objectives;38
11.2.2;2.2 Daycount, rolling and other conventions;38
11.2.2.1;2.2.1 Daycount;39
11.2.3;2.3 Rates;41
11.2.3.1;2.3.1 Roll conventions – business dates;42
11.2.3.2;2.3.2 Discount factors;46
11.2.3.3;2.3.3 Forward rates;46
11.2.3.4;2.3.4 Other rates;47
11.2.3.5;2.3.5 Interest rate curves;47
11.2.4;2.4 Reading list;48
11.3;3 Markets and Products – Deposits, Bonds, Futures, Repo;49
11.3.1;3.1 Introduction and objectives;49
11.3.2;3.2 Deposits;49
11.3.2.1;3.2.1 Market quotes;49
11.3.3;3.3 Futures;49
11.3.4;3.4 Bonds;51
11.3.4.1;3.4.1 Bond math;52
11.3.4.2;3.4.2 Par rate;54
11.3.4.3;3.4.3 Yield to maturity;55
11.3.4.4;3.4.4 Bond risk measures;56
11.3.5;3.5 Repos;58
11.3.6;3.6 Market quotes;61
11.3.7;3.7 Reading list;61
11.4;4 Markets and Products – FRAs and Swaps;62
11.4.1;4.1 Introduction and objectives;62
11.4.2;4.2 FRAs;62
11.4.2.1;4.2.1 FRA math;63
11.4.2.2;4.2.2 FRA quotes;64
11.4.3;4.3 Swaps;64
11.4.3.1;4.3.1 Fixed against float interest rate swap;65
11.4.3.2;4.3.2 Swap quotes;67
11.4.3.3;4.3.3 In arrears swaps;68
11.4.4;4.4 Float against float interest rate swaps;76
11.4.4.1;4.4.1 Money market basis swaps;76
11.4.4.2;4.4.2 Constant maturity swaps (CMS);79
11.4.4.3;4.4.3 Other type of swaps;79
11.4.5;4.5 Reading list;83
11.5;5 Using Curves;1
11.5.1;5.1 Introduction and objectives;84
11.5.2;5.2 Interpolation methods;84
11.5.2.1;5.2.1 Constant interpolation;85
11.5.2.2;5.2.2 Linear interpolation;85
11.5.2.3;5.2.3 Cubic spline interpolation;86
11.5.2.4;5.2.4 Which method to use and how?;91
11.5.3;5.3 Curve construction;91
11.5.3.1;5.3.1 Bootstrapping;93
11.5.3.2;5.3.2 Curve construction – optimization;113
11.5.4;5.4 Risk measures;117
11.5.4.1;5.4.1 Risk measures 1D;117
11.5.4.2;5.4.2 Risk measures nD;119
11.5.4.3;5.4.3 Forward buckets;120
11.5.5;5.5 Interpolation in two and three dimensions;126
11.5.6;5.6 Example: cap and floor volatilities;127
11.5.7;5.7 Reading list;127
12;Part II Markets and Non-Linear Products;131
12.1;6 Options I;132
12.1.1;6.1 Introduction and objectives;132
12.1.2;6.2 Market conventions;132
12.1.2.1;6.2.1 Black model;132
12.1.2.2;6.2.2 Normal model;133
12.1.2.3;6.2.3 Displaced diffusion model – shifted black model;134
12.1.3;6.3 Caps and floors;134
12.1.3.1;6.3.1 Cap/Floor math;135
12.1.3.2;6.3.2 Cap/Floor quotes;136
12.1.4;6.4 Swaptions;141
12.1.4.1;6.4.1 Swaption math;143
12.1.4.2;6.4.2 Swaption quotes;145
12.1.4.3;6.4.3 The swaption smile/skew;145
12.1.5;6.5 Transforming volatility;146
12.1.5.1;6.5.1 Transforming caplet volatilities;150
12.1.5.2;6.5.2 Transforming swaption volatilities;156
12.1.5.3;6.5.3 Examples;160
12.1.6;6.6 Bond options;161
12.1.7;6.7 Reading list;164
12.2;7 Options II;165
12.2.1;7.1 Introduction and objectives;165
12.2.2;7.2 CMS caps and floors;166
12.2.2.1;7.2.1 CMS math;168
12.2.2.2;7.2.2 CMS quotes;179
12.2.3;7.3 CMS spread options;1
12.2.3.1;7.3.1 CMS spread option math;183
12.2.4;7.4 Reading list;195
13;Part III Counterparty Credit Risk Adjustments;200
13.1;8 Adjustments;201
13.1.1;8.1 Introduction and objectives;201
13.1.2;8.2 The credit value adjustment (CVA);201
13.1.3;8.3 Bilateral CVA (BCVA) and debit value adjustment (DVA);205
13.1.4;8.4 The funding value adjustment (FVA);206
13.1.5;8.5 CVA, DVA, FVA – what to do?;207
13.1.5.1;8.5.1 Example;208
13.1.6;8.6 Reading list;209
14;Bibliography;212
15;Index;216