An Introduction to Bond Markets by Moorad Choudhry

By Moorad Choudhry

The bond markets are an essential component of the realm financial system. The fourth version of Professor Moorad Choudhry's benchmark reference textual content An creation to Bond Markets brings readers modern with most up-to-date advancements and marketplace perform, together with the influence of the monetary obstacle and problems with relevance for traders. This publication deals an in depth but available examine bond tools, and is aimed in particular at newbies to the marketplace or these surprising with smooth mounted source of revenue items. the writer capitalises on his wealth of expertise within the mounted 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 subject matters resembling the cash markets and rules of danger administration also are brought as beneficial heritage for college students and practitioners. The e-book is vital analyzing for all those that require an advent to the monetary markets.

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Extra resources for An Introduction to Bond Markets

Example text

Because of the size and crucial nature of the debt markets, a large number of market participants, ranging from bond issuers to bond investors and associated intermediaries are inter­ ested in analysing them. This chapter introduces the building blocks of the analysis. Bonds are debt instruments that represent cash flows payable during a specified time period. They are a form of debt, much like how a bank loan is a form of debt. The cash flows they represent are the interest payments on the loan and the loan redemption.

Hence, the lenders receive simple interest when the instrument expires. 1): FV ¼ PVð1 þ rÞ where ð1:1Þ FV ¼ Future value of the instrument; PV ¼ Initial investment, or the present value, of the instrument; r ¼ Interest rate. The market convention is to quote annualised interest rates: the rate corresponding to the amount of interest that would be earned if the investment term were 1 year. Consider a 3-month deposit of $100 in a bank earning a rate of 6% a year. The annual interest gain would be $6.

Bonds are debt instruments that represent cash flows payable during a specified time period. They are a form of debt, much like how a bank loan is a form of debt. The cash flows they represent are the interest payments on the loan and the loan redemption. Unlike commercial bank loans, however, bonds are tradeable in a secondary market. Bonds are commonly referred to as fixed-income instru­ ments. This term goes back to a time when bonds paid fixed coupons each year. That is no longer necessarily the case.

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