This book provides comprehensive coverage of all aspects of bond risk measures. The author walks the reader through the price volatility characteristics of option-free bonds and bonds with embedded options to the proper method for calculating duration and convexity. The author explains why an interpretation of duration as some measure of time of receipts or in terms of complex mathematical concepts is foolish and is not operationally meaningful for money managers and traders. The author covers the following topics: modified versus effective duration; effective duration for bonds with embedded options (inlcuding spread duration); the various duration measures for mortgage-backed securities; the contribution to duration of foreign bonds to a domestic portfolio; duration for a floater, including spread and index duration; duration for inverse floaters; yield curve risk measures such as key rate duration; duration measures for derivative instruments and how to compute a portfolio; duration when derivatives are included; other bond risk measures such as portfolio standard deviation, value-at-risk, downside risk such as semi-variance, risk of loss; and, much more. This is the most comprehensive book on bond risk measures available and is intended for both the novice and experienced money managers and others responsible for understanding the interest rate risk of a portfolio or institution such as board members, trustees, consultants, and regulators.
Book Details:
- Author: Frank J. Fabozzi
- ISBN: 9780470253564
- Year Published: 1999
- Pages: 258
- BISAC: BUS036000, BUSINESS & ECONOMICS/Investments & Securities / General
About the Book and Topic:
This book provides comprehensive coverage of all aspects of bond risk measures. The author walks the reader through the price volatility characteristics of option-free bonds and bonds with embedded options to the proper method for calculating duration and convexity. The author explains why an interpretation of duration as some measure of time of receipts or in terms of complex mathematical concepts is foolish and is not operationally meaningful for money managers and traders. The author covers the following topics: modified versus effective duration; effective duration for bonds with embedded options (inlcuding spread duration); the various duration measures for mortgage-backed securities; the contribution to duration of foreign bonds to a domestic portfolio; duration for a floater, including spread and index duration; duration for inverse floaters; yield curve risk measures such as key rate duration; duration measures for derivative instruments and how to compute a portfolio; duration when derivatives are included; other bond risk measures such as portfolio standard deviation, value-at-risk, downside risk such as semi-variance, risk of loss; and, much more. This is the most comprehensive book on bond risk measures available and is intended for both the novice and experienced money managers and others responsible for understanding the interest rate risk of a portfolio or institution such as board members, trustees, consultants, and regulators.
1. Overview 2. The Reasons Why a Bond’s Price Changes 3. Price Volatility Characteristics of Bonds 4. The Basics of Duration and Convexity 5. Duration Measures for Bonds with Embedded Options and Foreign Bonds 6. Duration and Convexity for Mortgage-Backed Securities 7. Yield Curve Duration Measures 8. Risk Measures for Interest Rate Derivatives 9. Other Risk Measures 10. Measuring Yield Volatility
About the Author
Frank J. Fabozzi is a financial consultant, the editor of the Journal of Portfolio Management, and an Adjunct Professor of Finance at Yale University’s School of Management.