Fixed income trading and risk management. (2021)

• Record Type: Book
• Further Information: Note: Alexander Düring.
• Authors: Düring, Alexander
• Contents: I Preliminaries 15 1 Introduction 17 2 Money, credit and banking 25 2.1 Abstract properties of money 25 2.2 Early forms of money 27 2.2.1 Paper money and bank notes 31 2.3 Fiat money 32 2.3.1 Fiat money and trade 33 3 Banks 35 3.1 Banks and bank money creation 35 3.2 Categories of banks 36 4 Bank money creation 39 4.1 Single-bank introduction 39 4.2 Extension to multiple banks 42 4.3 Transfer settlement in central bank money 46 4.4 Trade and non-bank credit 50 4.4.1 Non-cash trading instruments 51 4.4.2 Discounting 52 4.4.3 Delineating payment instruments from money 52 4.5 Digital token monies and cryptocurrencies 53 4.6 The money multiplier 54 5 The role of central banks 57 5.1 Introduction 57 5.2 Monetary financing 63 6 Monetary policy 65 6.1 Objectives of monetary policy 65 6.2 Monetary policy under inflation targeting 68 6.3 Central bank operational frameworks 72 6.3.1 Symmetric interest rate corridors 74 6.3.2 Asymmetric lending corridors 76 7 Operational frameworks 77 7.1 Control of the money supply 77 7.2 Liquidity provision: Rediscounting, outright purchases and Lombard lending 78 7.3 Liquidity absorption: Asset sales and reverse repos 79 7.4 The impact of FX operations 80 8 Interaction between frameworks and policy 83 8.1 Volatility 83 8.2 Collateral 84 9 Non-standard monetary policy 87 9.1 Quantitative easing 87 9.1.1 The monetary effect of large-scale asset purchases 92 9.1.2 Market liquidity and central bank asset purchases 93 9.1.3 Helicopter money 95 9.1.4 Choice of methods and assets 96 9.2 Practical experience 99 9.2.1 QE, money multipliers and FX 99 9.2.2 Bank of Japan 2013 QE experience 104 9.2.3 Lessons from the initial BoJ quantitative easing 106 9.3 Negative interest rates 108 9.4 The specific situation of the ECB 109 II Cash instruments 113 10 Contract and instrument types 115 10.1 Securities and bilateral contracts 115 10.2 Security identifiers 118 10.2.1 ISIN codes 118 10.2.2 CUSIP codes 120 11 Trading and settlement 123 11.1 Trading 123 11.1.1 Trading and price formation 123 11.1.2 Trading venues 124 11.1.3 The OTC trade lifecycle 126 11.1.4 The exchange trade cycle 137 11.1.5 Trading in competition versus single dealer inquiries and orders 137 11.2 Settlement 139 11.2.1 Settlement mechanisms 139 11.2.2 Settlement conventions 140 12 Central clearing 143 12.1 Direct clearing 143 12.2 Indirect clearing 149 12.2.1 Agency clearing 149 12.2.2 Principal clearing 150 12.2.3 Hybrid clearing models 150 12.3 Contract value adjustments (xVA) 151 12.3.1 Credit Value Adjustment 152 12.3.2 Funding Value Adjustment 152 12.3.3 Debit Value Adjustment 153 13 The money market 155 13.1 Money market instruments 155 13.2 Discount factors 157 13.3 Daycount conventions 158 13.4 Money market interest rates 160 13.5 Compounding 161 13.6 LIBOR, Euribor, and friends 162 13.7 Overnight benchmarks 164 13.8 Benchmark reform 165 13.9 Money market futures and futures trading 167 13.9.1 Money market futures 167 13.9.2 Identification of futures contracts 168 13.9.3 Futures trading basics 169 13.9.4 Convexity adjustment 170 14 The repo market 173 14.1 The repurchase market 173 14.2 Haircut 175 14.3 Variations of repurchase transactions 176 14.4 Rehypothecation 178 15 Spot and forward rates 179 15.1 Forward rates 179 15.2 No-arbitrage calculations 179 15.3 Official rates versus term rates 181 15.3.1 The turn premium 182 15.3.2 Matching policy expectations to market rates 183 16 Bond market 187 16.1 Introduction 187 16.2 Cashflow types 188 16.2.1 Bullet bonds 188 16.2.2 Zero coupon bonds, perpetuals and annuities 190 16.3 Issuer types 194 16.3.1 Joint issuance 196 16.3.2 Supranationals 199 16.4 Governing law and contractual clauses 200 16.5 Bond markets 203 16.5.1 The primary market 206 16.5.2 The secondary market I: (interdealer market) 211 16.5.3 The secondary market II: (customer-facing market) 212 16.6 Accrued interest 212 16.7 Yield 214 16.7.1 Running yield 214 16.7.2 Simple yield 214 16.7.3 Compound yield 215 16.7.4 Bond-equivalent yield 216 16.8 Interest rate risk 217 16.9 Convexity 219 16.10Bond value decomposition 220 16.11Carry 223 17 Floating-rate notes 225 17.1 Coupon reset mechanics 226 17.2 Libor and OIS-linked notes 227 17.3 Discount margin 229 17.4 CMS and CMT floaters 231 18 Asset markets and liquidity 233 18.1 Concepts 233 18.2 Liquidity measurement 237 18.2.1 Taxonomy of liquidity measures 239 18.3 Examples 241 18.4 Liquidity premium 244 18.5 Liquidity and volatility 246 19 Curves and curve models 249 19.1 Models 250 19.2 Yield curve representation and interpretations 251 19.2.1 Discount factors versus par curves 251 19.3 Market-based curve representations 254 19.3.1 Bootstrapping 254 19.3.2 Reverse bootstrapping 256 19.4 Parametric curve models 257 19.4.1 The Nelson-Siegel and Nelson-Siegel-Svensson spline 258 19.4.2 Polynomial splines 259 19.4.3 The exponential spline 261 19.4.4 The Vasicek spline 261 19.4.5 Composite models 264 19.5 Fitting curve models 265 20 Curve analyis 269 20.1 Expectations 270 20.2 Convexity bias 274 20.3 Term risk premium 276 20.4 Preferred habitat 278 20.4.1 Asset–liability matching 278 20.4.2 Regulatory constraints 279 20.4.3 Passive investing 280 20.4.4 Central bank reserve portfolios 281 20.4.5 Market technicals 281 21 Carry and roll-down 283 22 Curve spreads 287 22.1 Z-spread 287 22.2 Par spread 288 22.3 Swap spreads 289 22.3.1 Asset swap spreads 289 22.3.2 I-spreads 291 22.3.3 The TED spread 292 III Inflation-linked debt 293 23 Inflation-indexed bonds 295 23.1 Introduction 295 23.1.1 Cashflows of inflation-linked bonds 298 23.1.2 Quotation of index-linked bonds 300 23.2 Rebalancing, rebasing and revision of CPI indices 301 23.3 Inflation seasonality 304 23.4 Price formation in inflation-linked markets 308 23.5 Return measures of inflation-linked bonds 310 23.6 Breakeven inflation 312 23.7 Carry on inflation-indexed bonds 315 23.8 Comprehensive inflation modelling 316 23.9 Inflation models and expectations 321 IV Defaultable claims 325 24 Credit risk 327</
• Publisher Details: Chichester, West Sussex, United Kingdom : John Wiley & Sons, Ltd
• Publication Date: 2021
• Copyright Date: 2021
• Extent: 1 online resource
• Subjects: 332.63/2044; Fixed-income securities; Risk management; Fixed-income securities; Risk management; Electronic books
• Languages: English
• ISBNs: 9781119756354; 1119756359; 9781119756347; 1119756340
• Related ISBNs: 9781119756330
• Notes: Note: Description based on online resource; title from digital title page (viewed on February 15, 2021).
• Access Rights: Legal Deposit; Only available on premises controlled by the deposit library and to one user at any one time; The Legal Deposit Libraries (Non-Print Works) Regulations (UK).
• Access Usage: Restricted: Printing from this resource is governed by The Legal Deposit Libraries (Non-Print Works) Regulations (UK) and UK copyright law currently in force.