Fixed Income Analytics

Abstract

Part 1 Yield and duration: invoice prices, cash flows and yields on treasury bonds zero coupon strips and custodial receipts duration - an introduction to the concept and its uses the effect of interest payments on the duration of a bond - implications for portfolio management and yield curve analysis rate of return and futurity of cash flow from a bond - are yield and duration good measures? bond convexity and its implications for immunization. Part 2 Yield curves and relative value: the structure of treasury yields - duration, coupon and liquidity effects coupon rolls treasury bills with special value comparing yields on zeros to yields on treasury bonds. Part 3 Bond portfolio management when the shape of the yield curve changes: yield spread trades - weighting, financing and applications hedging in the treasury bond market - implications of imperfect correlation and nonuniform volatility of yield changes for the size and an optimal hedge approximating the yield on a portfolio of bonds - value-weighted averages versus value of a basis point-weighted averages butterfly trades - a critical assessment of yield, convexity and risk managing yield curve risk - a generalized approach to immunization. Part 4 Modes of fluctuation of the yield curve: modes of fluctuation in bond yields - an analysis of principal components polynomial representations of the yield curve and its modes of fluctuation consistency between the shape of the yield curve and its modes of fluctuation pricing claims whose payments are contingent on interest rates time variation in the modes of fluctuation of the spot treasury yield curve.

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