Fixed income securities

A volatile new breed of fixed income securities have taken the market by storm over the past few years. Offering profit-hungry money managers and institutional investors the promise of far greater rewards than traditional fixed securities, these fickle instruments also entail far greater risk. Due, in great part, to the sometimes violent ways in which these new fixed securities respond to changes in interest rates, old imprecise rules of thumb that worked so well in traditional markets only lead to disaster when applied to the likes of forward contracts, floating rate bonds, inverse floaters, IOs, interest rate swaps, and swaptions. Of course researchers have developed sophisticated tools for analyzing and applying these new instruments, but most of these, unfortunately, are over the heads of average practitioners ... or are they? In this highly readable, applications-oriented guide to one of today's hottest financial topics, Bruce Tuckman clearly, methodically, and with a bare minimum of difficult math, describes today's vast and growing array of new fixed income securities and schools you in cutting-edge techniques for fixed income application and risk control. Using easy-to-follow charts and tables that simplify the most complex subject matter, he walks you through the basic principles and procedures used in pricing today's fixed income choices - from securities and fixed cash flows to embedded options in corporate bonds and mortgage-backed securities. Working in a methodical, step-wise fashion, Tuckman begins with an in-depth review of the basic concepts and tools for traditional fixed income securities. From there he introduces modern arbitrage-free techniques for pricing more complex fixed income securities and their derivatives. He next acquaints readers with measures of price sensitivity crucial to portfolio risk assessment, asset/liability management, and hedging. And finally, by focusing in turn on futures, floaters, swaps, corporates, and mortgages, he clearly illustrates how to apply the ideas and tools developed in the rest of the book.