Bond Math: The Theory Behind the Formulas (Wiley Finance) - Hardcover

Smith, Donald J.

Hardcover

ISBN 10: 1576603067 ISBN 13: 9781576603062

Publisher: Wiley Finance, 2011

Synopsis

A guide to the theory behind bond math formulasBond Math explores the ideas and assumptions behind commonly used statistics on risk and return for individual bonds and on fixed income portfolios. But this book is much more than a series of formulas and calculations; the emphasis is on how to think about and use bond math.Author Donald J. Smith, a professor at Boston University and an experienced executive trainer, covers in detail money market rates, periodicity conversions, bond yields to maturity and horizon yields, the implied probability of default, after-tax rates of return, implied forward and spot rates, and duration and convexity. These calculations are used on traditional fixed-rate and zero-coupon bonds, as well as floating-rate notes, inflation-indexed securities, and interest rate swaps.Puts bond math in perspective through discussions of bond portfolios and investment strategies.Critiques the Bloomberg Yield Analysis (YA) pag

About this title

From the Inside Flap

The U.S. bond market, which includes everything from Treasuries and investment-grade corporate paper to municipals and high-yield bonds, is one of the largest and most important markets in the world. In order to succeed in this arena, it helps to have a firm foundation in bond mathematics and a working knowledge of how certain bond numbers arecalculated as well as which ones are most useful.

No one understands this better than author Donald J. Smith—an Associate Professor of Finance and Economics at Boston University's School of Management—who has been actively involved with executive education for over twenty-five years. And now, with Bond Math, he shares his experience in this field with you.

Filled with in-depth insights and expert advice, this reliable guide outlines the essential theory behind bond math formulas. Page by page, it skillfully explains the ideas and assumptions behind the commonly used statistics regarding the risk and return on bonds. The Bloomberg Yield Analysis(YA) page, which is widely used for bonds, is thoroughly explained and critiqued, indicating which numbers provide reliable information, which ones are meaningless data, and which ones can be misleading to investors.

Opening with an informative chapter on money markets—where rates do not follow the classic "time-value-of-money" principles taught in introductory finance courses—Bond Math quickly moves on to cover:

• Zero-Coupon Bonds

• Prices and Yields on Coupon Bonds

• Bond Taxation

• Yield Curves

• Duration and Convexity

• Floaters and Linkers

• Interest Rate Swaps

Rounding out this detailed discussion of bond mathematics are two chapters dedicated to bond portfolios and investment strategies,placing the math in perspective.

Whether you currently work with bonds or aspire to, understanding the math behind bonds and then carrying out specific calculations with itis essential to investment success. Bond Math will put you in a better position to achieve this goal and show you what it takes to excel atthis difficult endeavor.

From the Back Cover

Filled with in-depth insights and practical advice, Bond Math covers in concise detail the key calculations finance veterans, as well as aspiring professionals, need to succeed in this field. Engaging and informative, this book is much more than just a guide to bond calculations—it skillfully emphasizes how to think about bond math and reveals which numbers are most useful when dealing with bonds.

Throughout these pages, author Donald J. Smith—an Associate Professor of Finance at Boston University's School of Management, who has been actively involved with executive education for over twenty-five years—covers many essential issues. You'll quickly become familiar with everything from money market add-on and discount rates, periodicity conversions, yields to maturity, horizon yields, implied probability of default, and after-tax rates of return to implied spot and forward rates, duration, and convexity. You'll see how these figures are used with traditional fixed-rate and zero-coupon bonds, as well as floating-rate notes (floaters), inflation-indexed securities (linkers), and interest rate swaps.

This reliable resource puts bond math in perspective, analyzing the circumstances when statistics reported for individual securities can be used to calculate summary statistics for a portfolio of bonds. It also discusses how bond math is used in both aggressive and passive investment strategies, such as taking a view on the yield curve and immunizing the portfolio from interest rate volatility.

If you work in fixed income and use Bloomberg pages to access data on bonds, you need Bond Math.

Edition details

• Publisher: Wiley Finance
• Publication date: 2011
• ISBN 10: 1576603067
• ISBN 13: 9781576603062
• Binding: Hardcover
• Language: English
• Edition number: 1
• Number of pages: 288