Interest Rate Markets: A Practical Approach to Fixed Income
How to build a framework for forecasting interest rate market movements
With trillions of dollars worth of trades conducted every year in everything from U.S. Treasury bonds to mortgagebacked securities, the U.S. interest rate market is one of the largest fixed income markets in the world.
Interest Rate Markets: A Practical Approach to Fixed Income details the typical quantitative tools used to analyze rates markets; the range of fixed income products on the cash side; interest rate movements; and, the derivatives side of the business. Emphasizes the importance of hedging and quantitatively managing risks inherent in interest rate trades Details the common trades which can be used by investors to take views on interest rates in an efficient manner, the methods used to accurately set up these trades, as well as common pitfalls and risks?providing examples from previous market stress events such as 2008 Includes exclusive access to the Interest Rate Markets Web site which includes commonly used calculations and trade construction methods
Interest Rate Markets helps readers to understand the structural nature of the rates markets and to develop a framework for thinking about these markets intuitively, rather than focusing on mathematical models
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3 thoughts on “Interest Rate Markets: A Practical Approach to Fixed Income”
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Good book, fresh perspective on the market!,
The book starts out with an introduction to the wide range of liquid products traded in the rates space including bonds, swaps, and futures. Once the basics of these products have been described, basic frameworks around taking views on the outright direction of rates is described. This includes both very long term factors as well as short term data releases. After the basic framework is outlined, common types of rates trades are discussed which allow traders to express more specific views. Examples include swap spreads and carry trades which are not discussed frequently in other books. In addition to trades related to underlying securities, the book addresses interest rate options and their place in a rate portfolio. Finally, practical hedging strategies are expanded upon including pros and cons of using empirical methods such as regression.
Overall, I believe this book would be useful to anyone trying to gain a more intuitive understanding of interest rates and fulfills a needed niche in the space of fixed income books which tend to be either very model intensive or very basic in their discussion.
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A Fixed Income text for AFTER Business School,
While the other three texts (particularly the last two if you’re an MBA student), may cover their respective material in more depth, Mr. Jha’s book approaches the material with a traders view in mind. His casual, and often humorous tone makes the material approachable and easy to comprehend for the 1st year Analyst you’re about to give this book to. His analogy of Chevy’s vs. Ferrari’s in describing the Cheapest to Deliver option in Treasury futures was both entertaining AND lucid.
Although the rates markets have been written about extensively (unsurprisingly as it exists as the most fundamental of fixed income markets), Mr. Jha’s book closes a major hole in the outstanding literature and should be required reading for any incoming Sales and Trading Analyst or Associate.
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Another Book Review from The Aleph Blog,
It covers all of the noncredit, nonmortgage markets. It will not replace Handbook of Fixed Income Securities 7th Edition, but it will supplement it, because this is an easier read on the areas that it covers.
Swaps, futures, rolls, options — this book gives a friendly introduction to all of them.
Quibbles
The flipside of no math is that many things are not explained as well as they should be, or get glossed over. It would be better to ignore principal components analysis than to mention it and not give much explanation. (A brief appendix, maybe? Same for other math topics?)
Who would benefit from this book:
Beginners with a serious interest in the fixed income markets would benefit. No one else.
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