Fixed Income Analysis E-Book

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Serie: The CFA Institute Series
• Sprache: Englisch

Seitenzahl: 1910

Veröffentlichungsjahr: 2022

Beschreibung

The essential guide to fixed-income portfolio management, from experts working with CFA Institute Fixed Income Analysis, 5th Edition delivers an authoritative overview of how successful investment professionals manage fixed-income portfolios. Back with expanded content on the defining elements of fixed income securities, corporate debt, repurchase agreements, term structure models, and more, the 5th edition gives students and practitioners alike the tools to understand and apply effective fixed income portfolio management tactics. Revised and updated by a team of investment experts in collaboration with CFA Institute, this text introduces the fundamental topics of fixed income securities and markets while also providing in-depth coverage of fixed income security valuation. This new edition offers refreshed and expanded content on the analysis and construction of active yield curve and credit strategies for portfolio managers. Thanks to a wealth of real-world examples, Fixed Income Analysis remains an excellent resource for professionals looking to expand upon their current understanding of this important facet of portfolio management, as well as for students in the undergraduate or graduate classroom. Through this text, readers will: * Understand the main features and characteristics of fixed income instruments * Master the key return and risk measures of fixed income instruments * Develop and evaluate key fixed income investment strategies based on top-down and bottom-up analysis The companion workbook (sold separately) includes problems and solutions aligning with the text and allows learners to test their comprehension of key concepts. CFA Institute is the world's premier association for investment professionals, and the governing body for the CFA® Program, CIPM® Program, CFA Institute ESG Investing Certificate, and Investment Foundations® Program. Investment analysts, portfolio managers, individual and institutional investors and their advisors, and any reader with an interest in fixed income markets will value this accessible and informative guide.

Leseprobe

CFA Institute is the premier association for investment professionals around the world, with more than 150,000 CFA charterholders worldwide in 165+ countries and regions. Since 1963 the organization has developed and administered the renowned Chartered Financial Analyst® Program. With a rich history of leading the investment profession, CFA Institute has set the highest standards in ethics, education, and professional excellence within the global investment community and is the foremost authority on investment profession conduct and practice. Each book in the CFA Institute Investment Series is geared toward industry practitioners along with graduate-level finance students and covers the most important topics in the industry. The authors of these cutting-edge books are themselves industry professionals and academics and bring their wealth of knowledge and expertise to this series.

FIXED INCOME ANALYSIS

Fifth Edition

James F. Adams, PhD, CFA

Donald J. Smith, PhD

Cover image: Background © maxkrasnov/iStock.com

Cover design: Wiley

Copyright © 2022 by CFA Institute. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey.

The First, Second, Third, and Fourth Editions of this book were published by Wiley in 2000, 2011, 2015, and 2019, respectively.

Published simultaneously in Canada.

No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, [phone], fax [phone], or on the Web at www.copyright.com. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, [phone], fax [phone], or online at www.wiley.com/go/permissions.

Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created or extended by sales representatives or written sales materials. The advice and strategies contained herein may not be suitable for your situation. You should consult with a professional where appropriate. Neither the publisher nor author shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages.

For general information on our other products and services or for technical support, please contact our Customer Care Department within the United States at [phone], outside the United States at [phone], or fax [phone].

Wiley publishes in a variety of print and electronic formats and by print-on-demand. Some material included with standard print versions of this book may not be included in e-books or in print-on-demand. If this book refers to media such as a CD or DVD that is not included in the version you purchased, you may download this material at http://booksupport.wiley.com. For more information about Wiley products, visit www.wiley.com.

ISBN 978-1-119-85054-0 (Hardcover)

ISBN 978-1-119-85055-7 (ePDF)

ISBN 978-1-119-85056-4 (ePub)

CONTENTS

Cover

Title Page

Copyright

Preface

Acknowledgments

About the CFA Institute Series

PART I Fixed Income Essentials

CHAPTER 1 Fixed-Income Securities: Defining Elements

Learning Outcomes

1. Introduction and Overview of a Fixed-Income Security

1.1. Overview of a Fixed-Income Security

2. Bond Indenture

2.1. Bond Indenture

3. Legal, Regulatory, and Tax Considerations

3.1. Tax Considerations

4. Principal Repayment Structures

4.1. Principal Repayment Structures

5. Coupon Payment Structures

5.1. Floating-Rate Notes

5.2. Step-Up Coupon Bonds

5.3. Credit-Linked Coupon Bonds

5.4. Payment-in-Kind Coupon Bonds

5.5. Deferred Coupon Bonds

5.6. Index-Linked Bonds

6. Callable and Putable Bonds

6.1. Callable Bonds

6.2. Putable Bonds

7. Convertible Bonds

Summary

Practice Problems

CHAPTER 2 Fixed-Income Markets: Issuance, Trading, and Funding

Learning Outcomes

1. Introduction

2. Classification of Fixed-Income Markets

2.1. Classification of Fixed-Income Markets

2.2. Fixed-Income Indexes

2.3. Investors in Fixed-Income Securities

3. Primary Bond Markets

3.1. Primary Bond Markets

4. Secondary Bond Markets

5. Sovereign Bonds

5.1. Characteristics of Sovereign Bonds

5.2. Credit Quality of Sovereign Bonds

5.3. Types of Sovereign Bonds

6. Non-Sovereign, Quasi-Government, and Supranational Bonds

6.1. Non-Sovereign Bonds

6.2. Quasi-Government Bonds

6.3. Supranational Bonds

7. Corporate Debt: Bank Loans, Syndicated Loans, and Commercial Paper

7.1. Bank Loans and Syndicated Loans

7.2. Commercial Paper

8. Corporate Debt: Notes and Bonds

8.1. Maturities

8.2. Coupon Payment Structures

8.3. Principal Repayment Structures

8.4. Asset or Collateral Backing

8.5. Contingency Provisions

8.6. Issuance, Trading, and Settlement

9. Structured Financial Instruments

9.1. Capital Protected Instruments

9.2. Yield Enhancement Instruments

9.3. Participation Instruments

9.4. Leveraged Instruments

10. Short-Term Bank Funding Alternatives

10.1. Retail Deposits

10.2. Short-Term Wholesale Funds

11. Repurchase and Reverse Repurchase Agreements

11.1. Structure of Repurchase and Reverse Repurchase Agreements

11.2. Credit Risk Associated with Repurchase Agreements

Summary

Practice Problems

CHAPTER 3 Introduction to Fixed-Income Valuation

Learning Outcomes

1. Introduction

2. Bond Prices and the Time Value of Money

2.1. Bond Pricing with a Market Discount Rate

2.2. Yield-to-Maturity

2.3. Relationships between the Bond Price and Bond Characteristics

2.4. Pricing Bonds Using Spot Rates

3. Prices and Yields: Conventions For Quotes and Calculations

3.1. Flat Price, Accrued Interest, and the Full Price

3.2. Matrix Pricing

3.3. Annual Yields for Varying Compounding Periods in the Year

3.4. Yield Measures for Fixed-Rate Bonds

3.5. Yield Measures for Floating-Rate Notes

3.6. Yield Measures for Money Market Instruments

4. The Maturity Structure of Interest Rates

5. Yield Spreads

5.1. Yield Spreads over Benchmark Rates

5.2. Yield Spreads over the Benchmark Yield Curve

Summary

Practice Problems

CHAPTER 4 Introduction to Asset-Backed Securities

Learning Outcomes

1. Introduction: Benefits of Securitization

1.1. Benefits of Securitization for Economies and Financial Markets

2. How Securitization Works

2.1. An Example of a Securitization

2.2. Parties to a Securitization and Their Roles

3. Structure of a Securitization

3.1. Key Role of the Special Purpose Entity

4. Residential Mortgage Loans

4.1. Maturity

4.2. Interest Rate Determination

4.3. Amortization Schedule

4.4. Prepayment Options and Prepayment Penalties

4.5. Rights of the Lender in a Foreclosure

5. Mortgage Pass-Through Securities

5.1. Mortgage Pass-Through Securities

6. Collateralized Mortgage Obligations and Non-Agency RMBS

6.1. Sequential-Pay CMO Structures

6.2. CMO Structures Including Planned Amortization Class and Support Tranches

6.3. Other CMO Structures

6.4. Non-Agency Residential Mortgage-Backed Securities

7. Commercial Mortgage-Backed Securities

7.1. Credit Risk

7.2. CMBS Structure

8. Non-Mortgage Asset-Backed Securities

8.1. Auto Loan ABS

8.2. Credit Card Receivable ABS

9. Collateralized Debt Obligations

9.1. CDO Structure

9.2. An Example of a CDO Transaction

10. Covered Bonds

Summary

Practice Problems

CHAPTER 5 Understanding Fixed-Income Risk and Return

Learning Outcomes

1. Introduction

2. Sources of Return

3. Macaulay and Modified Duration

3.1. Macaulay, Modified, and Approximate Duration

4. Approximate Modified and Macaulay Duration

5. Effective and Key Rate Duration

5.1. Key Rate Duration

6. Properties of Bond Duration

7. Duration of a Bond Portfolio

8. Money Duration and the Price Value of a Basis Point

9. Bond Convexity

10. Investment Horizon, Macaulay Duration, and Interest Rate Risk

10.1. Yield Volatility

10.2. Investment Horizon, Macaulay Duration, and Interest Rate Risk

11. Credit and Liquidity Risk

12. Empirical Duration

Summary

Reference

Practice Problems

CHAPTER 6 Fundamentals of Credit Analysis

Learning Outcomes

1. Introduction

2. Credit Risk

3. Capital Structure, Seniority Ranking, and Recovery Rates

3.1. Capital Structure

3.2. Seniority Ranking

3.3. Recovery Rates

4. Rating Agencies, Credit Ratings, and Their Role in the Debt Markets

4.1. Credit Ratings

4.2. Issuer vs. Issue Ratings

4.3. ESG Ratings

4.4. Risks in Relying on Agency Ratings

5. Traditional Credit Analysis: Corporate Debt Securities

5.1. Credit Analysis vs. Equity Analysis: Similarities and Differences

5.2. The Four Cs of Credit Analysis: A Useful Framework

6. Credit Risk vs. Return: Yields and Spreads

6.1. Credit Risk vs. Return: The Price Impact of Spread Changes

7. High-Yield, Sovereign, and Non-Sovereign Credit Analysis

7.1. High Yield

7.2. Sovereign Debt

7.3. Non-Sovereign Government Debt

Summary

Practice Problems

PART II Fixed Income Term Structure, Advanced Valuation, and Credit Analysis

CHAPTER 7 The Term Structure and Interest Rate Dynamics

Learning Outcomes

1. Spot Rates, Forward Rates, and the Forward Rate Model

1.1. Spot Rates and Forward Rates

2. Yield-to-Maturity in Relation to Spot and Forward Rates

2.1. Yield Curve Movement and the Forward Curve

3. Active Bond Portfolio Management

4. The Swap Rate Curve

4.1. Swap Rate Curve

4.2. Why Do Market Participants Use Swap Rates When Valuing Bonds?

4.3. How Do Market Participants Use the Swap Curve in Valuation?

5. The Swap Spread and Spreads as a Price Quotation Convention

5.1. Spreads as a Price Quotation Convention

6. Traditional Theories of the Term Structure of Interest Rates

6.1. Expectations Theory

6.2. Liquidity Preference Theory

6.3. Segmented Markets Theory

6.4. Preferred Habitat Theory

7. Yield Curve Factor Models

7.1. A Bond’s Exposure to Yield Curve Movement

7.2. Factors Affecting the Shape of the Yield Curve

8. The Maturity Structure of Yield Curve Volatilities and Managing Yield Curve Risks

8.1. Yield Volatility

8.2. Managing Yield Curve Risks Using Key Rate Duration

9. Developing Interest Rate Views Using Macroeconomic Variables

Summary

References

Practice Problems

CHAPTER 8 The Arbitrage-Free Valuation Framework

Learning Outcomes

1. Introduction to Arbitrage-Free Valuation

1.1. The Meaning of Arbitrage-Free Valuation

1.2. The Law of One Price

1.3. Arbitrage Opportunity

1.4. Implications of Arbitrage-Free Valuation for Fixed-Income Securities

2. Arbitrage-Free Valuation for an Option-Free Bond

2.1. The Binomial Interest Rate Tree

3. The Basics of Creating a Binomial Interest Rate Tree

3.1. Determining the Value of a Bond at a Node

4. Calibrating the Binomial Interest Rate Tree to the Term Structure

5. Valuing an Option-Free Bond with a Binomial Tree

6. Valuing an Option-Free Bond with Pathwise Valuation

7. The Monte Carlo Method

8. Term Structure Models

8.1. Model Choice

8.2. Equilibrium Models

8.3. Arbitrage-Free Models

8.4. Modern Models

Summary

References

Practice Problems

CHAPTER 9 Valuation and Analysis of Bonds with Embedded Options

Learning Outcomes

1. Introduction and Overview of Embedded Options

1.1. Overview of Embedded Options

2. Valuation and Analysis of Callable and Putable Bonds

2.1. Relationships between the Values of a Callable or Putable Bond, Straight Bond, and Embedded Option

2.2. Valuation of Default-Free and Option-Free Bonds: A Refresher

2.3. Valuation of Default-Free Callable and Putable Bonds in the Absence of Interest Rate Volatility

3. Effect of Interest Rate Volatility on the Value of Callable and Putable Bonds

3.1. Interest Rate Volatility

3.2. Level and Shape of the Yield Curve

4. Valuation of Default-Free Callable and Putable Bonds in the Presence of Interest Rate Volatility

4.1. Valuation of a Callable Bond with Interest Rate Volatility

4.2. Valuation of a Putable Bond with Interest Rate Volatility

5. Valuation of Risky Callable and Putable Bonds

5.1. Option-Adjusted Spread

5.2. Effect of Interest Rate Volatility on Option-Adjusted Spread

6. Bonds with Embedded Options: Effective Duration

6.1. Duration

7. One-Sided and Key Rate Duration

7.1. Key Rate Durations

8. Effective Convexity

9. Valuation and Analysis of Capped and Floored Floating-Rate Bonds

9.1. Valuation of a Capped Floater

9.2. Valuation of a Floored Floater

10. Valuation and Analysis of Convertible Bonds: Defining Features and Analysis of a Convertible Bond

10.1. Defining Features of a Convertible Bond

10.2. Analysis of a Convertible Bond

11. Valuation of a Convertible Bond and Comparison of Risk–Return Characteristics

11.1. Comparison of the Risk–Return Characteristics of a Convertible Bond, the Straight Bond, and the Underlying Common Stock

Summary

Practice Problems

CHAPTER 10 Credit Analysis Models

Learning Outcomes

1. Introduction

2. Modeling Credit Risk and the Credit Valuation Adjustment

3. Credit Scores and Credit Ratings

4. Structural and Reduced-Form Credit Models

5. Valuing Risky Bonds in an Arbitrage-Free Framework

6. Interpreting Changes in Credit Spreads

7. The Term Structure of Credit Spreads

8. Credit Analysis for Securitized Debt

Summary

References

Practice Problems

CHAPTER 11 Credit Default Swaps

Learning Outcomes

1. Introduction

2. Basic Definitions and Concepts

2.1. Types of CDS

3. Important Features of CDS Markets and Instruments, Credit and Succession Events, and Settlement Proposals

3.1. Credit and Succession Events

3.2. Settlement Protocols

3.3. CDS Index Products

3.4. Market Characteristics

4. Basics of Valuation and Pricing

4.1. Basic Pricing Concepts

4.2. The Credit Curve and CDS Pricing Conventions

4.3. CDS Pricing Conventions

4.4. Valuation Changes in CDS during Their Lives

4.5. Monetizing Gains and Losses

5. Applications of CDS

5.1. Managing Credit Exposures

6. Valuation Differences and Basis Trading

Summary

Practice Problems

PART III Fixed Income Portfolio Management

CHAPTER 12 Overview of Fixed-Income Portfolio Management

Learning Outcomes

1. Introduction

2. Roles of Fixed-Income Securities in Portfolios

2.1. Diversification Benefits

2.2. Benefits of Regular Cash Flows

2.3. Inflation-Hedging Potential

3. Classifying Fixed-Income Mandates

3.1. Liability-Based Mandates

3.2. Total Return Mandates

3.3. Fixed-Income Mandates with ESG Considerations

4. Fixed-Income Portfolio Measures

4.1. Portfolio Measures of Risk and Return

4.2. Correlations between Fixed-Income Sectors

4.3. Use of Measures of Risk and Return in Portfolio Management

5. Bond Market Liquidity

5.1. Liquidity among Bond Market Sub-Sectors

5.2. The Effects of Liquidity on Fixed-Income Portfolio Management

6. A Model for Fixed-Income Returns

6.1. Decomposing Expected Returns

6.2. Estimation of the Inputs

6.3. Limitations of the Expected Return Decomposition

7. Leverage

7.1. Using Leverage

7.2. Methods for Leveraging Fixed-Income Portfolios

7.3. Risks of Leverage

8. Fixed-Income Portfolio Taxation

8.1. Principles of Fixed-Income Taxation

8.2. Investment Vehicles and Taxes

Summary

References

Practice Problems

CHAPTER 13 Liability-Driven and Index-Based Strategies

Learning Outcomes

1. Introduction

2. Liability-Driven Investing

2.1. Liability-Driven Investing vs. Asset-Driven Liabilities

2.2. Types of Liabilities

3. Interest Rate Immunization: Managing the Interest Rate Risk of a Single Liability

3.1. A Numerical Example of Immunization

4. Interest Rate Immunization: Managing the Interest Rate Risk of Multiple Liabilities

4.1. Cash Flow Matching

4.2. Laddered Portfolios

4.3. Duration Matching

4.4. Derivatives Overlay

4.5. Contingent Immunization

5. Liability-Driven Investing: An Example of a Defined Benefit Pension Plan

5.1. Model Assumptions

5.2. Model Inputs

5.3. Calculating Durations

5.4. Addressing the Duration Gap

6. Risks in Liability-Driven Investing

6.1. Model Risk in Liability-Driven Investing

6.2. Spread Risk in Liability-Driven Investing

6.3. Counterparty Credit Risk

6.4. Asset Liquidity Risk

7. Bond Indexes and the Challenges of Matching a Fixed-Income Portfolio to an Index

7.1. Size and Breadth of the Fixed-Income Universe

7.2. Array of Characteristics

7.3. Unique Issuance and Trading Patterns

7.4. Primary Risk Factors

8. Alternative Methods for Establishing Passive Bond Market Exposure

8.1. Full Replication

8.2. Enhanced Indexing

8.3. Alternatives to Investing Directly in Fixed-Income Securities

9. Benchmark Selection

Summary

References

Practice Problems

CHAPTER 14 Yield Curve Strategies

Learning Outcomes

1. Introduction

2. Key Yield Curve and Fixed-Income Concepts for Active Managers

2.1. Yield Curve Dynamics

2.2. Duration and Convexity

3. Yield Curve Strategies

3.1. Static Yield Curve

3.2. Dynamic Yield Curve

3.3. Key Rate Duration for a Portfolio

4. Active Fixed-Income Management across Currencies

5. A Framework for Evaluating Yield Curve Strategies

Summary

References

Practice Problems

CHAPTER 15 Fixed-Income Active Management: Credit Strategies

Learning Outcomes

1. Introduction

2. Key Credit and Spread Concepts for Active Management

2.1. Credit Risk Considerations

2.2. Credit Spread Measures

3. Credit Strategies

3.1. Bottom-Up Credit Strategies

3.2. Top-Down Credit Strategies

3.3. Factor-Based Credit Strategies

4. Liquidity and Tail Risk

4.1. Liquidity Risk

4.2. Tail Risk

5. Synthetic Credit Strategies

6. Credit Spread Curve Strategies

6.1. Static Credit Spread Curve Strategies

6.2. Dynamic Credit Spread Curve Strategies

7. Global Credit Strategies

8. Structured Credit

9. Fixed-Income Analytics

Summary

References

Practice Problems

Glossary

About the Editors

About the CFA Program

Index

End User License Agreement

Guide

Cover

Table of Contents

Title Page

Begin Reading

End User License Agreement

Pages

i

ii

iii

iv

v

vi

vii

viii

ix

x

xi

xii

xiii

xiv

xv

xvi

xvii

xviii

xix

xx

xxi

xxii

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

29

30

31

32

33

34

35

36

37

38

39

40

41

42

43

44

45

46

47

48

49

50

51

52

53

54

55

56

57

58

59

60

61

62

63

64

65

66

67

68

69

70

71

72

73

74

75

76

77

78

79

80

81

82

83

84

85

86

87

88

89

90

91

92

93

94

95

96

97

98

99

100

101

102

103

104

105

106

107

108

109

110

111

112

113

114

115

116

117

118

119

120

121

122

123

124

125

126

127

128

129

130

131

132

133

134

135

136

137

138

139

140

141

142

143

144

145

146

147

148

149

150

151

152

153

154

155

156

157

158

159

160

161

162

163

164

165

166

167

168

169

170

171

172

173

174

175

176

177

178

179

180

181

182

183

184

185

186

187

188

189

190

191

192

193

194

195

196

197

198

199

200

201

202

203

204

205

206

207

208

209

210

211

212

213

214

215

216

217

218

219

220

221

222

223

224

225

226

227

228

229

230

231

232

233

234

235

236

237

238

239

240

241

242

243

244

245

246

247

248

249

250

251

252

253

254

255

256

257

258

259

260

261

262

263

264

265

266

267

268

269

270

271

272

273

274

275

276

277

278

279

280

281

282

283

284

285

286

287

288

289

290

291

292

293

294

295

296

297

298

299

300

301

302

303

304

305

306

307

308

309

310

311

312

313

314

315

316

317

318

319

320

321

322

323

324

325

326

327

328

329

330

331

332

333

334

335

336

337

338

339

340

341

342

343

344

345

346

347

348

349

350

351

352

353

354

355

356

357

358

359

360

361

362

363

364

365

366

367

368

369

370

371

372

373

374

375

376

377

378

379

380

381

382

383

384

385

386

387

388

389

390

391

392

393

394

395

396

397

398

399

400

401

402

403

404

405

406

407

408

409

410

411

412

413

414

415

416

417

418

419

420

421

422

423

424

425

426

427

428

429

430

431

432

433

434

435

436

437

438

439

440

441

442

443

444

445

446

447

448

449

450

451

452

453

454

455

456

457

458

459

460

461

462

463

464

465

466

467

468

469

470

471

472

473

474

475

476

477

478

479

480

481

482

483

484

485

486

487

488

489

490

491

492

493

494

495

496

497

498

499

500

501

502

503

504

505

506

507

508

509

510

511

512

513

514

515

516

517

518

519

520

521

522

523

524

525

526

527

528

529

530

531

532

533

534

535

536

537

538

539

540

541

542

543

544

545

546

547

548

549

550

551

552

553

554

555

556

557

558

559

560

561

562

563

564

565

566

567

568

569

570

571

572

573

574

575

576

577

578

579

580

581

582

583

584

585

586

587

588

589

590

591

592

593

594

595

596

597

598

599

600

601

602

603

604

605

606

607

608

609

610

611

612

613

614

615

616

617

618

619

620

621

622

623

624

625

626

627

628

629

630

631

632

633

634

635

636

637

638

639

640

641

642

643

644

645

646

647

648

649

650

651

652

653

654

655

656

657

658

659

660

661

662

663

664

665

666

667

668

669

670

671

672

673

674

675

676

677

678

679

680

681

682

683

684

685

686

687

688

689

690

691

692

693

694

695

696

697

698

699

700

701

702

703

704

705

706

707

708

709

710

711

712

713

714

715

716

717

718

719

720

721

722

723

724

725

726

727

728

729

730

731

732

733

734

735

736

737

738

739

740

741

742

743

744

745

746

747

748

749

750

751

752

753

754

755

756

757

758

759

760

761

762

763

764

765

766

767

768

769

770

771

772

773

774

775

776

777

778

779

780

781

782

783

784

785

786

787

788

789

790

791

792

793

794

795

796

797

798

799

800

801

802

803

804

805

806

807

808

809

810

811

812

813

814

815

816

817

818

819

820

821

822

823

824

825

826

827

828

829

830

831

832

833

834

835

836

837

838

839

840

841

842

843

844

845

846

847

848

849

850

851

852

853

854

855

856

857

858

859

860

861

862

863

864

865

866

867

868

869

870

871

872

873

874

875

876

877

878

879

880

881

882

883

884

885

886

887

888

889

890

891

PREFACE

We are pleased to bring you Fixed Income Analysis, which provides authoritative and up-to-date coverage of how investment professionals analyze and manage fixed-income portfolios. As with many of the other titles in the CFA Institute Investment Series, the content for this book is drawn from the official CFA Program curriculum. As such, readers can rely on the content of this book to be current, globally relevant, and practical.

The content was developed in partnership by a team of distinguished academics and practitioners, chosen for their acknowledged expertise in the field, and guided by CFA Institute. It is written specifically with the investment practitioner in mind and provides numerous examples and practice problems that reinforce the learning outcomes and demonstrate real-world applicability.

The CFA Program curriculum, from which the content of this book was drawn, is subjected to a rigorous review process to assure that it is:

Faithful to the findings of our ongoing industry practice analysis

Valuable to members, employers, and investors

Globally relevant

Generalist (as opposed to specialist) in nature

Replete with sufficient examples and practice opportunities

Pedagogically sound

The accompanying workbook is a useful reference that provides Learning Outcome Statements, which describe exactly what readers will learn and be able to demonstrate after mastering the accompanying material. Additionally, the workbook has summary overviews and practice problems for each chapter.

We hope you will find this and other books in the CFA Institute Investment Series helpful in your efforts to grow your investment knowledge, whether you are a relatively new entrant or an experienced veteran striving to keep up to date in the ever-changing market environment. CFA Institute, as a long-term committed participant in the investment profession and a not-for-profit global membership association, is pleased to provide you with this opportunity.

THE CFA PROGRAM

If the subject matter of this book interests you, and you are not already a CFA charterholder, we hope you will consider registering for the CFA Program and starting progress toward earning the Chartered Financial Analyst designation. The CFA designation is a globally recognized standard of excellence for measuring the competence and integrity of investment professionals. To earn the CFA charter, candidates must successfully complete the CFA Program, a global graduate-level self-study program that combines a broad curriculum with professional conduct requirements as preparation for a career as an investment professional.

Anchored by a practice-based curriculum, the CFA Program Body of Knowledge reflects the knowledge, skills, and abilities identified by professionals as essential to the investment decision-making process. This body of knowledge maintains its relevance through a regular, extensive survey of practicing CFA charterholders across the globe. The curriculum covers 10 general topic areas, ranging from equity and fixed-income analysis to portfolio management to corporate finance—all with a heavy emphasis on the application of ethics in professional practice. Known for its rigor and breadth, the CFA Program curriculum highlights principles common to every market so that professionals who earn the CFA designation have a thoroughly global investment perspective and a profound understanding of the global marketplace.

ACKNOWLEDGMENTS

Authors

We would like to thank the many distinguished authors who contributed outstanding chapters in their respective areas of expertise:

Leslie Abreo, MFE

James F. Adams, PhD, CFA

Don M. Chance, PhD, CFA

Moorad Choudhry, PhD, FRM, FCSI

Frank J. Fabozzi, PhD, CPA, CFA

Ioannis Georgiou, CFA

Campe Goodman, CFA

Christopher L. Gootkind, CFA

Bernd Hanke, PhD, CFA

Brian J. Henderson, PhD, CFA

Thomas S.Y. Ho, PhD

Andrew Kalotay, PhD

Robert W. Kopprasch, PhD, CFA

Sang Bin Lee, PhD

Steven V. Mann, PhD

Oleg Melentyev, CFA

Brian Rose

Donald J. Smith, PhD

Lavone F. Whitmer, CFA

Stephen E. Wilcox, PhD, CFA

Reviewers

Special thanks to all the reviewers, curriculum advisors, and question writers who helped to ensure high practical relevance, technical correctness, and understandability of the material presented here.

Production

We would like to thank the many others who played a role in the conception and production of this book: the Curriculum and Learning Experience team at CFA Institute with special thanks to the curriculum directors, past and present, who worked with the authors and reviewers to produce the chapters in this book, the Practice Analysis team at CFA Institute, and the Publishing and Technology team for bringing this book to production.

ABOUT THE CFA INSTITUTE SERIES

CFA Institute is pleased to provide you with the CFA Institute Investment Series, which covers major areas in the field of investments. We provide this series for the same reason we have been chartering investment professionals for more than 50 years: to lead the investment profession globally by promoting the highest standards of ethics, education, and professional excellence for the ultimate benefit of society.

The books in the CFA Institute Investment Series contain practical, globally relevant material. They are intended both for those contemplating entry into the extremely competitive field of investment management as well as for those seeking a means of keeping their knowledge fresh and up to date. This series was designed to be user friendly and highly relevant.

We hope you find this series helpful in your efforts to grow your investment knowledge, whether you are a relatively new entrant or an experienced veteran ethically bound to keep up to date in the ever-changing market environment. As a long-term, committed participant in the investment profession and a not-for-profit global membership association, CFA Institute is pleased to provide you with this opportunity.

THE TEXTS

Alternative Investments is the definitive guide to help students and professionals understand non-traditional asset classes, including real estate, commodities, infrastructure, private equity, private credit, and hedge funds. This book provides readers the foundational knowledge to recognize the many distinguishing characteristics of alternative investments—higher fees, less regulation than traditional investments, concentrated portfolios, unique legal and tax considerations, and more. Through a series of strategically designed learning objectives and high-level chapter summaries, learners will develop an understanding of the value, risks, and processes associated with non-traditional investments.

Derivatives is a key resource for anyone interested in the role of derivatives within comprehensive portfolio management. Via accessible prose and real-world examples, a general discussion of the types of derivatives leads to a detailed examination of each market and its contracts—including forwards, futures, options and swaps, and a look at credit derivative markets and their instruments. This vital text offers a conceptual framework for understanding the fundamentals of derivatives. By the end of the book, readers will recognize the different types of derivatives, their characteristics, and how and why derivatives are essential to risk management.

The Portfolio Management in Practice three-volume set meets the needs of a wide range of individuals, from graduate-level students focused on finance to practicing investment