By Moorad Choudhry
The bond markets are an integral part of the area economic climate. The fourth variation of Professor Moorad Choudhry's benchmark reference textual content An advent to Bond Markets brings readers modern with most recent advancements and marketplace perform, together with the impression of the monetary predicament and problems with relevance for traders. This e-book bargains a close but obtainable examine bond tools, and is aimed particularly at beginners to the marketplace or these strange with smooth mounted source of revenue items. the writer capitalises on his wealth of expertise within the fastened source of revenue markets to offer this concise but in-depth insurance of bonds and linked derivatives.
Topics coated include:
- Bond pricing and yield
- Duration and convexity
- Eurobonds and convertible bonds
- Structured finance securities
- Interest-rate derivatives
- Credit derivatives
- Relative price trading
Related subject matters comparable to the cash markets and ideas of chance administration also are brought as helpful heritage for college kids and practitioners. The publication is vital analyzing for all those that require an creation to the monetary markets.
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Additional resources for An Introduction to Bond Markets
Principal and coupon rate The principal of a bond is the amount that the issuer agrees to repay the bondholder on the maturity date. This amount is also referred to as the redemption value, maturity value, par value or face amount. The coupon rate or nominal rate is the interest rate that the issuer agrees to pay each year. The annual amount of the interest payment made is called the coupon. The coupon rate multiplied by the principal of the bond provides the cash amount of the coupon. For example, a bond with a 7% coupon rate and a principal of £1,000,000 will pay annual interest of £70,000.
The discussion thus far has involved calculating future value given a known present value and rate of interest. For example, $100 invested today for 1 year at a simple interest rate of 6% will generate 100 � ð1 þ 0:06Þ ¼ $106 at the end of the year. The future value of $100 in this case is $106. Conversely, $100 is the present value of $106, given the same term and interest rate. 7) applies to investments earning annual interest pay ments, giving the present value of a known future sum. 2). 4).
A convertible bond is an issue giving the bondholder the right to exchange the bond for a speciﬁed number of shares (equity) in the issuing company. This feature allows the investor to take advantage of favourable movements in the price of the issuer’s shares. The presence of embedded options in a bond makes valuation more complex compared with plain vanilla bonds, and will be considered separately. OUTLINE OF MARKET PARTICIPANTS There is a large variety of players in the bond markets, each trading some or all of the different instruments available to suit their own purposes.
An Introduction to Bond Markets by Moorad Choudhry