Table of Contents
Acknowledgments.Introduction.
Chapter 1: Tools of the Trade.
Basic Statistics.
Regression–The Fundamentals.
Regression – How Good a Fit?
Principal Components Analysis.
Scaling Through Time.
Backtesting Strategies.
Summary.
Chapter 2: Introduction to Bonds.
Basics of Bonds.
Risks Embedded in Fixed Income Instruments.
Discounting.
Bond Pricing.
Yield Curve.
Duration.
Convexity.
Repo Markets.
Bid Offer.
Calculating Profit/Loss (P/L) of a Bond.
Carry and Forward Rates.
Forward Rates.
Rolldown/Slide.
Curves and Spreads.
Butterflies and Condors.
Summary.
Chapter 3: Overview of Fixed Income Markets.
Federal Reserve.
Treasuries.
STRIPS.
TIPS.
Mortgages.
Agency Debt.
Corporate Bonds.
Municipal Bonds.
Summary.
Chapter 4: Introduction to Futures Markets.
Basics of Futures Transactions.
Eurodollar Futures.
Convexity Bias (or Financing Bias).
Creating Longer Dated Assets Using Eurodollar Futures.
Treasury Futures.
Fed Funds Futures.
Futures Positioning Data.
Summary.
Chapter 5: Introduction to Swaps.
Duration and Convexity.
Uses of Swaps.
Other Types of Swaps.
Summary.
Chapter 6: Understanding Drivers of Interest Rates.
Supply and Demand for Borrowing.
Flight to Quality.
Components of Fixed Income Supply and Demand.
Treasury Supply.
Other Sources of Fixed Income Supply.
Fixed Income Demand.
Foreigner Holdings.
Households.
Federal Reserve.
Mutual Funds.
Banks.
Pension Funds.
Short Term Yield Drivers.
Summary.
Chapter 7: Carry and Relative Value Trades.
Carry Trades.
Carry Trade Set up and Evaluation.
Pitfalls of the Carry Trade.
Carry Efficient Directional Trades.
Relative Value Trades.
Setting Up Relative Value Trades.
Treasury Bond Relative Value—Par Curve.
Other Treasury Relative Value Trades.
Summary.
Chapter 8: Hedging Risks in Interest Rate Products.
Principles of Hedging.
Choices of Instruments for Hedging.
Calculating Hedge Ratios.
Yield Betas.
Convexity Hedging.
Summary.
Chapter 9: Trading Swap Spreads.
How Swap Spreads Work.
Why Trade Swap Spreads?
Directionality of Swap Spreads to Yields.
Futures Asset Swaps.
Spread Curve Trades.
Summary.
Chapter 10: Interest Rate Options and Trading Volatility.
Option Pricing and Fundamentals.
Modifications for the Interest Rate Markets.
Quoting Volatility.
Measuring Risks in Option Positions.
Put call parity.
Implied and Realized Volatility.
Skew.
Delta Hedging.
Interest Rate Options.
Embedded Options and Hedging.
More Exotic Structures.
Yield Curve Spread Options (YCSOs).
Forward Volatility.
Volatility Trading.
Interest Rate Skew.
Volatility Spread Trades.
Caps versus Swaptions.
Summary.
Chapter 11: Treasury futures basis and rolls.
The Bond Basis.
Calculating the Delivery Option Value.
Option Adjusted and Empirical Duration.
Treasury Futures Rolls.
Summary.
Chapter 12: Conditional Trades.
Conditional Curve Trades.
Conditional Spread Trades.
Summary.
References.
About the Author.
About the Website.
Index.
