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Fixed Income Modelling

Author

Listed:
  • Munk, Claus

    (Professor, Department of Finance, Copenhagen Business School)

Abstract

Fixed Income Modelling offers a unified presentation of dynamic term structure models and their applications to the pricing and risk management of fixed income securities. It explains the basic fixed income securities and their properties and uses as well as the relations between those securities. The book presents and compares the classical affine models, Heath-Jarrow-Morton models, and LIBOR market models, and demonstrates how to apply those models for the pricing of various widely traded fixed income securities. It offers a balanced presentation with both formal mathematical modelling and economic intuition and understanding. The book has a number of distinctive features including a thorough and accessible introduction to stochastic processes and the stochastic calculus needed for the modern financial modelling approach used in the book, as well as a separate chapter that explains how the term structure of interest rates relates to macro-economic variables and to what extent the concrete interest rate models are founded in general economic theory. The book focuses on the most widely used models and the main fixed income securities, instead of trying to cover all the many specialized models and the countless exotic real-life products. The in-depth explanation of the main pricing principles, techniques, and models as well as their application to the most important types of securities will enable the reader to understand and apply other models and price other securities. The book includes chapters on interest rate risk management, credit risk, mortgage-backed securities, and relevant numerical techniques. Each chapter concludes with a number of exercises of varying complexity. Suitable for MSc students specializing in finance and economics, quantitatively oriented MBA students, and first- or second-year PhD students, this book will also be a useful reference for researchers and finance professionals and can be used in specialized courses on fixed income or broader courses on derivatives.

Suggested Citation

  • Munk, Claus, 2015. "Fixed Income Modelling," OUP Catalogue, Oxford University Press, number 9780198716440.
    • Handle: RePEc:oxp:obooks:9780198716440
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    Cited by:

    1. Leo Krippner, 2009. "A theoretical foundation for the Nelson and Siegel class of yield curve models," Reserve Bank of New Zealand Discussion Paper Series DP2009/10, Reserve Bank of New Zealand.
    2. Gzyl, Henryk & Mayoral, Silvia, 2016. "Determination of zero-coupon and spot rates from treasury data by maximum entropy methods," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 456(C), pages 38-50.
    3. Moreno, Manuel & Platania, Federico, 2015. "A cyclical square-root model for the term structure of interest rates," European Journal of Operational Research, Elsevier, vol. 241(1), pages 109-121.
    4. Sergio Ortobelli & Sebastiano Vitali & Marco Cassader & Tomáš Tichý, 2018. "Portfolio selection strategy for fixed income markets with immunization on average," Annals of Operations Research, Springer, vol. 260(1), pages 395-415, January.
    5. Bueno-Guerrero, Alberto & Moreno, Manuel & Navas, Javier F., 2020. "Valuation of caps and swaptions under a stochastic string model," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 559(C).
    6. Moreno, Manuel & Novales, Alfonso & Platania, Federico, 2018. "A term structure model under cyclical fluctuations in interest rates," Economic Modelling, Elsevier, vol. 72(C), pages 140-150.
    7. Giorgio Mirone, 2017. "Inference from the futures: ranking the noise cancelling accuracy of realized measures," CREATES Research Papers 2017-24, Department of Economics and Business Economics, Aarhus University.
    8. Giorgio Mirone, 2018. "Cross-sectional noise reduction and more efficient estimation of Integrated Variance," CREATES Research Papers 2018-18, Department of Economics and Business Economics, Aarhus University.
    9. Tarik Bazgour & Federico Platania, 2022. "A defaultable bond model with cyclical fluctuations in the spread process," Annals of Operations Research, Springer, vol. 312(2), pages 647-672, May.
    10. Andreasen, Martin M & Meldrum, Andrew, 2015. "Dynamic term structure models: the best way to enforce the zero lower bound in the United States," Bank of England working papers 550, Bank of England.
    11. Laurini, Márcio Poletti & Mauad, Roberto Baltieri, 2012. "Non-Parametric Pricing of Interest Rates Options," Brazilian Review of Econometrics, Sociedade Brasileira de Econometria - SBE, vol. 32(2), April.
    12. Martin M. Andreasen & Andrew Meldrum, 2014. "Dynamic term structure models: The best way to enforce the zero lower bound," CREATES Research Papers 2014-47, Department of Economics and Business Economics, Aarhus University.

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