By Bruce Tuckman
From the again Cover
Praise for fastened source of revenue Securities, moment Edition
"What distinguishes this publication from many others at the topic is that Tuckman has skillfully mixed intuitive intent with mathematical research to offer readers a transparent and deep realizing of the industry. Tuckman has written a finished reference e-book that are supposed to be stumbled on at the desks of either pro practitioners and newcomers alike."
-Gerald Lucas, Senior govt Strategist
Director, international Securities learn, Merrill Lynch
"This striking booklet bargains a well-written and transparent instructional for plenty of of the state-of-the-art analytical thoughts and types utilized in perform. Combines a wealth of institutional wisdom, functional instruments, and real looking examples, whereas giving a transparent knowing of the underlying theory."
-Francis Longstaff, Professor of Finance
The Anderson university at UCLA
"An very good reference for a person meaning to bridge the space among monetary arithmetic idea and the perform of monetary markets."
-Marek Musiela, BNP Paribas
"This is an exceptionally readable e-book with a stability among technical element and useful software. in contrast to different books within the region, thorough and tightly knit chapters replicate Tuckman's designated history as a well-respected educational and marketplace participant."
-Tony D. Kao, dealing with Director, worldwide fastened Income
GM Asset Management
About the Author
BRUCE TUCKMAN, PhD, is a coping with Director within the mounted source of revenue and Derivatives department of credits Suisse First Boston. After receiving his doctorate in economics from MIT, he grew to become a professor of finance at big apple University's Stern college of industrial and a vacationing professor at UCLA's Anderson Graduate college of administration. He all started his Wall road occupation at Salomon Brothers' fastened source of revenue Proprietary buying and selling staff.
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Additional info for Fixed Income Securities: Tools for Today's Markets (2nd Edition)
If the coupon rate exceeds the yield, then the bond sells at a premium to par, that is, for more than face value. Intuitively, if it is appropriate to discount all cash ﬂows at the yield, then, in exchange for an above-market coupon, investors will demand less than their initial investment at maturity. Equivalently, investors will pay more than face value for the bond. Third, when c<100y, P<100. If the coupon rate is less than the yield, then the bond sells at a discount to par, that is, for less than face value.
Similarly, when investors want fewer zeros, they are willing to pay a premium for coupon bonds over zeros and professionals will ﬁnd it proﬁtable to reconstitute bonds. APPENDIX 1A DERIVING THE REPLICATING PORTFOLIO Four bonds are required to replicate the cash ﬂows of the 103/4s of February 15, 2003. 4. In problems of this structure, it is most convenient to start from the last date. 4) The face amounts of the ﬁrst three bonds are multiplied by zero because these bonds make no payments on February 15, 2003.
375. And, of course, the only way to raise these intermediate payments is to buy other bonds. Having matched the February 15, 2003, cash ﬂow of the replicating portfolio, proceed to the August 15, 2002, cash ﬂow. 114. 7), F3 and F4 are already known. 8), F2 is also known. 8). This is not possible, of course, since there are four unknowns. 8) as a system of four equations and four unknowns. There is nothing wrong with proceeding in this way, but, if solving for the replicating portfolio by hand, starting from the end proves simpler.