The global market for inflation-indexed securities has ballooned in recent years, and this trend is set to continue. This book examines the rationale behind issuance and investment decisions, and details the issues facing anyone who designs indexed securities, illustrating them wherever possible with actual examples from the international capital markets. In particular, an extensive review of indexed debt markets throughout the world is provided - including for the first time, a comprehensive and consistent set of cash flow and price-yield equations for the instruments already in existence in the major bond markets - forming an important reference for those already experienced in the field, as well as practitioners and academics approaching the subject for the first time. The book also provides unique insight into the development of inflation-indexed derivative products, and the analytical tools required to value such instruments.

Disruptions in supply chains and consumption patterns triggered by the pandemic together with stimulus packages and the energy crisis have catapulted inflation rates to levels last seen in the 1970s. For inflation markets, it’s hard to understate this sudden and enormous change in fortunes. Understanding the future evolution of consumer prices has become crucial for investors across all asset classes as central banks tailor their policy responses with a view to anchoring inflation expectations. Inflation-Linked Bonds and Derivatives condenses more than 15 years of dedicated coverage of inflation markets. It provides investors, issuers and policy makers with all the relevant tools to navigate inflation markets, starting with the nuts and bolts of consumer price indices, forwards, carry and trading strategies, to advanced topics like seasonality adjustments and the use of inflation options. With its many illustrative graphs and tabulated data, this exceptional book will benefit traders, corporate treasury departments, fixed income investors, insurance companies and pension funds executives.

This chapter provides an introduction to index-linked securities, including inflation-indexed securities such as TIPS issued by the U.S. government and index-linked gilts issued by the UK government. Basic concepts of bond purpose and design are described in summary, followed by a detailed look at inflation-linked bond yield analysis. This then enables us to look at the concept of the inflation term structure. The second half of the chapter considers inflation-linked derivatives such as inflation-linked bond swaps, year-on-year inflation swaps, and real annuity swaps, together with a look at the use of inflation derivatives for hedging purposes. This includes hedging pension liabilities and restructuring bond portfolios. We then review constructing the inflation term structure and pricing inflation derivatives.

The entry of the USA into the index-linked bond market has heightened the demand for more complex information about these instruments. This text aims to help the readers understand securities, the motivation of both issuers and of investors, and how their value compares to one another.

Handbook of Inflation Indexed Bonds provides complete coverage of inflation protection bonds beginning with their first U.S. issuance in 1997. Five, in-depth sections detail: strategic asset allocation; mechanics, valuation, and risk monitoring; global environment; issuers; and investors.

The definitive guide to fixed-come securities-revised to reflect today's dynamic financial environment The Second Edition of the Fixed-Income Securities and Derivatives Handbook offers a completely updated and revised look at an important area of today's financial world. In addition to providing an accessible description of the main elements of the debt market, concentrating on the instruments used and their applications, this edition takes into account the effect of the recent financial crisis on fixed income securities and derivatives. As timely as it is timeless, the Second Edition of the Fixed-Income Securities and Derivatives Handbook includes a wealth of new material on such topics as covered and convertible bonds, swaps, synthetic securitization, and bond portfolio management, as well as discussions regarding new regulatory twists and the evolving derivatives market. Offers a more detailed look at the basic principles of securitization and an updated chapter on collateralized debt obligations Covers bond mathematics, pricing and yield analytics, and term structure models Includes a new chapter on credit analysis and the different metrics used to measure bond-relative value Contains illustrative case studies and real-world examples of the topics touched upon throughout the book Written in a straightforward and accessible style, Moorad Choudhry's new book offers the ideal mix of practical tips and academic theory within this important field.

A highly-detailed, practical analysis of fixed income management The Advanced Fixed Income and Derivatives Management Guide provides a completely novel framework for analysis of fixed income securities and portfolio management, with over 700 useful equations. The most detailed analysis of inflation linked and corporate securities and bond options analysis available;, this book features numerous practical examples that can be used for creating alpha transfer to any fixed income portfolio. With a framework that unifies back office operations, such as risk management and portfolio management in a consistent way, readers will be able to better manage all sectors of fixed income, including bonds, mortgages, credits, and currencies, and their respective derivatives, including bond and interest rate futures and options, callable bonds, credit default swaps, interest rate swaps, swaptions and inflation swaps. Coverage includes never-before-seen detail on topics including recovery value, partial yields, arbitrage, and more, and the companion website features downloadable worksheets that can be used for measuring the risks of securities based on the term structure models. Many theoretical models of the Term Structure of Interest Rates (TSIR) lack the accuracy to be used by market practitioners, and the most popular models are not mathematically stable. This book helps readers develop stable and accurate TSIR for all fundamental rates, enabling analysis of even the most complex securities or cash flow structure. The components of the TSIR are almost identical to the modes of fluctuations of interest rates and represent the language with which the markets speak. Examine unique arbitrage, risk measurement, performance attribution, and replication of bond futures Learn to estimate recovery value from market data, and the impact of recovery value on risks Gain deeper insight into partial yields, product design, and portfolio construction Discover the proof that corporate bonds cannot follow efficient market hypothesis This useful guide provides a framework for systematic and consistent management of all global fixed income assets based on the term structure of rates. Practitioners seeking a more thorough management system will find solutions in The Advanced Fixed Income and Derivatives Management Guide.