Book Title: Fixed Income Mathematics

Book Description

Bond Math is at the center of the functioning of the bond markets, yet this critical sub-finance discipline is usually not accessible to the typical investor. Keep in mind that the bond markets are far larger than the stock markets. This is an approachable study of the mathematical theories underlying Fixed Income instruments. It is not a study of bonds per se or the bond markets. Most readers will be comfortable with the basic ninth-grade mathematics involved. The author has intentionally simplified this otherwise abstruse topic so that it will be accessible to the average reader. Where necessary, ample and clear definitions of terms are provided.

The text commences with a basic review of the time value of money, i.e., the theory of compound interest. It then proceeds to discuss how bond prices and yields are determined. Next, it covers the relationships between bond prices and general movements of interest rates in the economy. Other topics include bond portfolio management, how an investor may cope with ever-changing interest rates, and “callable bonds.” Each chapter smoothly transitions to the next; before moving on to the next chapter, the reader will sense a feeling of mastery and completion. Chapters are followed by review questions so that the student can gauge his/her mastery.

This concise and enjoyable text will be of great interest and use to students and professors alike as well as anyone who wishes to access an otherwise inaccessible topic.