Bond Math

In clear and logical terms, the second edition of Bond Math offers an accessible resource for understanding the intricacies of bond calculations. Written by Donald J. Smith, a professor at Boston University and an experienced executive trainer, the text explores the ideas and assumptions behind commonly used statistics on risk and return for individual bonds as well as fixed income portfolios. Designed to be more than simply a series of formulas and calculations, Bond Math reveals how to think about and effectively use the essentials of bond math. The author covers in detail money market rates, periodicity conversions, bond yields to maturity and horizon yields, the implied probability of default, after-tax rates of return, implied forward and spot rates, and duration and convexity. These calculations are used on traditional fixed-rate and zero-coupon bonds, as well as floating-rate notes, inflation-indexed securities, and interest rate swaps. Bond Math includes a wealth of strategies, math tools, and the various risk and return statistics to facilitate either aggressive or passive investment strategies. Thoroughly revised and updated, the second edition aligns the notation and terminology presented in Bond Math with CFA® readings on Fixed Income Valuation and Risk and Return. The author also includes the simple model to value floating-rate notes that is used in the Fixed-Income Valuation reading. In addition, Smith presents a clear explanation with illustrative examples of the math behind numbers presented on commonly used Bloomberg pages, primarily the Yield and Spread Analysis page for bonds. The new edition also includes an informative discussion of how the financial crisis of 2007 to 2009 has changed derivatives valuation. To support the text, Bond Math, Second Edition has a companion website that contains an extensive set of mulitple-choice questions and answers tied to each chapter in the book. Learning how to mentally approach the math behind bonds gives you a head start on the competition. The Bond Math approach puts calculations in context and enables an easier transition from theory to application. For the bond professional seeking a quick math reference, Bond Math offers the key to investment success.