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Preface | |
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Acknowledgements | |
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A Beginner's Toolkit | |
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Money markets | |
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What is money? | |
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Why there is a money market? | |
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Choosing a maturity | |
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Repo | |
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Central-bank money-market operations | |
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Two money markets | |
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The euro | |
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Writing money | |
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Settlement details | |
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Summary | |
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Government bonds | |
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Introduction | |
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The concept of yield | |
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Example yield calculations | |
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Coupon and yield | |
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The yield curve | |
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Primary dealers | |
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Government bond markets | |
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Repo as part of the government-bond market | |
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Accrued interest | |
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STRIPS | |
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Other tradable government debt | |
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Non-government debt | |
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Rating agencies | |
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Summary | |
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Futures | |
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The gold miner's problem | |
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The gold miner's solution | |
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Contract specification | |
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Credit and margin | |
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Cash settlement | |
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Cash-settling other contracts | |
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The fixings | |
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The 3-month interest rate future | |
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Price action | |
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The strip and TED spreads | |
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Arbitrage | |
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Some trading jargon | |
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Summary | |
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Swaps | |
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Introduction | |
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An example | |
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Asset swaps | |
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A typical swap in detail | |
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Credit risk in swaps | |
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Trading jargon | |
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Swaps and interest rate futures | |
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Myth and reality | |
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Summary | |
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Options | |
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Introduction | |
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Puts and calls | |
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What is the option worth? | |
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Combinations | |
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Underlyings | |
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Embedded options | |
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Implied volatility | |
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Summary | |
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Foreign exchange | |
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The basic rationale | |
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Size and conventions | |
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Forwards | |
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Shake the dice | |
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Summary | |
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Players | |
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Governments | |
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Pseudo-government issuers | |
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Non-financial corporations | |
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Pension funds | |
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Insurers | |
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Mutual funds | |
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Hedge funds | |
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Commercial banks | |
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Mortgage lenders | |
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Central banks | |
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Private investors | |
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Summary | |
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People | |
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Introduction | |
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Proprietary traders | |
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Market makers | |
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Brokers | |
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Salespeople | |
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Researchers | |
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Back office and middle office | |
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Investment bankers | |
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Summary | |
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Price action | |
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Why do prices move? | |
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Necessity never made a good bargain | |
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Stability and leverage | |
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Fixed-income prices | |
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A stylised crash in fixed income | |
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Forwards, zeros and par yields | |
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Trading the crash | |
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Market irrationality | |
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Summary | |
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More detail | |
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Swaps revisited | |
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Introduction | |
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Credit risk in swaps | |
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Reducing the credit risk | |
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Cross-currency basis swaps | |
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The price of a basis swap | |
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A cross-currency issue | |
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Reducing credit risk in basis swaps | |
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Forward rate agreements | |
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Summary | |
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Non-government issuance | |
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Introduction | |
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Bringing a deal to market | |
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The syndicate | |
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Book-building: taking orders | |
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Pricing a swapped deal | |
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Pricing an unswapped deal | |
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Some legal details | |
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Free to trade | |
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An example issue | |
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Opportunistic reopenings | |
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Summary | |
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Yield, duration, repo and forward bond prices | |
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Measuring risk | |
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Yields: compounding frequencies | |
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Duration continued | |
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Definition of DV01 | |
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How coupon affects duration and DV01 | |
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An example yield curve | |
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A 3s10s flattener | |
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A flattener generates cash | |
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A forward flattener | |
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What happens if nothing happens? | |
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Weighting the forward flattener | |
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A barbell | |
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Carry and slide | |
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Summary | |
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Bond futures | |
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Introduction | |
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Specification | |
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Delivery day | |
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The delivery process | |
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Cheapest to deliver: at par | |
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Cheapest to deliver: far from par | |
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CTD calculations before delivery | |
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Delivery tail | |
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Summary | |
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Basic fixed-income arithmetic | |
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The proportion of a year | |
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Yield to price and price to yield | |
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Semi to annual: halve and square | |
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Forward yield | |
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Forward asset swap | |
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Summary | |
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Index | |