The Handbook of interest rate risk management

목차 (Table of Contents)

• CONTENTS
• SECTION 1INTRODUCTION TO INTEREST RATE RISK MANAGEMENT = 1
• CHAPTER 1 THE TREASURY YIELD CURVE AND ITS INTERPRETATION = 4
• Introduction = 3
• Drawing the Yield Curve = 4
• Definition of Yield to Maturity for Coupon Bonds = 5
• The Loss of Information in Considering only the Yield to Maturity of Bonds = 6
• What Are These Forward Rates? = 9
• Methods for Determining the F from Treasury Bond Prices = 10
• The General Method for Determining F Rates = 10
• A Simple Method for Determining F Rates = 10
• The Treasury Coupon Bond Yield Curve and the Yield Curve of One-Period Forward Rates = 11
• Interpreting the Yield and Forward Rate Curves : Some Lessons = 13
• Lesson One = 14
• Lesson Two = 15
• Lesson Three = 16
• Lesson Four = 17
• Conclusion. = 18
• Yield Curve for Treasury Coupon Bonds = 19
• The Forward Interest Rate Curve = 20
• CHAPTER 2 FACTORS INFLUENCING THE LEVEL OF INTEREST RATES = 26
• Introduction. = 26
• A Small Set of Forward Rates Determines All Bond Prices = 26
• What Factors Determine the Level of Forward Rates? = 27
• Influenccs on the Short Rate = 28
• The Mathematics of Inflation and Interest : Fisher's Law = 28
• Will the Real Inflation Rate Please Stand Up! = 30
• What Determines What? = 31
• Federal Reserve Policy : A Factor Influencing Short-Term Rates? = 34
• Influences on the Long-Run Interest Rate = 36
• Traditional Theories of the Yield Curve = 36
• Newer Theories of the Yield Curve = 40
• Summary = 41
• CHAPTER 3 A CALL-ADJUSTED TERM STRUCTURE ESTIMATION METHODOLOGY = 46
• Abstract = 46
• Basics of the Spot Curve = 47
• A Simple Discount Function = 47
• A Spot Curve for the Treasury Market = 48
• How to Incorporate the Callable Treasuries = 51
• The Noncall Approach = 51
• The First Call Approach = 51
• The Dummy Variable Approach = 51
• The Option Pricing Approach = 52
• The Call-Adjusted Estimation Technique = 54
• An Iterative Procedure = 54
• The Embedded Call Option Valuation = 55
• Empirical Results = 55
• Uniqueness and Existence of the Spot Curve = 55
• The Significance of the Call Provision = 57
• The Diversity of the Call Provision = 61
• Summary and Concluding Remarks = 65
• Appendix : Theoretical and Actual Spot Rate Curves = 66
• CHAPTER 4 WHY HEDGE? = 73
• Introduction = 73
• Impact of Interest Rate Changes on Asset Values = 73
• Determinants of Asset Values = 73
• Interest Rate Sensitivity of Asset Values = 75
• Coupon Effect = 76
• Maturity Effect = 78
• Why Hedge? = 80
• Measures of Interest Rate Sensitivity = 82
• Duration as a Measure of Interest Rate Sensitivity = 84
• Appendix : a Generalized Duration Approach = 91
• CHAPTER 5 HEDGING INTEREST RATE RISK : THE BASICS = 95
• Financial Risk = 95
• Managing Risk = 96
• Insurance = 97
• Asset／Liability Management = 97
• Hedging = 99
• Hedging Foundations = 103
• Translating Market Risks to Firm-Specific Risks = 104
• Quantifying Interest Rate Risk = 106
• Developing Hedge Ratios = 117
• Measuring Hedge Effectiveness = 118
• Measuring Hedge Cost = 120
• Determining the Hedge Horizon = 122
• Selecting Hedge Instruments = 123
• Miscellaneous Considerations = 128
• SECTION 2 FINANCIAL FUTURES = 131
• CHAPTER 6 INTRODUCTION TO THE FINANCIAL FUTURE MARKETS = 133
• Background = 134
• Trading Uses = 135
• Eurodollar Swaps = 136
• Synthetic Asset Allocation = 139
• Inventory Hedging of Treasury Securities = 141
• Pricing = 142
• Products = 146
• CHAPTER 7 STRUCTURE OF THE FINANCIAL FUTURES MARKETS = 159
• Exchange Structure and Governance = 160
• Mode of Trading = 162
• Multilateral Off-set and Clearing = 167
• Financial Safeguards = 169
• Futures Commission Merchants (FCMs) = 176
• Regulation = 179
• Appendix : Major International Interest Rate Futures Exchanges = 181
• CHAPTER 8 SHORT-TERM 'HEDGING APPLICATIONS USING FINANCIAL FUTURES = 185
• Hedging = 185
• Financial and Cash-Settled Futures = 186
• LIBOR (London Interbank Offered Rate) = 189
• Hedging Methodology = 191
• Determining the Direction of Hedging = 192
• Choosing the Index = 193
• Cash Flow = 193
• Timing = 194
• Scenario Analysis = 198
• Applicable Rate = 201
• Single Contract = 201
• Multicontract = 202
• Rolling = 203
• Long-Term Exposure to Risk = 205
• Appendix A : The Tail Effect = 210
• Appendix B : Eurodollar Futures Contract = 211
• Final Settlement Price = 211
• Appendix C : U.S. Treasury Bill Futures Contract = 212
• CHAPTER 9 ACCOUNTING FOR FINANCIAL FUTURES AND FORWARD CONTRACTS = 214
• Futures and Forward Contracts = 214
• Futures Contracts = 215
• FAS 80 = 216
• Accounting for Forward Contracts = 217
• Accounting for a Forward Contract for a Financial Security = 217
• Accounting for a Forward Conract for Foreign Currency : A Premium = 222
• Accounting for a Forward Contract for Foreign Currency : A Discount = 223
• Separate Accounting = 224
• Conclusions = 225
• CHAPTER 10 FORWARD RATE AGREEMENTS (FRA) = 226
• The FRA Market = 227
• Availability and Pricing = 230
• Applications = 232
• FRAs versus Futures in Managing interest Rate Risk = 234
• Lilquidity = 235
• Flexibuity and Basis Risk = 235
• Administration = 235
• CHAPTER 11 TASK ASPECTS OF FINANCIAL FUTURES = 237
• Straddles = 237
• IRC Section 1256 : Regulate Futures Contracts = 239
• Timing and Character Rules = 240
• IRC Section 1092 : Taxation of Straddles = 241
• Offsetting Positions = 242
• Rules Applied to Straddles = 243
• Avoiding Section 1256 and Section 1092 Rules = 244
• SECTION Ⅲ LISTED INTEREST RATE OPTIONS = 247
• CHAPTER 12 INTRODUCTION TO OPTIONS APPLICATIONS = 249
• Eurodollar Time Deposits and Eurodollar Futures = 250
• Foundations of Options = 251
• How Option Traders Trade = 254
• How Risk Managers Hedge = 258
• CHAPTER 13 THE STRUCTURE OF MARKETS FOR INTEREST RATE OPTIONS = 268
• Introduction = 268
• Introduction to Debt (Interest Rate) Options = 268
• Definition of an Option = 268
• Option Prices = 269
• Purchase of an Option = 271
• Margin on an Option Position = 272
• Exercise of an Option = 272
• Exchange-Traded Options = 274
• U.S. Markets = 274
• Markets outside the United States = 278
• The Microstructure of Trading Systems = 282
• Physical Exchanges = 282
• Electronic Markets = 286
• Market Participants = 289
• Credit Guarantees = 289
• Over-the-Counter Options = 293
• Market Participants = 293
• OTC Market Microstructure = 294
• Credit Arrangements = 296
• Combinations of OTC Options = 297
• Embedded Options = 298
• Conclusion = 299
• CHAPTER 14 USING A ONE-FACTOR MODEL TO VALUE INTEREST RATE-SENSITIVE SECURITIES : WITH AN APPLICATION TO TREASURY BOND OPTIONS = 302
• The First Bond Option Valuation Models = 303
• About this Chapter's Model = 303
• Valuing Securities = 304
• Illustration of How to Get Today's Values from Future Values = 305
• Finding Short Rates from the Term Structure = 306
• Valuing Options on Treasury Bonds = 310
• Coupon Bonds as Collections of Zeros = 311
• Puts and Calls on Treasuries = 312
• Option Hedge Ratios = 314
• Reducing the Interval Size = 316
• Alternative Models = 317
• Computational Schortcuts = 319
• CHAPTER 15 TAX RAMIFICATIONS OF OPTIONS = 321
• Option Premiums = 321
• Character of Income = 323
• Capital Assets = 325
• Types of Market Participants = 325
• Hedging = 326
• SECTION 4 INTEREST RATE SWAPS = 331
• CHAPTER 16 INTRODUCTION TO INTEREST RATE SWAPS = 333
• Types of Swaps = 334
• Swap Characteristics = 335
• Applications = 337
• Execution of and interest Rate Swap = 340
• Interest Rate Swap Economics = 343
• Swap Risks = 345
• CHAPTER 17 EXISTING AND POTENTIAL CREDIT (OR DEFAULT) RISK IN SWAPS AND DERIVATIVE TRANSACTIONS = 347
• Introduction = 347
• How and Why Do Exposures Occur? = 348
• Predicting Potential Mark-to-Market Value = 350
• Historic Observations = 352
• Modeling = 354
• Rule-of-Thumb Approach = 357
• Summary of Market Price Expectations = 358
• Probability of Default = 359
• Bank Loan Pricing = 359
• The Bond Markets = 363
• Summary = 365
• What Happens when a Default Occurs? = 367
• Calculations = 369
• Limited Two-Way Payments = 370
• Full Two-Way Payments = 370
• Security = 370
• Commercial Considerations = 371
• Default History = 372
• Default Survey = 372
• The Regulatory Framework for Banks = 373
• Conclusion = 375
• CHAPTER 18 A NO-ARBITRAGE TERM STRUCTURE MODEL AND THE VALUATION OF INTEREST RATE SWAPS = 376
• Introduction = 376
• Interest Rate Swaps = 376
• Floating Short Rates = 377
• Plain-Vanilla Interest Rate Swaps = 378
• Delayed-Reset (In-Arrears) Swaps = 379
• Valuation of Plain-Vanilla Interest Rate Swaps = 380
• No-Arbitrage Term Structure Models = 381
• Classes of Theoretical Term Structure Models = 381
• Basic Characteristics of No-Arbitrage Term Structure Models = 382
• A Discrete-Time, Single-Factor Consol Rate Model = 383
• Short-Rate Movements = 383
• The Consol Rate Movements and Consol Bond Values = 385
• Relationship between Consol Rate and Short-Rate Movements = 387
• Example Application of the Model : The Valuation of a 3-Year Zero Coupon Bond by Dynamic Replication = 388
• Valuation of Delayed-Reset Swaps = 393
• Conclusion = 396
• CHAPTER 19 THE INTEREST RATE SWAP TERM STRUCTURE = 399
• Introduction = 399
• Short-Term Swaps = 401
• Long-Term Swaps = 402
• Swap Spread Boundary Conditions = 404
• Other Faciors Affecting Long-Term Swap Spreads = 406
• Medium-Term Swaps = 408
• Quantitative Swap Spread Trading = 408
• Step One : Term Structure Fitting = 409
• Step Two : Forward Term Structure Estimation = 410
• Step Three : Quantifying Risk and Return = 413
• Conciusion = 414
• Appendix : Term Structure Fitting = 415
• CHAPTER 20 TECHNIQUES FOR DERIVING A ZERO COUPON CURVE FOR PRICING INTEREST RATE SWAPS : A SIMPLIFIED APPROACH = 417
• Synopsis = 417
• Introduction = 417
• Definitions = 418
• Compounding Conversion Formulas = 419
• Discount Factor = 419
• Present Value = 420
• Future Value = 421
• Law of Exponents = 421
• Term Structure Estimation = 421
• Method Ⅰ : Bootstrapping Using Linear Interpolation of Par Coupon Rates = 422
• Method Ⅱ : Bootstrapping Using Exponential Interpolation of Discount Factors = 427
• Method Ⅲ : Creating a Spot Curve from Eurodollar Futures = 432
• Swap Pricing = 439
• Pricing a Four-Year Plain-Vanilla Swap = 442
• Pricing a Forward Swap = 443
• Pricing a Forward Amortizing Swap = 445
• Solving for Unknowns = 446
• Conclusion = 447
• Appendix : The MFE Group, Inc., SwapEngineer$$^{TM}$$ Computer Program = 448
• CHAPTER 21 THE SWAP YIELD CURVE = 452
• Introduction = 452
• What the Futures Curve Is Supposed to Be Telling Investors = 454
• What the Futures Curve Is Really Telling Investors = 458
• Getting Swap Rates from Discounting Rates = 460
• Cash-Settled Swaps = 462
• An Example of a Cash-Settled Swap Settlement Computation = 463
• Information from the Swaps Curve = 464
• Interpolation = 467
• CHAPTER 22 ACCOUNTING IMPLICATIONS OF INTEREST RATE SWAPS = 469
• A Basic Interest Rate Swap = 471
• External Reporting for a Counterparty = 473
• Accounting for Termination = 476
• Accounting for Principals = 477
• The Timing of Swap Income = 478
• The Risks of Matched Swaps = 479
• Trading Risk = 480
• Clean Risk at Settlement = 483
• Termination Loss = 485
• Reset Risk = 485
• Statement of Financial Accounting Standards No. 105 = 486
• Materiality = 487
• Accounting on a Cash Basis = 487
• Accounting on a Market-to-Market Basis = 487
• Hedge Accounting Issues = 491
• Conclusions = 491
• CHAPTER 23 SWAPS : A LEGAL PERSPECTIVE = 495
• Creation and Documentation of Swap Agreements = 495
• Enforceability Issues = 496
• "Master" Agreements = 499
• Standardization Efforts = 501
• Authorization Issues = 503
• Termination. Damages, and Insolvency = 504
• Termination. 504 Measures of Damages = 505
• Bankruptcy and Insolvency = 508
• The Netting Provisions of the Federal Deposit Insurance Corporation Improvement Act of 1991 = 512
• Regulatory Considerations = 512
• Bank Capital Adequacy Guidelines = 512
• Securities Regulation = 514
• Commodities Regulation = 515
• Secondary Market Issues = 516
• Conclusion = 516
• Appendix : ISDA Master Agreement and Schedule to the Master = 518
• CHAPTER 24 TAXATION OF INTEREST RATE SWAPS = 540
• Periodic Payments = 542
• Example Ⅰ = 543
• Example 2 = 544
• Termination Payments = 544
• Example 3 = 545
• Nonperiodic Payments = 546
• Example 4 = 546
• Market Value Accounting = 548
• Character = 548
• Source = 549
• SECTION 5 OVER-THE-COUNTER OPTIONS = 551
• CHAPTER 25 INTRODUCTION TO OVER-THE-COUNTER (OTC) OPTIONS = 553
• Interest Rate Caps = 554
• Caps. Floors, and Collars in Terms of Call and Put Options = 555
• Some Examples of Caps, Floors, and Collars = 560
• Caps. Collars, and Floors in Practice = 565
• The Over-the-Counter Market = 566
• End Users = 568
• Size of the Market = 570
• Swaptions = 571
• Size of the Swaption Market = 574
• Equity Index Options = 574
• Currency Options = 575
• Exotic Options = 577
• CHAPTER 26 CHARACTERISTICS OF OTC OPTIONS = 580
• Interest Rate Caps and Floors = 581
• Pricing of Caps and Floors = 584
• Some Applications = 587
• Caps with Varying Notional Amount = 587
• Step-Up Caps = 588
• Reducing. Swap Rate = 589
• Corridors = 591
• Floors = 591
• Lowering Cost of Fund = 592
• Collars and Zero-Cost Collars = 593
• Center Lock = 595
• Collars and Swaps = 596
• Floortions. Spreadtions, and Yield Curve Options = 598
• Swaptions = 599
• Path-Dependent Options = 600
• Down-and-Out and Up-and-in-Caps = 602
• Trigger Options = 602
• Summary and Concluding Remarks = 604
• CHAPTER. 27 APPLICATIONS OF OTC OPTIONS = 606
• Introduction = 606
• Interest Rate Caps and Floors = 608
• Hedging Interest Rate Risk Using Caps = 611
• Selling Caps as Yield Enhancement = 612
• Another Interest Rate Cap Example = 613
• Buying Floors to Hedge Downside Risk = 614
• Selling Floors to Reduce Financing Cost = 614
• Interest Rate Collar = 615
• Range Forwards = 616
• Conclusions = 618
• CHAPTER 28 ACCOUNTING FOR TRADED OPTIONS = 619
• The Premium = 620
• Market-to-Market = 620
• Cost-Based Accounting = 621
• Investor : Speculation = 622
• Intrinsic Value and Time Value = 623
• Investor Hedge = 624
• Issuer : Speculation = 626
• Issuer : Hedge = 626
• Recognition of Profit = 627
• A Synthetic Future = 627
• Buving Options to Hedge Stock Issue Commitments = 628
• Options and Debt = 629
• EITF Abstract : Issue No. 87-31 = 631
• Foreign Currency Options = 631
• Hedge Accounting : a Foreign Currency Option = 632
• Hedging Risks with a Put = 633
• Conclusions = 634
• Appendix : AICPA Issues Paper, Accounting for Options (March 6, 1986) = 634
• CHAPTER 29 THE LEGAL STRUCTURE OF OTC OPTIONS = 642
• Swaptions = 643
• Physical Delivery = 643
• Cash Settlement = 644
• Caps. Floors, and Collars = 645
• Commodity Trade Options = 646
• Special Concerns = 647
• Unknown Size of the Market = 647
• Illiquidity = 649
• Conclusion = 649
• SECTION 6 ASSET-LIABILITY MANAGEMENT = 651
• CHAPTER 30 HEDGING AN ANTICIPATED DEBT OFFERING = 653
• Introduction = 653
• Preliminary Considerations = 654
• Risk Identification = 654
• Defining the Environment = 655
• Balancing Hedge Objectives = 656
• Hedge Design = 658
• Fixing a Rate = 660
• Full Rate Fix = 661
• Fixing the Base Rate = 662
• Fixing a Spread = 673
• Capping a Rate = 675
• Buying Put Options = 675
• Caps and Collars = 680
• Caputs = 683
• Summary = 684
• Appendix A : Forward Sale of Coupon Bond = 685
• Appendix B : Determining the Futures Hedge Ratio = 686
• CHAPTER 31 FIXED-INCOME RISK MANAGEMENT: DESIGN AND PRACTICE = 689
• Overview = 689
• Defining Risk = 690
• Valuation Models = 693
• Measuring Risk = 694
• Hedging = 702
• Current Risk Profile = 703
• Modifying the Risk Profile = 703
• Hedging Instruments = 707
• On-the-Run Bonds = 708
• Interest Rate Futures = 709
• Interest Rate Options = 710
• Swaps and Swaptions = 712
• Concluding Remarks and Summary = 713
• CHAPTER 32 MANAGING A PORTFOLIO OF POSITIONS = 717
• Introduction = 717
• Framework = 718
• Categories of Risk = 719
• Risk Management Strategies = 719
• Obiectives = 723
• Volatility and Correlation = 727
• Time Series Data = 727
• Statistical Methods = 728
• RMU of a Portfolio = 729
• Sample RMU Calculations for a Two-Instrument Portfolio = 729
• Hedging and Trading = 730
• RMU Hedging Approach = 730
• Trading = 732
• RMU Applicability to Technical ALCO = 732
• Conclusion = 734
• SECTION 7 FUTURE OF THE MARKETS = 737
• CHAPTER 33 INNOVATIONS: BELLS AND WHISTLES = 739
• FRAs. SAFEs, and the FRA Clearinghouse = 739
• Forward Rate Agreement = 740
• FRA Clearinghouse = 741
• SAFEs = 741
• Swaptions = 742
• Equity Swaps = 743
• Warrant issues = 745
• New Directions = 745
• New Financial Structures = 746
• CHAPTER 34 THE ELEMENTS OF INTEREST RATE DERIVATIVES = 749
• Elementary Principles of Fixed-Income Derivatives = 750
• Exchange-Traded and OTC Derivatives Are Equivalent to Leveraged Cash Positions = 750
• Outrights and Options Are Pieces of the Same Puzzle = 752
• The Zero Coupon Yield Curve Is the Touchstone of Fixed-Income Cash and Derivative Markets = 753
• Develop an Intuition about the Behavior of Option Prices and Sensitivities within a Portfolio of Options = 756
• Measure Your Risks in Aggregate, Not Ti ade by Trade = 758
• Elementary Rules of Trading and Hedging = 759
• Transact in the Market that Offers You the Lowest Cost per Unit of Benefit = 759
• Your Broker／Dealer Is a Resource = 759
• You Must Be Able to Value What You Trade = 760
• Consciously Choose the Risks You Are Prepared to Live with in Exchange for the Risks You Cannot Afford to Assume = 760
• The More Customized the Derivative, the Less Liquid, and the More Expensive = 761
• Know the Liquidity Associated with Your Name and That of Your Counterparty When Dealing in the OTC Market = 761
• Avoid Self-Critical 20-20 Hindsight = 762
• Common Problems／Extra Costs = 762
• A Management Comfortable with Derivatives Is Rare = 762
• You Have to Worry about Counterparty Defaults = 764
• Do You Want to Pay for the Convenience of OTC Derivatives? = 765
• The Back-Office Processing of All Derivatives Will Make or Break You = 766
• Your Regulatory, Environment Dictates Which Derivatives Market to Use = 767
• Accounting Treatment Will Define Success or Failure = 767
• Using Derivatives' Tax Advantages Can be a Profitable Enterprise = 768
• Some Approaches to Usage = 769
• Banks Are Active in Both OTC and Exchange-Traded Markets = 769
• Insurance Companies Are Becoming Increasingly Sophisticated = 771
• Corporations Prefer the OTC Markets to the Exchange-Traded Markets = 772
• Mutual Funds Have Been and Will Continue to Be More Active in Exchange-Traded Markets = 773
• Pension Funds and Their Investment Advisors Are Moving beyond Exchange-Traded Derivatives into the OTC Market = 774
• Summary = 775
• APPENDIX = 777
• HP-12C Program to Calculate the Risk (Standard Deviation) of a Three-Stock, Portfolio = 777
• HP-12C Program to Calculate Convexity for an Annual Coupon-Paying Bond (with Added Instructions to Calculate Modified Convexity) = 779
• HP-12C Program to Calculate Modified Duration for an Annual Coupon Paying Bond = 781
• HP-12C Program to Calculate Duration for an Annual Coupon Paying Bond = 787
• HP-12C Program to Calculate Duration for a Semiannual Coupon Paying bond = 785
• HP-12C Program to Calculate Modified Duration for a Semiannual Coupon Paying Bond = 787
• HP-12C Program to Calculate Convexity for a Semiannual Coupon Paying Bond (With Added Instructions to calculate Modified Convexity) = 789
• HP-12C Program to Calculate Horizon Yield for a Semiannual Coupon Paying Bond When Time to Horizon Is Less than Time to Maturity and Bond Yield to Maturity Has Changed = 791
• HP-12C Program to Calculate European Call Price Using the Black-Scholes Option Pricing Formula = 793
• HP-12C Program to Calculate European Call or European Put Price Using the Put-Call Parity Equation = 796
• To Calculate P$$^{E}$$ when C$$^{E}$$ is Known = 800
• HP-12C Program to Calculate Price Sensitivity Hedge Ratios = 801
• HP-12C Program to Calculate Conversion Factors for T-Bonds Eligible for Delivery against T-Bond Futures Contracts = 803
• INDEX = 806