Bonds and Bond Derivatives, Second Edition

PREFACE

In the last 30 years, the size and the complexity of the bond markets have increased significantly. The two major causes are the enormous growth of the level of debt and the high variability of interest rates. Because of interest rate variability, the potential losses to borrowers and lenders from poor debt choices have greatly increased.

This book is an introduction to bond markets and bond derivatives for college and university students and executives in commercial businesses and financial institutions. Some books on bond markets contain a multitude of institutional details and other books present a great deal of technical material. This book presents the minimal institutional details necessary to understand the markets and covers essential technical material in an intuitive and relatively nonmathematical way. The only mathematics used is algebra and some geometry.

The book is designed to be the main text for a course in debt markets. In recent years, more and more universities and colleges are offering such courses. In addition, the text can be used as a supplementary book in courses on investments, money and banking, and financial institutions. It can be used as a training manual and reference source for firms involved in the debt markets.

Bonds and Bond Derivatives describes bond markets, bond derivatives, and institutions involved in these markets. The book begins with a discussion of the major macroeconomic determinants of interest rates. Next, the role of financial ...