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Practical Methods of Financial Engineering and Risk Management by Rupak Chatterjee

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CHAPTER 1

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Financial Instruments

Traditionally, Wall Street has categorized financial instruments using the following classification:

  • Fixed income
  • Credit
  • Emerging markets
  • Mortgage-backed securities (MBS)
  • Equities
  • Commodities
  • Foreign exchange (FX)

These categories are often referred to as asset classes. Fixed-income assets include all sorts of high-quality government bonds and interest-rate products from the G7 countries. The main source of risk here is interest-rate uncertainty. Bonds issued from emerging market countries such as the BRIC (Brazil, Russia, India, China) counties fall under emerging markets. Corporate bonds are classified under ...

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