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Basic Fixed Income Know-How
Markus Mayer
Overview
Introduction
The interest rate:
The term structure of interest rates:
Cash flows:
The zero coupon bond:
The fixed coupon bond:
The floating rate bond:
The discount factor:
Swaps:
The term structure of interest rates
The discount function
The zero curve
The discretely compounded zero curve
The continuously compounded zero curve
The par curve
Continualisation of the par curve
The `clean' par curve
The continuous par curve
The forward curve
The forward agreement on a general asset
Forward prices are break-even prices
Forward prices of zero bonds
Two notations for forward rates
Forward rates
Instantaneous forward rates
Profit and loss in a zero-bond position
Profit and loss in a slope position
The swap curve
The generic interest rate swap
Profit and loss calculations
Swaps and forwards
The Vasicek-Fong spline
The VF basis function
The VF spline
Some more properties of the VF spline
The short rate
Numerical instability in
for
Instantaneous forward rates
Fitting a zero curve
Fitting a par curve
Fitting forwards
Fitting arbitrary coupon bonds
Summary of market conventions
Swap cashflow conventions
Bibliography
About this document ...
Markus Mayer 2009-06-22
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