CONTENTS
Section 1 Why Do Bond Markets Exist? = 9
Introduction = 11
An Overview of Bond Markets = 12
Government and Coporate Bonds = 14
Who Needs Bond Markets? = 18
Primary and Secondary Markets = 20
What is a Bond? = 21
Summary = 24
Quick Quiz Questions = 25
Overview = 26
Quick Quiz Answers = 27
Further Resource = 27
Section 2 How Do Bond Markets Work? = 29
Introduction = 31
Elements end Markets = 32
Government Bonds = 32
Sovereign Bonds = 33
Corporate Bonds = 33
Domestic Bonds Markets = 34
Government Securities = 34
US Treasuries = 38
UK Gilts = 41
French Government Securities = 44
German Government Securities = 46
Japanese Government Bonds = 48
Corporate Issues = 51
Summary of Domestic Bond Markets = 53
International Bond Markets = 54
Foreign Bonds = 54
Eurobonde = 55
Dragon Bonds = 60
Global bonds = 60
Summary of International Bond Markets = 61
Summary = 62
Quick Quiz Questions = 63
Overview = 64
Quick Quiz Answers = 65
Further Resources = 65
Section 3 What Instruments Are Used in Bond Markets? = 67
Introduction = 69
Bond Market Instruments = 70
Market Classification = 71
Interest Related Classification = 75
Redemption Classification = 88
Principal Payments Classification = 94
Borrowers Classification = 101
Equity Linked Classification = 112
Summary = 120
Quick Quiz Questions = 122
Overview = 123
Quick Quiz Answers = 124
Further Resources = 124
Section 4 Derivatives = 127
Introduction = 129
What Are Derivatives? = 130
Who Uses Derivatives? = 132
How Are Derivatives Traded? = 133
Bond Futures = 137
Who Uses Bond Futures? = 144
Interest Rate Futures in the Market Place = 148
Forward Rate Agreements(FRAs) = 154
Comparing FRAs with Interest Rate Futures Contracts = 156
FRAs in the Market Place = 157
Interest Rate Swap(IRS) = 163
Who Uses IRSs? = 166
IRSs in the Market Place = 171
Currency Swap = 182
Who Uses Currency Swaps? = 184
Currency Swaps in the Market Place = 188
Interest Rate Option = 196
Who Uses Options on Bonds and Bond Futures = 201
Options on Bonds and Bond Futures in the Market Place = 203
Swaptions = 213
Who Uses Swaptions? = 213
Swaptions in the Market Place = 214
Summary = 216
Quick Quiz Questions = 217
Overview = 220
Quick Quiz Answers = 221
Further Resources = 222
Section 5 Bond Valuation and Bond Yields = 225
Introduction = 229
Bond Characteristics = 229
The Price of a Bond = 229
Credit Risk = 230
Other Bond Characteristics = 232
Bond Valuation = 235
Rate of Return = 236
Simple and Compound Interest = 237
Equivalent Interest Rates = 239
Present Value = 241
Day Count Method = 243
Accrued Interest = 245
The Concept of Yield = 246
Bond Prices = 247
Bond Yields = 249
The Relationship Between Bond Price and Yield = 249
Yield Conventions = 251
Yield Conversions = 252
Yield Curves = 253
Total Return Analysis = 255
Yields for Complicated Bonds = 256
Bond Risk and Yield Analysis = 261
Duration = 62
Basis Point Value = 265
Convexity = 266
Summary = 268
Quick Quiz Questions = 269
Overview = 273
Quick Quiz Answers = 274
Further Resources = 276
Section 6 Trading in the Bond Markets = 277
Introduction = 279
Issuers in the Primary Markets = 280
Credit Rating and Agencies = 281
Issuing a Bond in the Primary Market = 285
Intermediaries Involved in the Primary Markets = 292
Players in the Secondary Markets = 293
How Bonds are Traded = 308
Investors in Bond Markets = 309
Regulation of Markets = 310
Summary = 311
Quick Quiz Questions = 312
Overview = 313
Quick Quiz Answers = 314
Further Resources = 314
