Bond Math
I keep hearing about Bond Math and that you should be good at it for FI. The only thing Ive been able to find is this: http://www.suitellc.com/education/Bond%20Mathemat…
But it only talkes about YTM no YTW needed for high yield etc.
The Hull book doesnt seem to have a direct referance. So what is bond math exactly and what are some good resources that will provide enough information in order to feel comfortable when being asked do you know "Bond Math"?
You def. need to be able to calc yield to worst, but that's done basically by calcing the yield to call for each call date as well as YTM and selecting the lowest yield.
I find that the term 'bond math' is an anachronism for a pretty broad subjet.
I think for starters, you should know how to bootstrap a yield curve from bond prices. Know how to go from a zero curve to a forward curve and back. Know some basic interest rate models (i.e. hull-white one factor etc.) Know how to price basic fixed income derivatives like CDS and options on bonds. Have some intuition about vanilla swaps, and learn basic features of more complex swaps (knockout, cancellable etc...). Then there's learning how to price CDOs, synthetic CDOs. Then you should learn about bringing in FX exposure to all of these instruments. For defaultable products, learn about CVA (credit valuation adjustment) etc.
There's a lot to learn.
Oh yes, and know about your sensitivies (duration, convexity, PV01, CR01 etc...)
Thanks guys, but what sources have you used in order to learn the above mentioned? I cant even find anything worthwhile on YTW. Did you use internal company manuals or more widely available texts?
John Hull - Options, Futures and other Derivatives (general text)
Frank Fabozzi - The Handbook of Fixed Income Securities (good intro)
Bruce Tuckman - Fixed Income Securities (advanced treatment)
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