Can Anyone Recommend a SOLID Bond maths book for young bond traders?
Hi there, I have just joined FT on a bond trading desk at a BB bank. I have been assigned a few projects like calculating net basis for CTD bonds and also a spreadsheet that calculates repo, carry etc for bonds.. and as I started doing these things I realised that my bond maths is failing me;
So can anyone of the traders out there recommend a solid book that covers fixed income maths, especially bond mathematics in detail but that is not crazy hard to understand?? Any of you guys used a book at the start of your career that really helped you learn bond maths (detailed maths that is)?
Cheers guys
it's just math, not "maths"
I really don't get this whole grammar nazi thing, I know this is Wall Street Oasis, but picking up on a guy from the UK because he used the UK version of a word rather than the US version seems pointless...
^ we are not all americans here you stupid dingus
I guess it depends on how rusty you are and what level you're looking for. i have tuckman's book and it's pretty good and basic.
OP - do you have any friends at BBs? If so, they sometimes give new joiners training manuels. Those are by far the best and if you can borrow one off a friend, you're set.
Americans run shit.
Fact.
anyways.
Fabozzi. good start.
Veronesi - Fixed Income Securities
I happen to specialize in Muni's and work on a Fixed Income Sales desk, but "The Fundamentals of Municipal Bonds" has been around for a long time and will give you some good ideas. Doesn't necessarily focus on math, but still helpful for anyone starting out in Muni's or Public Finance. Pretty much covers it all.
Two books by Frank Fabozzi, which are recommended to me by every investment prof I've had:
The Handbook of Fixed Income Securities http://www.amazon.com/Handbook-Income-Securities-Eighth-Edition/dp/0071…
Bond Markets, Analysis and Strategies http://www.amazon.com/Bond-Markets-Analysis-Strategies-Edition/dp/01319…
I'm currently reading Bond Markets, Analysis and Strategies - breaks down all concepts in a way easily understood by anyone in their junior, senior year.
The Fabozzi books are good, but I actually think a simpler, better bond math book is "The Treasury Bond Basis" by Galen Burghardt (spelling unsure).
do you have any book/resource recommendations (not necessarly "math" books) about (1) risk/money management, (2) market mechanics and (3) some sort of overview of the financial system and financial markets to help understand the "big picture" before diving into product/topic specific books?
thanks
Those are tougher to find..Good risk management is really pretty simple and some of the best insights I have gained into the subject came from interviews with traders (for eg covner and paul tudor jones in the original Market Wizards) and from watching how succesful traders with long track records and no blow-ups tend to operate. One of the advantages of spending my whole career on buyside trading desks (even tho the first half was in ops) is that I have seen many many traders come and go and seen how the succesful ones run their business and just as importantly how the shitty ones operate. I think if you dont have that advantage the best way to start is to use simple money management rule such as "never risk more then X% of capital on a trade" and go from there...there is a book called Trading For a Living by Elder that has a good way to structure such a rule...that book is not geared to professionals and some on here will be too snobby to take it seriously but a simple rule like that is a good place to start. I know many respected, professional traders for whom i thin just using simple stuff like that would be a vast improvement.
Trading Risk by Ken Grant is a must-read for traders imho. Excellent coverage of risk management from a veteran of the business. Well written and practical, It's the first book I recommend to trainees coming through my desk.
one other thing on risk management...learn about the concept of Risk of Ruin. A good book on the math of blackjack card counting will familarize you with the concept. I first heard the term while reading Ken Uston's "Million Dollar Blackjack" back in the day...not sure if that book is even still in print but im sure there are plenty of others. its important to understand perfectly clearly (like 100% crystal clear) that if you size your trades wrong (or in blackjack bet too much per hand relative to the size of your bankroll) you WILL go bankrupt even if you have a significant edge in the game and a positive expected value on every hand. You would be shocked how many people dont even understand this concept and think that if you have good trade ideas then you basically cannot lose your shirt. not the case.
Very well put Bondarb - a memorable line from Market Wizards is that if you're sweating bullets over the duration of a trade, you've risked too much capital on that trade (relative to portfolio).
Red-Blooded Risk by Aaron Brown is great book on that subject, linking risk mgmt and gambling theory. Also included is a great intuitive intro to VaR
Thanks Bondarb, would give you a banana but I ate them all already. Anyone with recommendations for the other two topics?
Fabozzi is good. U can download that PDF too.
Regarding the original question:
-If you look at basis trading etc, Butghart is the best ref but you could also check “Trading the Fixed Income, Inflation and Credit Markets” by Schofield and Bowler.
-Also check the “Interest Rate Markets” by Jha. For more books on the subject the author has an Amazon list full of classics
http://www.Amazon.com/Interest-rate-books/lm/R1CF5DOZYR57MU/ref=cm_lm_byauthor_title_full
Thanks for all the book recommendations! Newbie in the fixed income space, any if the above books good at understanding how to trade using flat and steep yield curves? Don't have the time to read them all :)
understanding the yield curve - salomon brothers guide
Hi Marker, I cant seem to find this, is it a publication? Paper?
People in my desk gave me The handbook of Fixed Income securities and The Treasury Bond Basis, and I think they are very good for bonds.
Maybe a bit offtopic, but does anyone know a solid weather derivatives book for young traders?
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