Advanced Bond Portfolio Management

Frank J. Fabozzi, PhD, CFA, CPA, is the Frederick Frank Adjunct Professor of Finance at Yale University's School of Management and a Fellow of the International Center for Finance. Prior to joining the Yale faculty, Fabozzi was a visiting professor of finance in the Sloan School at MIT. He is the Editor of the Journal of Portfolio Management. Lionel Martellini, PhD, is Professor of Finance at EDHEC Graduate School of Business in France and the Scientific Director of EDHEC Risk and Asset Management Research Centre. A former member of the faculty at the Marshall School of Business, University of Southern California, he holds Master's Degrees in Business Administration, Economics, Statistics, and Mathematics, as well as a PhD in Finance from the Haas School of Business, University of California, Berkeley.Philippe Priaulet, PHD, is the Head of Global Strategy at Natexis Banques Populaires. He is also an Associate Professor in the Department of Mathematics at the Université of Evry Val d'Essonne. He holds Master's Degrees in Business Administration and Mathematics as well as a PhD in Financial Economics from the Université Paris IX Dauphine.

"Effective in presenting the mechanics of bond portfolio management for those who understand basic bond math. . . worth the price."--Financial Analysts Journal

• Preface ixAbout the Editors xvContributing Authors xviiPART ONE Background 1CHAPTER 1 Overview of Fixed Income Portfolio Management 3Frank J. JonesCHAPTER 2 Liquidity, Trading, and Trading Costs 21Leland E. Crabbe and Frank J. FabozziCHAPTER 3 Portfolio Strategies for Outperforming a Benchmark 43Bülent Baygün and Robert TzuckerPART TWO Benchmark Selection and Risk Budgeting 63CHAPTER 4 The Active Decisions in the Selection of Passive Management and Performance Bogeys 65Chris P. Dialynas and Alfred MurataCHAPTER 5 Liability-Based Benchmarks 97Lev Dynkin, Jay Hyman, and Bruce D. PhelpsCHAPTER 6 Risk Budgeting for Fixed Income Portfolios 111Frederick E. DopfelPART THREE Fixed Income ModelingCHAPTER 7 Understanding the Building Blocks for OAS Models 131Philip O. ObazeeCHAPTER 8 Fixed Income Risk Modeling 163Ludovic Breger and Oren CheyetteCHAPTER 9 Multifactor Risk Models and Their Applications 195Lev Dynkin and Jay HymanPART FOUR Interest Rate Risk Management 247CHAPTER 10 Measuring Plausibility of Hypothetical Interest Rate Shocks 249Bennett W. Golub and Leo M. TilmanCHAPTER 11 Hedging Interest Rate Risk with Term Structure Factor Models 267Lionel Martellini, Philippe Priaulet, Frank J. Fabozzi, and Michael LuoCHAPTER 12 Scenario Simulation Model for Fixed Income Portfolio Risk Management 291Farshid Jamshidian and Yu ZhuPART FIVE Credit Analysis and Credit Risk Management 311CHAPTER 13 Valuing Corporate Credit: Quantitative Approaches versus Fundamental Analysis 313Sivan Mahadevan, Young-Sup Lee, Viktor Hjort, David Schwartz, and Stephen DulakeCHAPTER 14 An Introduction to Credit Risk Models 355Donald R. van DeventerCHAPTER 15 Credit Derivatives and Hedging Credit Risk 373Donald R. van DeventerCHAPTER 16 Implications of Merton Models for Corporate Bond Investors 389Wesley PhoaCHAPTER 17 Capturing the Credit Alpha 407David SoronowPART SIX International Bond Investing 419CHAPTER 18 Global Bond Investing for the 21st Century 421Lee R. ThomasCHAPTER 19 Managing a Multicurrency Bond Portfolio 445Srichander Ramaswamy and Robert ScottCHAPTER 20 A Disciplined Approach to Emerging Markets Debt Investing 479Maria Mednikov Loucks, John A. Penicook, Jr., and Uwe SchillhornINDEX 533