Nawalkha S., Beliaeva N., Soto Gl. Dynamic Term Structure Modeling

2007. The Fixed Income Valuation Course
his is the second book of the trilogy on a fixed income valuation course
by Wiley finance. This trilogy covers the following three areas of fixed
income valuation:
Interest rate risk modeling
Term structure modeling
Credit risk modeling
Unlike other books in fixed income valuation, which are either too rigorous but mathematically demanding or easy-to-read but lacking in important details, our goal is to provide readability with sufficient rigor. In the first book, we gave a basic introduction to various fixed income securities and their derivatives. The principal focus of the first book was on measuring and managing interest rate risk arising from general nonparallel rate changes in the term structure of interest rates. Due to smoothness in the shapes of term structures, interest rate risk of straight bonds can be managed
even without a proper valuation model simply by using empirical duration vectors or empirical key rate duration profiles. In fact, as demonstrated in the first book,Interest Rate Risk Modeling, basicinterest rate risk management of financial institutions such as commercial banks, fixed income funds, insurance companies, and pension funds can be done without using the
most sophisticated valuation models. In this second book, we shift ou