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Each new chapter of the Second Edition covers an aspect of the fixed income market that has become relevant to investors but is not covered at an advanced level in existing textbooks. This is material that is pertinent to the investment decisions but is not freely available to those not originating the products. Professor Choudhry’s method is to place ideas into contexts in order to keep them from becoming too theoretical. While the level of mathematical sophistication is both high and specialized, he includes a brief introduction to the key mathematical concepts.  This is a book on the financial markets, not mathematics, and he provides few derivations and fewer proofs. He draws on both his personal experience as well as his own research to bring together subjects of practical importance to bond market investors and analysts. Presents practitioner-level theories and applications, never available in textbooks Focuses on financial markets, not mathematics Covers relative value investing, returns analysis, and risk estimation

Bond market. --- Bonds -- Prices -- Econometric models. --- Bonds -- Valuation -- Econometric models. --- Interest rates -- Mathematical models.

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Finance --- Actuarial mathematics --- Interest rates --- Interest rate futures --- Taux d'intérêt --- Marchés à terme de taux d'intérêt --- Mathematical models. --- Modèles mathématiques --- Mathematical models --- -Interest rate futures --- -332.8015195 --- Futures, Interest rate --- Financial futures --- Money market rates --- Rate of interest --- Rates, Interest --- Interest --- Taux d'intérêt --- Marchés à terme de taux d'intérêt --- Modèles mathématiques --- Interest rates - Mathematical models --- Interest rate futures - Mathematical models

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The class of interest rate models introduced by O. Cheyette in 1994 is a subclass of the general HJM framework with a time dependent volatility parameterization. This book addresses the above mentioned class of interest rate models and concentrates on the calibration, valuation and sensitivity analysis in multifactor models. It derives analytical pricing formulas for bonds and caplets and applies several numerical valuation techniques in the class of Cheyette model, i.e. Monte Carlo simulation, characteristic functions and PDE valuation based on sparse grids. Finally it focuses on the sensitivity analysis of Cheyette models and derives Model- and Market Greeks. To the best of our knowledge, this sensitivity analysis of interest rate derivatives in the class of Cheyette models is unique in the literature. Up to now the valuation of interest rate derivatives using PDEs has been restricted to 3 dimensions only, since the computational effort was too great. The author picks up the sparse grid technique, adjusts it slightly and can solve high-dimensional PDEs (four dimensions plus time) accurately in reasonable time. Many topics investigated in this book  are new areas of research and make a significant contribution to the scientific community of financial engineers. They also represent a valuable development for practitioners.

Bond market. --- Bonds -- Prices -- Econometric models. --- Interest rates -- Mathematical models. --- Derivative securities --- Interest rates --- Interest rate futures --- Business & Economics --- Economic Theory --- Mathematical models --- Interest rate futures. --- Interest rate swaps. --- Futures, Interest rate --- Mathematics. --- Applied mathematics. --- Engineering mathematics. --- Economics, Mathematical. --- Numerical analysis. --- Quantitative Finance. --- Applications of Mathematics. --- Numerical Analysis. --- Swaps (Finance) --- Financial futures --- Finance. --- Mathematical analysis --- Math --- Science --- Funding --- Funds --- Economics --- Currency question --- Economics, Mathematical . --- Mathematical economics --- Econometrics --- Mathematics --- Engineering --- Engineering analysis --- Methodology --- Social sciences --- Mathematics in Business, Economics and Finance.

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The primary purpose of this study is to develop a framework that will explain the behavior of financial intermediaries and, more precisely, their pricing policies. As financial intermediation is the business of financial assets and liabilities, use is made of concepts and models developed tradition­ ally in Finance and Economics to end up with recommendations not only for optimal choices of interest rates but also for proper regulation and more sensible accounting methods. Also, the econometric implications of deposit rates stickiness are examined and empirically tested on Belgian data. My debt to many people has been growing during these years and it is a great pleasure to print a text and have the opportunity to thank those who have been so helpful. First of all, let me thank Professor Jacques Dreze, my thesis director. I am grateful to Jacques for encouragments, guidance and so many stimulating discussions. I also thank the members of the Jury, Professors A. Jacquemin, A. Kervyn de Lettenhove, A. Lamfalussy, P. Reding and A. Siaens for comments on earlier drafts of the manuscript. Discussions with Professor P. Howitt while he was visiting the Center for Operations Research and Econometrics (C.O.R.E., Universite Catholique de Louvain) in 1979 have greatly contributed to my under­ standing of the economics of risk sharing between lenders and borrowers. Philippe Gille has been extremely helpful in carrying out the joint econometric estimation in Chapter Five and in suggesting a fine way to present the results.

Money. Monetary policy --- Interest rates --- Financial institutions. --- Mathematical models. --- 336.717 --- AA / International- internationaal --- BE / Belgium - België - Belgique --- 333.131.40 --- 333.100 --- 333.50 --- 333.106 --- 333.131.45 --- 333.832.3 --- 333.131.43 --- 333.833 --- Bankactiviteiten. Bankoperaties. Giroverteer. Deposito. Rekening-courant. Beleningen. Disconto. Effecten. Beurs. Incasso. Emissies --- Algemeenheden. --- Algemeenheden. Theorie en principes van de bankorganisatie en -techniek. --- Financiële instellingen: algemeenheden. --- Kost, rendabiliteit en concurrentie in de banken. --- Rente op bankdeposito's. Intermediatiemarges. --- Rentevoet van het handelskrediet. --- Spaarinlagen. --- rente op bankdeposito's. --- Finance --- Business & Economics --- Finance - General --- Banking --- Investment & Speculation --- 336.717 Bankactiviteiten. Bankoperaties. Giroverteer. Deposito. Rekening-courant. Beleningen. Disconto. Effecten. Beurs. Incasso. Emissies --- Algemeenheden --- Algemeenheden. Theorie en principes van de bankorganisatie en -techniek --- Financiële instellingen: algemeenheden --- Kost, rendabiliteit en concurrentie in de banken --- Rente op bankdeposito's. Intermediatiemarges --- Rentevoet van het handelskrediet --- Spaarinlagen --- rente op bankdeposito's --- Interest rates - Mathematical models.

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This book analyzes real options valuation for non-constant versus constant interest rates using simulations and historical backtesting. It provides a systematic analysis and compares real options valuation using constant interest rates and the implied forward rates with methods that simulate interest rates stochastically. Real options are investigated and combined with various pricing tools and stochastic term structure models. Interest rates for real options valuation are simulated by using stochastic term structure models (Vasicek, Cox-Ingersoll-Ross, Ho-Lee, and Hull-White one-factor and two-factor models) and by using implied forward rates. All necessary theory is provided in the book. The analyses were conducted using a proprietary computer simulation program. All results are explained in detail and rules are derived for application in Corporate Finance practice. The major change in this second edition is the expanded number of tested scenarios. The second edition contains an expanded number of tested scenarios covering the time period of the financial crisis 2008, one of the worst stock market crashes in history. The findings confirm the results provided in the first edition.

Interest rates -- Mathematical models. --- Real options (Finance) -- Mathematical models. --- Real options (Finance). --- Real options (FInance) --- Interest rates --- Capital investments --- Finance --- Business & Economics --- Finance - General --- Investment & Speculation --- Mathematical models --- Decision making --- Interest rates. --- Valuation. --- Appraisal --- Capitalization (Finance) --- Economic valuation --- Property --- Money market rates --- Rate of interest --- Rates, Interest --- Valuation --- Finance. --- Applied mathematics. --- Engineering mathematics. --- Economics, Mathematical. --- Probabilities. --- Macroeconomics. --- Economics. --- Macroeconomics/Monetary Economics//Financial Economics. --- Applications of Mathematics. --- Probability Theory and Stochastic Processes. --- Finance, general. --- Quantitative Finance. --- Accounting --- Interest --- Mathematics. --- Distribution (Probability theory. --- Funding --- Funds --- Economics --- Currency question --- Distribution functions --- Frequency distribution --- Characteristic functions --- Probabilities --- Math --- Science --- Economics, Mathematical . --- Mathematical economics --- Econometrics --- Mathematics --- Probability --- Statistical inference --- Combinations --- Chance --- Least squares --- Mathematical statistics --- Risk --- Engineering --- Engineering analysis --- Mathematical analysis --- Methodology