Donald Smith’s New Book, Bond Math: The Theory Behind the Formulas

in Faculty, Finance
October 21st, 2011

Bond Math: The Theory Behind the Formulas

Bond Math: The Theory Behind the Formulas

Of his new book, Boston University Associate Professor of Finance Donald J. Smith writes, “My objective in Bond Math is to explain the theory and assumptions that lie behind the commonly used statistics regarding the risk and return on bonds.”

The book breaks down the calculations necessary for working in the field of fixed income. But it then goes beyond these calculations putting them in practical perspective, explaining how to think about bond math in the context of investment strategy and revealing which numbers prove most useful when dealing with bonds. For instance, it illuminates how bond math functions in both aggressive and passive investment strategies and analyzes the circumstances when statistics reported for individual securities can be used to calculate summary statistics for a portfolio of bonds. It also explains and critiques The Bloomberg Yield Analysis(YA) page, detailing which numbers provide data that are reliable, meaningless, or even misleading for investors.

A book that goes beyond calculation, explaining how to think about bond math.

Chapters progress from money market rates to coupon bonds and yield curves, duration and convexity to floaters and linkers, and interest rate swaps to bond portfolios and strategies. Throughout, Smith taps lessons drawn from his 25 years of experience teaching these topics, and making them more accessible, to both graduate students and finance professionals.

See more about Bond Math: The Theory Behind the Formulas, or get the related resource for professors, A Teaching Note on Pricing and Valuing Interest Rate Swaps with LIBOR and OIS Discounting-2.