Despite its forbidding nature yield curve modeling is vital component of the fixed income market. It has wide range of applications and practical importance. However, the lack understanding so often encountered leaves students and market investors with a gap between able to use the theory and being able to do so. One way of promoting understanding and bridging this gap is the method this book follows. The way of this book is to make the reader understand the subject by providing detailed explanation with carefully selected examples, show how principles and concepts may be applied to particular problem. And then offering the reader examples that differ slightly but which can be tackled by an extension of the approach that have been used previously. All this is evident in chapter one. In chapter two the author selects well motivated examples to demonstrate specific principle and concepts.
The book starts with an overview of the concept of bond yields and bond yield measurement. It then discusses the basic terminology of the yield curve. The core topics of classical yield curve are then examined in chapter two. It includes brief introduction to each topic where important results are stated and sometimes derived or reference given, followed by a number of practical example worked out in detail. Part two of the book deals with the very practical topic of yield curve modeling.
One of the powerful features of this book is that it provides relationship between theory and market practice. To sum up, the author explains all the components of the yield curve modeling at the atomic level.
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