- Paperback: 288 pages
- Publisher: Princeton University Press (5 Jan 2004)
- Language English
- ISBN-10: 0691118949
- ISBN-13: 978-0691118949
- Product Dimensions: 23.2 x 15.4 x 1.8 cm
- Average Customer Review: 5.0 out of 5 stars See all reviews (1 customer review)
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Amazon Bestsellers Rank:
697,319 in Books (See Top 100 in Books)
- #24 in Books > Business, Finance & Law > Professional Finance > Interest
- #68 in Books > Business, Finance & Law > Professional Finance > Investments & Securities > Bonds
- See Complete Table of Contents
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More About the Author
Product Description
Product Description
The field of financial mathematics has developed tremendously over the past thirty years, and the underlying models that have taken shape in interest rate markets and bond markets, being much richer in structure than equity-derivative models, are particularly fascinating and complex. This book introduces the tools required for the arbitrage-free modelling of the dynamics of these markets. Andrew Cairns addresses not only seminal works but also modern developments. Refreshingly broad in scope, covering numerical methods, credit risk, and descriptive models, and with an approachable sequence of opening chapters, Interest Rate Models will make readers--be they graduate students, academics, or practitioners--confident enough to develop their own interest rate models or to price nonstandard derivatives using existing models.
The mathematical chapters begin with the simple binomial model that introduces many core ideas. But the main chapters work their way systematically through all of the main developments in continuous-time interest rate modelling. The book describes fully the broad range of approaches to interest rate modelling: short-rate models, no-arbitrage models, the Heath-Jarrow-Morton framework, multifactor models, forward measures, positive-interest models, and market models. Later chapters cover some related topics, including numerical methods, credit risk, and model calibration. Significantly, the book develops the martingale approach to bond pricing in detail, concentrating on risk-neutral pricing, before later exploring recent advances in interest rate modelling where different pricing measures are important.
From the Back Cover
"This book provides an excellent introduction to the field of interest-rate modeling for readers at the graduate level with a background in mathematics. It covers all key models and topics in the field and provides first glances at practical issues (calibration) and important related fields (credit risk). The mathematics is structured very well."--Rdiger Kiesel, University of Ulm, coauthor of Risk-Neutral Valuation
"A very useful book that provides clear and comprehensive discussions of the topic that are not easily available elsewhere."--Edwin J. Elton, New York University, author of Modern Portfolio Theory and Investment Analysis
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Most Helpful Customer Reviews
5.0 out of 5 stars
Good book,
By
This review is from: Interest Rate Models: An Introduction (Paperback)
This book is very handy if you want to have a starting overview of all interest rate model. All models are clearly categorized with brief explanation. Not too difficult to read. You'll not be over-loaded with too much technical details. A little bit out-dated so can be updated with more recent development though.
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Most Helpful Customer Reviews on Amazon.com (beta) Amazon.com:
4.2 out of 5 stars (5 customer reviews) 4 of 4 people found the following review helpful:
4.0 out of 5 stars
Good intro on short-rate models and forward/LIBOR-rate models,
By Dr. Y - Published on Amazon.com
This review is from: Interest Rate Models: An Introduction (Paperback)
The book assumes that you've done some stochastic analysis courses before. You need to be familiar with Girsanov's theorem (change of measure) and some PDE theories (Feynman-Kac) to better understand the materials. The book starts with the introduction of instruments in the interest rate market. Then before introducing the continuous-time models, it shows how to price interest rate derivatives/ZCB in a binomial model, the classical Ho/Lee model is also introduced. The chapter on short-rate models is good, it shows 2 different ways to price zero-coupon bonds, martingale approach and the PDE approach. The book even proves ZCB/options on ZCB under the Vasicek and CIR models (in the appendices). More recent developments such as LIBOR/HJM are also introduced.The book might be a littel bit difficult to read at the start (formal maths), however, it rewards perseverance.
P.S. the solutions to the exercises of chapters 1-5 can be found from A.Cairn's web-page. P.S.2 note that the book does not give any details on implementing different interest rate models in practice. 2 of 2 people found the following review helpful:
4.0 out of 5 stars
very nice and clear, but no solutions to exercises,
By Freddy - Published on Amazon.com
This review is from: Interest Rate Models: An Introduction (Paperback)
I agree with the previous reviewer. The exposition is very nice and clear, one is not bogged down with too complicated calculations of too complicated models. It's a shame that there are no solutions to end of chapter exercises though. Hence one star down.
3.0 out of 5 stars
Textbook for student,
By SP5000 - Published on Amazon.com
This review is from: Interest Rate Models: An Introduction (Paperback)
A light-weighted text book for students taking IR model class. Practitioner's lauguage for bond paying coupon every six month is "semi-annually", not half-yearly. Read those classic term structure papers may help more than this book.
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