(This article was originally published at No Hesitations, and syndicated at StatsBlogs.)

Happy New Year to all!

Riccardo Rebonato's

*Bond Pricing and Yield-Curve Modeling: A Structural Approach*will soon appear from Cambridge University Press. It's very well done -- a fine blend of theory, empirics, market sense, and good prose. And not least, endearing humility, well-captured by a memorable sentence from the acknowledgements: "My eight-year-old son has forgiven me, I hope, for not playing with him as much as I would have otherwise; perhaps he has been so understanding because he has had a chance to build a few thousand paper planes with the earlier drafts of this book."

TOC below. Pre-order here.

Contents

Acknowledgements page ix

Symbols and Abbreviations xi

Part I The Foundations

1 What This Book Is About 3

2 Definitions, Notation and a Few Mathematical Results 24

3 Links among Models, Monetary Policy and the Macroeconomy 49

4 Bonds: Their Risks and Their Compensations 63

5 The Risk Factors in Action 81

6 Principal Components: Theory 98

7 Principal Components: Empirical Results 108

Part II The Building Blocks: A First Look

8 Expectations 137

9 Convexity: A First Look 147

10 A Preview: A First Look at the Vasicek Model 160

Part III The Conditions of No-Arbitrage

11 No-Arbitrage in Discrete Time 185

12 No-Arbitrage in Continuous Time 196

13 No-Arbitrage with State Price Deflators 206

14 No-Arbitrage Conditions for Real Bonds 224

15 The Links with an Economics-Based Description of Rates 241

Part IV Solving the Models

16 Solving Affine Models: The Vasicek Case 263

17 First Extensions 285

18 A General Pricing Framework 299

19 The Shadow Rate: Dealing with a Near-Zero Lower Bound 329

Part V The Value of Convexity

20 The Value of Convexity 351

21 A Model-Independent Approach to Valuing Convexity 371

22 Convexity: Empirical Results 391

Part VI Excess Returns

23 Excess Returns: Setting the Scene 415

24 Risk Premia, the Market Price of Risk and Expected Excess Returns 431

25 Excess Returns: Empirical Results 449

26 Excess Returns: The Recent Literature – I 473

27 Excess Returns: The Recent Literature – II 497

28 Why Is the Slope a Good Predictor? 527

29 The Spanning Problem Revisited 547

Part VII What the Models Tell Us

30 The Doubly Mean-Reverting Vasicek Model 559

31 Real Yields, Nominal Yields and Inflation: The D’Amico–Kim–Wei Model 575

32 From Snapshots to Structural Models: The Diebold–Rudebusch Approach 602

33 Principal Components as State Variables of Affine Models: The PCA Affine Approach 618

34 Generalizations: The Adrian–Crump–Moench Model 663

35 An Affine, Stochastic-Market-Price-of-Risk Model 688

36 Conclusions 714

Bibliography 725

index 000

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