This book is the opposite of the book Interest Rate Markets, where bond markets were described, but there was no math. This book was written by an academic who has done many seminars for bond professionals so that they could understand the math behind bonds.
The math rarely transcends algebra, except where he used calculus to briefly explain duration and convexity. Perhaps he could have consulted with actuaries who use discrete approximations.
One more virtue of the book is that if you use Bloomberg, which is common for bond professionals, the book explains the nuances of how Bloomberg does many of its detailed bond calculations. It even explains why you have to interpret some of what you get from Bloomberg with caution, because it may use different assumptions than you would expect.
So if you want to learn the bond math, this book is a congenial way to do so. I recommend it highly.
Now, the writer is an academic who has never managed bonds. As such, he can’t help a great deal with bond selection or portfolio management issues. But that’s not the main goal of the book… he’s here to teach us the math, and nothing more.
Who would benefit from this book:
Anyone who wants to learn the bond math would benefit from this book. Go learn and conquer.
If you want to, you can buy it here: Bond Math: The Theory Behind the Formulas (Wiley Finance).
Full disclosure: I asked the publisher for the book and he sent me a copy.
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