Fixed-Income Relative Value Strategies

A practical guide to finding, measuring, and managing relative value in fixed-income markets. This book presents a disciplined framework for comparing instruments whose prices, yields, cash flows, or risk exposures appear inconsistent. It connects valuation theory with the details that determine whether a trade is genuinely attractive after hedging, financing, liquidity, and transaction costs.

• Core valuation tools: cash flows, discount factors, spot and forward rates, yield measures, accrued interest, duration, convexity, key-rate risk, and dollar exposure.
• Curve analysis: discount-curve construction, bootstrapping, interpolation, rich and cheap identification, principal-component exposures, butterflies, steepeners, flatteners, carry, and roll-down.
• Government bonds and futures: benchmark liquidity, off-the-run pricing, repo specialness, auctions, bond switches, conversion factors, cheapest-to-deliver analysis, implied repo, and cash-futures basis.
• Swaps and credit: par swap valuation, projection and discounting curves, swap spreads, asset swaps, issuer curves, capital structures, seniority, recovery, corporate bonds, CDS, and cash-credit basis.
• Structured products and options: mortgage prepayments, option-adjusted spreads, securitized credit, callable and putable bonds, swaptions, volatility risk premia, and cross-Greek hedging.
• Portfolio discipline: position sizing, DV01 and CS01 limits, hedge ratios, factor models, stress testing, liquidity planning, performance attribution, governance, and post-trade review.

Each topic is organized around the questions a practitioner must answer: What is the correct comparison? Which assumptions drive the valuation? How should the position be hedged? What risks remain after neutralization? And does the expected return survive bid-offer spreads, financing, margin, and market impact?

Worked examples show how to value government and corporate bonds, construct a three-point butterfly, assess a basis trade, hedge a corporate bond with a swap, and compare bonds issued by the same company. The discussion also addresses model controls, data validation, scenario analysis, residual risk, and P&L attribution across rates, spreads, carry, roll, and basis.

Suitable for fixed-income traders, portfolio managers, analysts, risk professionals, students, and finance practitioners, this book offers a clear reference for turning apparent mispricing into carefully measured, market-aware relative-value decisions.