Kuznetsov - Complete Guide to Capital Markets for Quantitative Professionals

Other Titles in the McGraw-Hill Library of Investment and Finance

Convertible Securities by John P. Calamos

Pricing and Managing Exotic and Hybrid Options by Vineer Bhansali

Risk Management and Financial Derivatives by Satyajit Das

Valuing Intangible Assets by Robert F. Reilly and Robert P. Schweihs

Managing Financial Risk by Charles W. Smithson

High-Yield Bonds by Theodore Barnhill, William Maxwell, and Mark Shenkman

Valuing Small Business and Professional Practices, by Shannon Pratt, Robert F. Reilly, and Robert P. Schweihs

Implementing Credit Derivatives by Israel Nelken

The Handbook of Credit Derivatives by Jack Clark Francis, Joyce Frost, and J. Gregg Whittaker

The Handbook of Advanced Business Valuation by Robert F. Reilly and Robert P. Schweihs

Global Invstment Risk Management by Ezra Zask

Active Portfolio Management by Richard Grinold and Ronald Kahn

The Hedge Fund Handbook by Stefano Lavinio

Pricing, Hedging, and Trading Exotic Options by Israel Nelken

Equity Management by Bruce Jacobs and Kenneth Levy

Asset Allocation by Roger Gibson

Valuing a Business by Shannon P. Pratt, Robert F. Reilly, and Robert Schweihs

The Complete Arbitrage Deskbook by Stephane Reverre

Quantitative Business Valuation by Jay Abrams

Applied Equity Analysis by James English

Exchange Rate Determination by Michael Rosenberg

Dynamic Portfolio Theory and Management by Richard Oberuc

Building Financial Models by John Tjia

Modeling Financial Markets by Benjamin Van Vliet and Robert Hendry

The Handbook of Business Valuation and Intellectual Property Analysis by Robert Reilly and Robert Schweihs

Hedging Instruments and Risk Management by Patrick Cusatis and Martin Thomas

Pricing Derivatives by Ambar Sengupta

The Treasury Bond Basis, 3/e, by Galen Burghardt, Terry Belton, Morton Lane, and John Papa

Stock Valuation by Scott Hoover

Quantitative Equity Portfolio Management by Ludwig Chincarini and Daehwan Kim

ALEX KUZNETSOV

Copyright 2007 by The McGraw-Hill Companies. All rights reserved. Manufactured in the United States of America. Except as permitted under the United States Copyright Act of 1976, no part of this publication may be reproduced or distributed in any form or by any means, or stored in a database or retrieval system, without the prior written permission of the publisher.

ISBN-13: 978-0-07-170952-1
ISBN-10: 0-07-170952-5

The material in this eBook also appears in the print version of this title: ISBN: 978-0-07-146829-9, MHID: 0-07-146829-3.

All trademarks are trademarks of their respective owners. Rather than put a trademark symbol after every occurrence of a trademarked name, we use names in an editorial fashion only, and to the benefit of the trademark owner, with no intention of infringement of the trademark. Where such designations appear in this book, they have been printed with initial caps.

McGraw-Hill eBooks are available at special quantity discounts to use as premiums and sales promotions, or for use in corporate training programs. To contact a representative please e-mail us at bulksales@mcgraw-hill.com.

TERMS OF USE

This is a copyrighted work and The McGraw-Hill Companies, Inc. (McGraw-Hill) and its licensors reserve all rights in and to the work. Use of this work is subject to these terms. Except as permitted under the Copyright Act of 1976 and the right to store and retrieve one copy of the work, you may not decompile, disassemble, reverse engineer, reproduce, modify, create derivative works based upon, transmit, distribute, disseminate, sell, publish or sublicense the work or any part of it without McGraw-Hills prior consent. You may use the work for your own noncommercial and personal use; any other use of the work is strictly prohibited. Your right to use the work may be terminated if you fail to comply with these terms.

THE WORK IS PROVIDED AS IS. McGRAW-HILL AND ITS LICENSORS MAKE NO GUARANTEES OR WARRANTIES AS TO THE ACCURACY, ADEQUACY OR COMPLETENESS OF OR RESULTS TO BE OBTAINED FROM USING THE WORK, INCLUDING ANY INFORMATION THAT CAN BE ACCESSED THROUGH THE WORK VIA HYPERLINK OR OTHERWISE, AND EXPRESSLY DISCLAIM ANY WARRANTY, EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. McGraw-Hill and its licensors do not warrant or guarantee that the functions contained in the work will meet your requirements or that its operation will be uninterrupted or error free. Neither McGraw-Hill nor its licensors shall be liable to you or anyone else for any inaccuracy, error or omission, regardless of cause, in the work or for any damages resulting therefrom. McGraw-Hill has no responsibility for the content of any information accessed through the work. Under no circumstances shall McGraw-Hill and/or its licensors be liable for any indirect, incidental, special, punitive, consequential or similar damages that result from the use of or inability to use the work, even if any of them has been advised of the possibility of such damages. This limitation of liability shall apply to any claim or cause whatsoever whether such claim or cause arises in contract, tort or otherwise.

To my father

PART 1
THE FINANCIAL INDUSTRY

Chapter 1
Financial Markets

Chapter 2
Market Participants

Chapter 3
Financial Firms and Their People

PART 2
MARKETS

Chapter 4
Markets and the Economy

Chapter 5
The U.S. Treasury Market

Chapter 6
Equity Markets

Chapter 7
Financial Futures

Chapter 8
Interest-Rate Swaps

Chapter 9
Options Markets

Chapter 10
Mortgages and Agencies

Chapter 11
Credit Markets

PART 3
TECHNOLOGY AREAS

Chapter 12
Reference Data

Chapter 13
Financial Analytics and Modeling

Chapter 14
Market Data

Chapter 15
Trading Systems

Chapter 16
Risk Management

Chapter 17
Research and Strategy

PART 4
TECHNOLOGY PRACTICES

Chapter 18
Production Cycle

Chapter 19
Development Cycle

Chapter 20
Production Support and Problem Management

Many people have contributed to the creation of this book, and first I want to acknowledge the role of my wife, Olga, who (despite a healthy skepticism about this project) graciously put up with the inconvenience of having a writer around the house and provided that writer with invaluable moral support and much else besides. I had been vaguely thinking about writing a book like this one for quite some time, and it was Carl Carrie who tricked me into assuming that it would not be that hard to actually go ahead and do itnow that all this work is behind me, I can be properly grateful to him. At a very early stage of this project, Andrew Gelsey provided some much-needed encouragement.