Choudhry Moorad - Advanced Fixed Income Analysis

Second Edition

Moorad Choudhry

Michele Lizzio

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First edition 2003.

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ISBN: 978-0-08-099938-8

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The views, thoughts and opinions expressed in this book represent those of the authors in their individual private capacities, and should not in any way be attributed to Habib Bank Zurich plc, the Habib Bank AG Zurich Group, or Deloitte Financial Advisory S.r.l, or to Moorad Choudhry as a representative, officer, or employee of Habib Bank Zurich plc or the Habib Bank AG Zurich Group, or Michele Lizzio as an employee of Deloitte Financial Advisory S.r.l.

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Moorad Choudhry

For my grandfather, Mr Abdul Hakim

(c. 18981983), Advocate

Citizen of Noakhali, Bangladesh

and

Michele Lizzio

For my mum and dad

Moorad Choudhry is CEO of Habib Bank Zurich plc in London, and Visiting Professor at the Department of Mathematical Sciences, Brunel University. He is Founder of The Certificate of Bank Treasury Risk Management (BTRM).

Moorad has over 25 years experience in banking in the City of London and was previsouly IPO Treasurer at the Royal Bank of Scotland, Head of Treasury at RBS Corporate Banking, Head of Treasury at Europe Arab Bank, Head of Treasury at KBC Financial Products and vice-president in structured finance services at JPMorgan Chase Bank.

Moorad is a Fellow of the Chartered Institute for Securities & Investment and a Fellow of IFS-University College. He is Editor of Review of Financial Markets , and the author of The Principles of Banking (John Wiley & Sons 2012).

Michele Lizzio is Senior Analyst at Deloitte Financial Advisory, Valuation Services in Milan. He has experience in equity valuation and is involved in the development and implementation of fixed income and derivate based models in Deloitte.

He graduated cum laude in MSc Corporate Finance from University of Brescia. He began his career collaborating with Alberto Falini, Professor of Corporate Finance at University of Brescia.

Everything in life is relative. One persons simple is another persons difficult. Comparisons are often problematic to undertake, because of the difficulties with ensuring that one is measuring like against like. So we begin the Second Edition of Advanced Fixed Income Analysis with the caveat that while it may be advanced to some it may well not be to others. But nevertheless it is worth updating the book simply to reflect changes in thinking and approach that have occurred since the First Edition was published.

What is worthy then of a further investment of cash to purchase this second edition? Hopefully the new chapters on asset swap spread relative value, convertible bonds, callable/putable bonds and floating-rate notes will be sufficient justification; additionally we have updated the previous chapters on inflation-linked bonds and risky corporate bonds valuation. We have also included Excel spreadsheets that enable the reader to apply the analysis described in the chapters right away to bonds that he or she selects.

We have deleted the chapters on cubic spline (a technique now very well known and with plenty of material about it out there on the internet) and Brady bonds. We have also removed the earlier editions chapters on risk-free sovereign bonds trading, on the grounds that the logic of analysis employed for such investments has not changed since 2003, and also more indirectly because there are so few genuinely risk-free sovereign issuers left in the world!

I am grateful to my new co-author for this Second Edition, Michele Lizzio, for his tireless and energetic input.

As always readers are welcome to send feedback direct, please email me at

We hope you enjoy the book.

Moorad Choudhry, Surrey, England

February 2015