Patrick J.Brown – An Introduction to the Bond Markets

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Author: Patrick J.Brown 

  • Trading books are a form of accounting ledger that contains records of all tradeable financial assets of a bank.
  • Trading books are subject to gains and losses that affect the financial institution directly.
  • Losses in a bank’s trading book can have a cascading effect on the global economy, such as those that occurred during the 2008 financial crisis.

An Introduction to the Bond Markets

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Author Information

PATRICK J. BROWN, the well known financial mathematician, has worked in stockbroking and the capital markets for over 35 years. He has previously worked at Datastream and was a director of ISMA in London for a number of years. Patrick J.Brown was involved in developing the original EFFAS bond indices and has written the official guide to their construction. He has been the chairman of the European Bond Commission and the convenor of the ISO 15022 financial message standard working group. Patrick J.Brown is also the author of the ISMA publication Bond Markets – Structures and Yield Calculations.


This book gives an introduction to the bond markets for practitioners and new entrants who need to understand what they are, how they work and how they can be used, but do not want to be intimidated by mathematical formulae. By the end of the book readers will be able to decide whether to invest in the bond market. The mathematical formulae will be relegated to the appendices and supplemented by a companion website which allows users to enter their own bond market investments, to simulate anticipated events and see the results.

  • Patrick Brown is well-known as Chairman of the European Bond commission (recently retired)
  • The only bond book that does not rely heavily on mathematical formulae

Table of Contents



  1. What is a Bond and Who Issues Them?

1.1 Description of a bond.

1.2 The difference between corporate bonds and equities.

  1. Yield Curves.

5.1 Yield curve shapes.

5.2 Zero-coupon or spot yield curves.

5.3 Forward or forward-forward yield curves.

5.4 Par yield curves.

5.5 Investment strategies for possible yield curves changes.

  1. Repos.

6.1 Classic repos.

6.2 Sell/buy-backs.

6.3 Stock borrowing/lending.

  1. Option Calculations.

7.1 Buying a call option.

7.2 Writing a call option.

7.3 Buying a put option.

7.4 Writing a put option.

7.5 Theoretical value of an option.

7.6 Combining options.

  1. Credit and Other Risks and Ratings.

8.1 Credit risk.

8.2 Liquidity.

  1. Swaps, Futures and Derivatives.

9.1 Swaps.

9.2 Credit risk in swaps.

9.3 Swaptions.

9.4 Futures.

9.5 Credit default swaps.

  1. Portfolios and Other Considerations.

10.1 Holding period returns.

10.2 Immunization.

10.3 Portfolio measures.

10.4 Allowing for tax.

  1. Indices.

11.1 Bond index classification.

11.2 Choosing indices.

11.3 Index data calculations.

11.4 Index continuity.

Appendix A: Using the Interactive Website.

Appendix B: Mathematical Formulae.


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