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Chapter 3: Fixed-Income Modeling

Chapter 3: Fixed-Income Modeling

pp. 81-122

Authors

, California Institute of Technology
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Summary

Fixed-income (UK Fixed-interest) investing is based on the translation of future money to present money via borrowing arrangements. A lender has a long (positive) position in future money (including any interest and principal payments) and a short (negative) position in present money. The interest rate that the lender receives reflects among other things the tradeoff of future money for present money.

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