References

[Fabozzi] Bond Markets, Analysis and Strategies, 5^th Edition

Frank J. Fabozzi. 2003 Pearson Prentice Hall.

Fabozzi’s book is a (if not the) definitive reference on bonds. There are plenty of examples and discussion on duration, convexity, strips, callable and convertible bonds, mortgage-backed securities, bond markets, swaps, futures, etc. There are some minor typos, but the intent is usually obvious. Without qualification, I much prefer Fabozzi’s approach to the math. In particular, his presentation of pricing under changing yield conditions (duration, convexity, etc.) is superior to Farrell’s or anybody else I’ve read so far.

[Farrell] Portfolio Management, Theory and Application, 2^nd Edition

James L Farrell, Jr. 1997 McGraw-Hill Companies, Inc.

Farrell doesn’t provide as many formulas (thus leaving himself less exposed to errors) or revisit them in as many ways as Fabozzi does, but this book has the advantage of covering portfolio theory and working valuation models at a lower level than you’ll typically find in a book on portfolio management, so it’s a nice overall introduction to the subject matter for the uninitiated. It’s also a nice complement to Hull’s book, which doesn’t venture into portfolio theory, but if you’d rather pass on that and focus on on yield curves, strips, and other fixed income issues, you’re better off moving up to Fabozzi.