High Yield Bonds: Market Structure, Portfolio Management, and Credit Risk Modeling

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Theodore M. Barnhill, William F. Maxwell, Mark R. Shenkman
McGraw-Hill, 1999 - Business & Economics - 574 pages
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HIGH-YIELD BONDS provides state-of-the-art research, strategies, and tools—alongside the expert analysis of respected authorities including Edward Altman of New York University’s Salomon Center, Lea Carty of Moody’s Investor Service, Sam DeRosa-Farag of Donaldson, Lufkin & Jenrette, Martin Fridson of Merrill Lynch & Company, Stuart Gilson of Harvard University, Robert Kricheff of CS First Boston, and Frank Reilly of the University of Notre Dame—to help you truly understand today’s high-yield market. For added value and ease of reference, this high-level one-volume encyclopedia is divided into seven sections detailing virtually every aspect of high-yield bond investment. They include: Market structure—The role of investment banks in security innovation and market development, evolution of analytical methodologies, and recent leveraged loan market developments; Security risk analysis—Historical bond default rates, real interest rate and default rate relationships, and new simulation methodologies for modeling credit quality; Security valuation—Impact of seniority and security on bond pricing and return, important trading factors, and a Monte Carlo simulation methodology for valuing bonds and options in the context of correlated interest rate and credit risk; Market valuation models—Econometric studies which detail the importance of monetary influences, risk-free interest rates, default rates, mutual fund flows, and seasonal fluctuations; Portfolio management—Historical perspective and comparison to alternative investments, analysis of indices available to investors, and specific portfolio selection and risk management strategies of professional fund managers; Distressed security investing—Historical risk and return information, plus an academic overview of the market and decision criteria for uncovering and investing in securities with higher-than-average risk-adjusted returns; Corporate finance considerations—Emerging firms’ strategic choice between external debt and equity financing, as well as the choice of issuing public versus private (Rule-144a) securities. HIGH-YIELD BONDS provides extensive coverage of bond valuation and the construction and management of high-yield portfolios. Advanced Monte Carlo simulation models for the valuation of bonds and options on bonds as well as risk assessments on portfolios of bonds under conditions of correlated interest rate and credit risk are demonstrated. In today’s explosive environment of multiple new issues and high risk versus return relationships, it is paramount that you get advice from analysts and experts who have been influential in shaping and defining the market. HIGH-YIELD BONDS will provide you with a valuable reference to this fascinating and constantly changing class of securities, helping you assemble a stable, diversified portfolio of fixed income investments that provides the greatest returns and the lowest risks.

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Contents

The High Yield Market
3
A Historic Perspective
17
Chapter
23
Copyright

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About the author (1999)

Theodore M. Barnhill, Jr., Ph.D., is professor of finance and director of the Financial Markets Research Institute at George Washington University in Washington, D.C. Dr. Barnhill is a widely published financial researcher and author and the developer of the ValueCalc financial software (www.valuecalc.com). William F. Maxwell, Ph.D., is a visiting assistant professor of finance at Georgetown University, specializing in the areas of fixed income valuation and risk management. Dr. Maxwell’s work has been published in academic and professional journals. His professional experience includes security valuation and mergers and acquisitions. Mark R. Shenkman, MBA, is a pioneer in the field of high-yield bonds. Actively involved in the high-yield market for over two decades, Mr. Shenkman is the founder and chief investment officer of Shenkman Capital Management, a New York investment management firm that focuses exclusively on the high-yield market.

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