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Preface to the 2013 Edition ix <p>Acknowledgments xi</p> <p><b>PART I: DURATION TARGETING: A NEW LOOK AT BOND PORTFOLIOS (2013 EDITION) 1</b></p> <p>Introduction 3</p> <p>CHAPTER 1 Duration Targeting and the Trendline Model 9</p> <p>CHAPTER 2 Volatility and Tracking Error 35</p> <p>CHAPTER 3 Historical Convergence to Yield 51</p> <p>CHAPTER 4 Barclays Index and Convergence to Yield 63</p> <p>CHAPTER 5 Laddered Portfolio Convergence to Yield 81</p> <p>Appendix: Path Return and Volatility 95</p> <p>References 105</p> <p><b>PART II: SOME TOPICS THAT DIDN’T MAKE IT INTO THE 1972 EDITION (2004 EDITION) 107</b></p> <p>Contents of the 2004 Edition 109</p> <p>Foreword by Henry Kaufman 111</p> <p>Preface to the 2004 Edition: A Historical Perspective 113</p> <p>Technical Appendix to “Some Topics” 157</p> <p><b>PART III: INSIDE THE YIELD BOOK (ORIGINAL EDITION) 171</b></p> <p>Preface to the 1972 Edition 173</p> <p>Contents of the 1972 Edition 175</p> <p>List of Tables 179</p> <p>About the Authors 349</p> <p>Index 353</p>

<p>“The third edition of <i>Inside the Yield Book</i> builds on the previous editions with valuable insights into duration targeting. The authors convey their mathematically elegant findings with the same clarity and accessibility that characterized the writing of Leibowitz and Homer more than 40 years ago, before abstruse formulas began to permeate fixed-income analysis.” <br /> —<i><b>CFA Institute Book Review</b></i></p>

<p><b>MARTIN L. LEIBOWITZ</b> is a managing director with Morgan Stanley Research Department's global strategy team. Prior to Morgan Stanley, he was vice chairman and chief investment officer of TIAA-CREF. He is the author of numerous books, and over 200 articles on various investment analysis topics, ten of which have won the prestigious Graham and Dodd Award. Leibowitz has received three of the CFA Institute's highest awards: the Nicholas Molodovsky Award, the James R. Vertin Award, and the Professional Excellence Award. In 1995, he became the first inductee into the Fixed Income Analysts Society's Hall of Fame.</p> <p>The late <b>SIDNEY HOMER</b> was the founder and general partner in charge of Salomon Brothers' bond market research department. Best known for his pioneering and analytical studies of bond market history and relative values and the economic forces that create bond market trends, he is the author of several books including <i>A History of Interest Rates, The Bond Buyer's Primer</i>, and <i>The Price of Money</i>. He was inducted posthumously into the Fixed Income Analysts Society's Hall of Fame in 1997.</p> <p><b>ANTHONY BOVA</b> is an Executive Director with Morgan Stanley Equity Research's Global Strategy team. He won Best Article in the ninth annual Bernstein Fabozzi/Jacobs Levy Awards presented by the <i>Journal of Portfolio Management</i> for his coauthoring of "Gathering Implicit Alphas in a Beta World." In 2008, Mr. Bova coauthored <i>Modern Portfolio Management</i> (Wiley), which focused on active equity strategies. In 2010, he coauthored <i>The Endowment Model of Investing</i> (Wiley) with Martin Leibowitz and Brett Hammond of TIAA-CREF.</p> <p><b>STANLEY KOGELMAN</b> is President of Delft Strategic Advisors, LLC, and a Principal at Advanced Portfolio Management. Prior to founding Delft Strategic Advisors, he served as a managing director at JPMorgan Private Bank and Goldman, Sachs & Co. He is the author and coauthor of more than sixty articles on finance and received two Graham and Dodd Awards and published two books jointly with Martin Leibowitz. In an earlier academic career, he held senior mathematics faculty positions and wrote several pioneering books on mathematics education, including <i>Mind Over Math</i> and <i>The Only Math Book You'll Ever Need</i>.</p>

<p><b>First published in 1972,</b> and then updated in 2004, Inside the <i>Yield Book</i> is the widely-read classic volume that led to the modern science of bond analytics.</p> <p>With the global nature of today’s investment management process and the increasing complexity of financial instruments, we may seem far removed from the bond markets that authors Martin Leibowitz and Sidney Homer first wrote about over forty years ago, but the ability of this new <i>Third Edition</i> to explain complex relationships in the debt markets in a logical and often intuitive way remains unchanged. <p>Divided into three comprehensive parts, this new edition is filled with what many would consider some of the best information regarding bonds you’ll ever find. It contains the complete original edition of Leibowitz and Homer’s classic, which basically created the science of bond analysis through clear explanations of bond portfolio management and the math behind bond yields and prices. It also includes the 2004 updates to the classic, which developed a horizon-based approach to present-value and showed how these concepts could be generalized beyond bonds to become useful in the analysis of virtually any investment opportunity, including equities. <p>While the earlier editions of this reliable guide focused on a single bond that was continuously held either to maturity or to some specified horizon, many bond investments take the form of portfolios composed of multiple bond holdings and a continually changing bond composition. A completely new part of this <i>Third Edition</i> contains material coauthored by Martin Leibowitz, Anthony Bova, and Stanley Kogelman that reflects this reality. It provides valuable insights into the often-surprising return behavior exhibited by Duration Targeting (DT) portfolios—the most common form of bond management—over multi-year horizons. Engaging and informative, this new part addresses some practical concerns in this arena as it: develops a trendline-based zero coupon bond model of Duration Targeting; explores the relationship between yield volatility and return volatility; moves beyond theory and simulated returns to the recorded returns of actual Duration Targeted portfolios; analyzes the so-called “laddered portfolios” that commonly are used by individual investors; and much more. <p>Whether you’re an institutional or individual investor, trader, or analyst, if you’re looking to enhance your bond analysis skills, this authoritative work covers essential concepts and contains illustrative examples that will allow you to excel in today’s challenging bond markets.

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