Bond Prices and Yields (Chapter 14)

This chapter has been reorganized to unify the coverage of the corporate bond sector. It also contains new material on innovation in the bond market, including more material on inflation-protected bonds.

The Term Structure of Interest Rates (Chapter 15)

This chapter contains new material illustrating the link between forward interest rates and interest-rate forward and futures contracts.

Managing Bond Portfolios (Chapter 16)

We have added new material showing graphical and spreadsheet approaches to duration, have extended our discussion on why investors are attracted to bond convexity, and have shown how to generalize the concept of bond duration in the presence of call provisions.

Equity Valuation Models (Chapter 18)

We have added new material on comparative valuation ratios such as price-to-sales or price-to-cash flow. We also have added new material on the importance of growth oppor- tunities in security valuation.

Financial Statement Analysis (Chapter 19)

This chapter contains new material on economic value added, on quality of earnings, on international differences in accounting practices, and on interpreting financial ratios using industry or historical benchmarks.

Option Valuation (Chapter 21)

We have introduced spreadsheet material on the Black-Scholes model and estimation of implied volatility. We also have integrated material on delta hedging that previously appeared in a separate chapter on hedging.

Futures and Swaps: A Closer Look (Chapter 23)

Risk management techniques using futures contracts that previously appeared in a separate chapter on hedging have been integrated into this chapter. In addition, this chapter contains new material on the Eurodollar and other futures contracts written on interest rates.