Customer Reviews

The Handbook of Fixed Income Securities, 6th Edition

5 star:		(16)
4 star:		(8)
3 star:		(2)
2 star:		(1)
1 star:		(5)

 

 

I used this book as a text for a graduate level "Fixed Income Analysis" course. This book covers almost all the fixed income financial instruments from plain vanilla bonds to interest rate derivatives. However, reading this book leaves the reader with a desire for more than just the peripheral knowledge, which is all this book offers.

Theoretically, this book justfies its being called a handbook, but on the mathematical front, it stands absolutely nowhere. There are little or no examples used in the text even though the author touches base on the advanced topics sometimes. Any fixed income practioner, including me, will tell you that ONE JUST CANNOT LEARN FIXED INCOME CONCEPTS WITHOUT GRASPING THE MATH BEHIND THEM, and this book scores poorly in the quantitative analysis. Fixed income securities are extremely sensitive to interest rate fluctuations, and hence, it would be only sensible to present atleast a few chapters trying to explore the concepts used in the modeling of interest rates. But this book doesn't do that. There is little quantitative discussion about duration and convexity, two of the most important risk-measurement tools for bonds.

Since it is called a handbook, I don't see any reason why the author should hold back advanced concepts from the readers. Conversely, since this book doesn't attempt to teach all the concepts to its readers, it should not be called a handbook. This problem is actually common to all the Fabozzi books. Either his math is weak, or he is just busy making money writing a handbook on every possible fixed income security. It's only a shame that a capable and learned individual like him should do such a sloppy job.

I would recommend books by Bruce Tuckman, Garbade, or Horne for more advanced and intelligent discussions on fixed income securities and interest rates rather than this book. One really need not waste money on this book. Theory on Fixed Income instruments is widely available from Federal Reserve publications, which are almost always free. Put your money only where it will produce fixed & positive returns - Fixed Income 101.

This book has been around for years and new editions are lapped up by fresh generations of bond geeks. You will find a copy on pretty much every fixed income desk in the industry (including mine). Why all the hoopla? Because there is simply no other book like it. Because it is simply the most comprehensive survey of the various fixed income markets in print. For a basic understanding of the structure and institutional aspects fixed income securities, Fabozzi is the inevitable first stop. All this being said, it is important to understand the book's weaknesses. There is relatively little depth in terms of analytics and if you want formulae you will have to look elsewhere. But for basic overviews, structural details and the orientation that is a precondition for deeper study, the Handbook is in a class by itelf.

This book probably tells you everything you need to know about bonds. Certainly, I was asked four 'interview' questions about bonds the other day and I could answer all 4 confidently after reading just the opening chapters.

However the length of the book works against it. It's so huge, Fabozzi hasn't written it all himself, rather, he's relied on a number of authors to contribute chapters.

This results in an uneven flow. After a chapter 5, a fairly complex chapter covering things like calculating the yield-to-maturity by combining all of a bond's cashflows, comes chapter 6, covering such basics as how to calculate a percentage return if you invest x dollars and get back y dollars 1 year later!

Another problem is that the book's got so huge, Fabozzi's even forgotten what's in it. For example, repos are covered in pages 295-301, and pages 1048-1054. However, the coverage is almost identical, word-for-word. One is clearly just a slightly edited version of the other. Both chapters are written by Fabozzi and Steven V Mann. Perhaps Fabozzi, as editor, simply forgot that he included the information previously, and added it in again in a later edition. This kind of repetitivness just wastes the reader's time.

This is meant to be the fixed income manual, but if there are dozens of uncorrected math errors which is inexcusable in a sixth edition. This book is overrated, and if you are new to this subject, it is dangerous.

I recommend Bruce Tuckman's Fixed Income Securities on the same topic as a better alternative. I noticed it is currently the #3 seller with banks and credit unions (Fabozzi's isn't even on the radar screen), and there is a good reason they prefer Tuckman's book over this one.

The Handbook attempts to be all things to all people, and thus tries to cover many too many topics with uneven results. The Handbook provides good institutional knowledge about fixed income markets and the basics of pricing and portfolio management (including some international portfolio management issues). This is sufficient to learn basic fixed income intuition, which may be enough for people not heavily involved in fixed income markets (i.e. MBA students, consultants, CFA candidates, etc.). The greatest fault (to me) is the book does not address the biggest assumption of basic fixed income pricing theory (i.e. interest rates are assumed to be constant or at least know functions of time). This is obviously unrealistic. The Handbook does not help practitioners interested in advanced pricing theory and requires consultation with more advanced texts.

However, I must admit the Handbook does look impressive sitting on your desk. In a pinch, it also makes for a good, albeit expensive, paperweight or doorstop. :-)

The kindle edition of this seminal text is horrible. You can't navigate the table of contents which is a very basic but crucial flaw. Either pay up for the paper version or wait until they get this fixed - this is absolutely atrocious.

The term bible of fixed income has been used in conjunction with this book numerous times. It is not an understatement. Less like a textbook, more like a guide, Fabozzi's work takes the reader step by step through the fixed income universe. The book can be found on many a practitioner's desk and has even reached cult status with a mention in Paul Stiles' Merrill Lynch recap. Just a few topics on fixed income escape discussion, but then again, Fabozzi wrote more than one book.

I totally agree with Amit's review. For a practitioner's perspective Bruce Tuckman's "Fixed Income Securities: Tools for Today's Markets" is a much better choice than Fabozzi.

If you, like me, want to carry a copy of this standard reference book around in your Kindle, be aware that the table of contents in my version is non-functional. Considering the paper copy is around 1,300 pages long, this makes it difficult to find exact spot you're looking for in the Kindle version.

I would wait until McGraw-Hill fixes the electronic edition before purchasing a copy.

Has anyone else out there had a problem with their Kindle version TOC?

This monstrosity (over a thousand pages long) is at best a mediocre work of reference. Whether you are interested in fixed income from a qualitative or a quantitative perspective, you are strongly advised to stay away from this book. First it is poorly written, extremely wordy and perplexingly disorganized. Second there is no serious discussion of the ideas and mathematics used to price the securities treated. A few mathematical formulas with zero motivation whatsoever are thrown here and there. Where the formulas come from is never explained. If you are an individual trying to learn fixed income, Fixed Income Securities: Tools for Today's Markets, Second Edition, University Edition by Tuckman is a good introductory text that reads like a novel, without dumbing down the subject.
The only people who have a reason to buy this book are employees who can use company money to pay for it, and do not plan on ever reading it. Aside from serving as a reference to look up some terminology, this book is mostly useless and nobody should waste their own money on it. There are too many worthy alternatives.