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Course Syllabus

Master 2020/2021

Fixed Income

Type: Elective course (Financial Economics)
Area of studies: Economics
Delivered by: International College of Economics and Finance
Where: International College of Economics and Finance
When: 2 year, 2 module
Mode of studies: offline
Instructors: Vladimir Sokolov
Master’s programme: Financial Economics
Language: English
ECTS credits: 3
Contact hours: 28

Course Syllabus

Full Syllabus

Abstract

Fixed income analysis is an optional course for the master level students at ICEF. The course runs in the first semester. The course consists of three parts. In the first part we cover yield curve calculations and topics in bond portfolio management. The second part of the course introduces the arbitrage-free and equilibrium term structure models. The last part of the course introduces applications of the no-arbitrage theory to pricing derivative securities in different segments of the bond market. We cover a broad range of fixed-income products and contract specifications. The home work material also offers a heuristic introduction to numerical methods and various numerical recipes.
Learning Objectives

Learning Objectives

  • The course offers a thorough understanding of the workings and pricing of the fixed income securities and derivative instruments on fixed income securities.
Expected Learning Outcomes

Expected Learning Outcomes

  • use different measures of bond price sensitivity such as duration and convexity
  • apply the contingent securities pricing methods by replication of the portfolio of the synthetic claims
  • analyze the pricing techniques and the trading strategies for derivative products
Course Contents

Course Contents

  • Introduction to the Valuation of Fixed Income Securities
    Overview of the Bond Sectors and Instruments. Introduction to Valuation of Fixed Income Securities. Risks Associated with Investing in Bonds. Duration and Convexity Measures based on the Parallel Yield curve Shifts. Bond Portfolio Management
  • The Science of Term Structure Interest Rate Models
    The Term Structure Models of the Short Interest Rates. The No-arbitrage Pricing Models. The Heath-Jarrow-Morton Forward Rate Model.
  • Valuation of Interest Rate Derivatives
    Valuing Bonds with Embedded Options. Futures on the Money Market Instruments. Futures on Bonds, Forward Rate Agreements (FRAs). Interest Rate Swaps. Valuation of Caps and Floors, Swaptions. Valuation of Mortgage Backed Securities. Valuation of Collaterized Debt Obligations (CDOs).
Assessment Elements

Assessment Elements

  • non-blocking Class participation
  • non-blocking Home assignments
  • non-blocking Mid-term test
  • blocking Final Exam
Interim Assessment

Interim Assessment

  • Interim assessment (2 module)
    0.05 * Class participation + 0.6 * Final Exam + 0.1 * Home assignments + 0.25 * Mid-term test
Bibliography

Bibliography

Recommended Core Bibliography

  • Fixed Income Securities : Tools for Today's Markets, Tuckman, B., 2002
  • Hull, J. C. (2017). Options, Futures, and Other Derivatives, Global Edition. [Place of publication not identified]: Pearson. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsebk&AN=1538007
  • Modelling fixed income securities and interest rate options, Jarrow, R. A., 2002

Recommended Additional Bibliography

  • Day, A. (2015). Mastering Financial Mathematics in Microsoft Excel : A Practical Guide to Business Calculations. [N.p.]: FT Publishing International. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsebk&AN=1419395
  • Fabozzi, F. J. (2002). The Handbook of Financial Instruments. Hoboken, N.J.: Wiley. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsebk&AN=81949