This module provides a general introduction to various aspects of the fixed income market and its instruments. Indicative topics may include:
- The structure of fixed income markets, main instruments and pricing
- Introduction to the various types of interest rate curves, and interest rate arbitrage through the Law of One Price
- Modelling the term structure
- Interest rate risk: duration,-based measures of risk, the effect of convexity, multi-factor models and key rate durations
- Passive strategies, active strategies and liability-hedging through immunization
- Funding fixed income positions through the repo rate, liquidity risk and the practical limits to arbitrage
- Interest rate derivatives: forwards, futures and swaps
- Credit scoring, credit risk models, credit risk derivatives and their applications
Total contact hours: 36
Private study hours: 114
Total study hours: 150
Main assessment methods
Group Empirical Report (2000 words) (20%)
Individual Report (2000 words) (20%)
Examination, 2 hour (60%).
Reassessment method:
100% Exam
Bruce Tuckman and Angel Serrat, 2011, Fixed Income Securities: Tools for Today's Markets, 3rd Edition, Wiley.
Moorad Choodhry, 2005, Fixed Income Securities and Derivatives Handbook: Analysis and Valuation, Bloomberg Press.
Lionel Martellini, Philippe Priaulet and Stephane Priaulet, 2003, Fixed-Income Securities: Valuation, Risk Management and Portfolio Strategies, Wiley.
John Hull, 2011, Options, Futures and other Derivatives, 8th Edition, Prentice Hall.
See the library reading list for this module (Canterbury)
The intended subject specific learning outcomes.
On successfully completing the module students will be able to:
- model and evaluate the mechanics of fixed income securities and their derivative instruments;
- quantify and evaluate the various sources of risk in fixed-income markets;
- implement various hedging strategies using traditional and derivative fixed income instruments;
- model the term structure of interest rates;
- construct alternative passive and active portfolios based on the shape of the term structure;
- implement fixed income strategies using real-market data.
The intended generic learning outcomes.
On successfully completing the module students will be able to:
- work through complex quantitative exercises;
- analyse real-market data;
- work in groups to complete and present empirical projects;
- identify and understand current literature in the field.
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