FM413      Half Unit
Fixed Income Markets

This information is for the 2018/19 session.

Teacher responsible

Dr Andrea Tamoni

Availability

This course is compulsory on the MSc in Financial Mathematics. This course is available on the Global MSc in Management, MSc in Accounting and Finance, MSc in Finance and Economics (Work Placement Pathway), MSc in Risk and Finance, MSc in Statistics (Financial Statistics) and MSc in Statistics (Financial Statistics) (Research). This course is not available as an outside option.

Global MSc in Management (Accounting and Finance concentration only).

This course is available with permission on the Diploma in Accounting and Finance with the approval of the Programme Director.

This course is available to other students from the Departments of Economics, Mathematics, and Statistics where regulations permit.

This course is not available as an outside option.

Pre-requisites

Students taking this course are expected to be familiar with the theory of asset evaluation at the level of FM429 Asset Markets A.

Course content

This advanced course is designed for students seeking an understanding of fixed income valuation and hedging methods, and a basic familiarity with the major fixed income markets and instruments.

By the end of the course, the students will be familiar with a variety of topics, including (i) the basic concepts of fixed-income instruments, such as yield, duration, convexity; (ii) the basic techniques to analyse and hedge fixed income products, such as "curve fitting", "bootstrapping", duration-based hedging and asset-liability management; (iii) the forces, or "factors", driving the variation in the entire spectrum of interest rates at different maturities; (iv) the main evaluation tools, which can be applied to evaluate a wide range of products (trees, no arbitrage trees, calibration and some continuous time models) ; (v) the main fixed income products such as government bonds, corporate bonds (convertible, callable, puttable), and their evaluation; (vi) plain vanilla interest derivatives (caps, floors and collars, swaps, swaptions, etc.) and their evaluation; (vii) mortgage backed securities and credit risk transfers; (viii) the analysis of the "destabilizing" effects related to the use of certain derivatives written on fixed income instruments.

Teaching

20 hours of lectures and 10 hours of seminars in the LT.

Formative coursework

Students will be expected to produce 10 problem sets in the LT.

Indicative reading

The primary source for this course is a comprehensive set of Lecture Notes, tutorials and case studies, and a reading pack containing chapters from the following books: Sundaresan, S. (2001), Fixed Income Markets and Their Derivatives, South Western College Publishing. Duffie, D and Singleton, K (2003), Credit Risk: Pricing, Management, and Measurement, Princeton: Princeton University Press (Princeton Series in Finance). Tuckman B. and A. Serrat (2011), Fixed Income Securities: Tools for Today's Markets, 3rd Edition, John Wiley & Sons.  Veronesi, P. (2010), Fixed Income Securities: Valuation, Risk, and Risk Management, John Wiley & Sons.

Assessment

Exam (100%, duration: 2 hours) in the summer exam period.

Key facts

Department: Finance

Total students 2017/18: 101

Average class size 2017/18: 14

Controlled access 2017/18: Yes

Lecture capture used 2017/18: Yes (LT)

Value: Half Unit

Guidelines for interpreting course guide information

Personal development skills

  • Problem solving
  • Communication
  • Application of numeracy skills
  • Commercial awareness
  • Specialist skills

Course survey results

(2014/15 - 2016/17 combined)

1 = "best" score, 5 = "worst" score

The scores below are average responses.

Response rate: 85%

Question

Average
response

Reading list (Q2.1)

2.1

Materials (Q2.3)

1.9

Course satisfied (Q2.4)

1.9

Integration (Q2.6)

1.9

Contact (Q2.7)

2

Feedback (Q2.8)

2

Recommend (Q2.9)

Yes

65%

Maybe

29%

No

6%