FM413      Half Unit
Fixed Income Markets

This information is for the 2020/21 session.

Teacher responsible

Dr Walker Ray


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 Risk and Finance, MSc in Statistics (Financial Statistics), MSc in Statistics (Financial Statistics) (LSE and Fudan) and MSc in Statistics (Financial Statistics) (Research). This course is not available as an outside option.

Global MSc in Management ('Accounting and Finance' and 'Finance' concentrations 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.


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.


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.


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

Important information in response to COVID-19

Please note that during 2020/21 academic year some variation to teaching and learning activities may be required to respond to changes in public health advice and/or to account for the situation of students in attendance on campus and those studying online during the early part of the academic year. For assessment, this may involve changes to mode of delivery and/or the format or weighting of assessments. Changes will only be made if required and students will be notified about any changes to teaching or assessment plans at the earliest opportunity.

Key facts

Department: Finance

Total students 2019/20: 137

Average class size 2019/20: 23

Controlled access 2019/20: Yes

Value: Half Unit

Guidelines for interpreting course guide information

Personal development skills

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