Quantitative Finance and Insurance

Fixed Income

Fixed Income

Academic year 2013/2014

Sommario del corso

• Course objectives
• Results of learning outcomes
• Program
• Suggested textbooks and readings
• Notes
• Teaching tools

Course objectives

The course presents the main problems in valuation, asset allocation and hedging for
fixed income instruments.

Results of learning outcomes

1) Knowledge and understanding ability.

Being familiar with Fixed-Income markets and instruments; to know the
determinants of interest rate movements and how to evaluate their impact; how to
construct and maintain a fixed-income portfolio; how credit risk is assessed.

2) Capability to apply knowledge and understanding

Capability to apply the basic course knowledge to open theoretical issues and concrete market situations.

3) Capability to approach the subject in a critical manner

Capability to approach the subject in a critical manner through the examination of the different approaches in the literature and the practice of the fixed-income market, and the discussion of case studies.

4) Communication abilities

Development of communication abilities through the debate during the lectures and the discussion of case studies.

5) Learning ability

Advancing learning ability through teaching material, class discussion, case studies, homeworks and tests.

Program

Part one:
- What is a bond
- Bond terminology/types/structure/priority
- Bond Valuation
- Valuing Bonds Between Coupon Dates
- Bond Return Measures
- Yield curve
- The effect of interest rate changes on bond prices
- Duration
- Convexity
- Determinants of Interest Rates
- Credit rating agency (CRA)
- Bond Ratings
- Other bond features
- Case study 1 - Portfolio construction
- Case study 2 - Corporate bond fund analysis
Part two:
- Fixed-income derivatives
- Boostrap of the interest rate curve
- Interest rate models
- Hedging interest rate risk

Part one:
Material and lecture notes will be made available at Klips.it.
Part two:
Veronesi, P., Fixed income securities, Wiley, 2010.
Background: D'Amico, Luciano, E., Peccati L., Calcolo finanziario, Egea, Milano,
2010
Material and lecture notes will be made available at Klips.it.
Other references:
Filipovic, D., Term structure models, Springer, 2009.
Brigo, D., Mercurio, F., Interest Rate Models: Theory and Practice With Smile, Inflation and Credit, Springer, 2006.

Note

The course should be taken together with “Derivatives”.

• Teaching materials
• Exams and finals
• Go to Moodle
• Visit the forums