Objectives

This course deals with the theory and application in pricing fixed income securities in capital markets. The goal is to give students an understanding of fixed income securities -- what are fixed income securities, how are they priced and traded in capital markets, what are the risks to investing in these securities and how are these risks hedged.

Selected Topics

-Bond prices and yields
-Bond price volatility
-The term structure of interest rates
-Liability funding
-Interest rate futures and hedging
-Models of interest rates
-Interest rate options, swaps, caps  and floors
-Mortgages and mortgage-backed securities
-International bonds
-Corporate debt

Frank Fabozzi, Bond Prices and Yields (Prentice Hall). Also articles by Black, Derman and Toy; Litterman, Scheinkman and Weiss; Richard and Roll; Jorion; and Litterman and Iben (which are included in the packet). These materials will be supplemented with lecture notes.

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