Fixed Income Securities

29-06-18 web.xrh 0 comment

Course Name: Fixed Income Securities

Teachers: Dimitris Voliotis

School: Finance and Statistics

Department: Banking and Financial Management

Level: Undergraduate

Course ID: ΧΡΧΡΗ27 Semester: 4th

Course Type: Core Course – General Background

Prerequisites: –

Teaching and Exams Language: Greek

Course Availability to Erasmus Students: No

Course webpage: 

Specific Teaching Activities

Weekly Teaching Hours
Credit Units
4
6

Course Content

1) Introduction. Description of bonds – Bonds’ issuers – Maturity characteristics – Floating rate and Fixed rate securities – Bonds with an embedded option  – Risks associated to bonds

2) Valuations of bonds. Fair price of bonds – Calculation using the PV of annuity – Using spot rate and forward rate as discount rates – Calculation of accrued interest

3) Yield to Maturity. YTM as internal rate of return – The relation between price and yield to maturity – Conventional yield measures – Total return

4) Bond price volatility. Measures of bond price volatility – DV01’ – Duration – Modified duration – Macaulay duration – Convexity – Calculation of duration and convexity for bond portfolios

5) Factors affecting bond yields. Benchmark spread – Relative yield spread – Yield Ratio – Determinants of yield spread

6) Treasury bonds and other securities. Treasury securities – TIPS – treasury bond auctions -Valuation of Treasury Bills – Zero coupon bonds

7) Corporate bonds and other securities. Corporate bonds – Medium Term Notes –  Commercial Papers – Asset Backed Securities –  Seniority of Debt – bankruptcy and Crdititors’ rights

8) Interest rate models. One factor models -Binomial model – Continuous time models -Binomial approach to continuous time models (Ho-Lee, Vasicek, CIR)

9) Bonds with Embedded Option. Bonds with call provision – Static spread – Callable bonds and investment characteristics – Valuation with the  Kalotay -Williams – Fabozzi  model– Valuation with call provision

10) Credit default swaps. Credit events – Single name CDS -Index CDS – CDS with fixed recall – CDS valuation

Teaching Results

This is an introductory course into the markets of fixed income securities, with emphasis given to bonds. The material covers the fixed income instruments of debt markets and aims at  explaining their fundamental characteristics. With emphasis  given to bonds, students ought to understand the valuation of bonds, be able to calculate their fair price  and discern the risks that affect their mark-to-market price.

Moreover, students will be able to calculate the  bonds’ price volatility from the  changes of interest rate and to suggest appropriate hedging strategies.

Last, students ought to comprehend the fundamental models of interest rate term structure and understand its impact on debt markets.

Skills

  • Individual Work
  • Decision Making

Teaching and Learning Methods - Evaluation

Lecture: Face-to-Face teaching

Use of Information and Communication Technologies: E-class platform support

Teaching Analysis: 

Activity

Semester Workload
Lectures
52
Autonomous study
98
Total
150

Student Evaluation:

Written Final Exam, which includes:
• short-answer questions
• problem-solving questions

Recommended Bibliography

– Recommended Bibliography:

– Related scientific journals:

  • Frank J. Fabozzi. Αγορά Ομολόγων. Ανάλυση και Στρατηγικές, (2016). Εκδόσεις Broken Hill
  • Bruce Tuckman. Χρεόγραφα Σταθερού Εισοδήματος, (2010), Εκδόσεις Παπαζήση