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Syllabus

EN IT

Learning Objectives

The course provides a basic knowledge of the theory and practice of Fixed Income Markets.
Upon completion of the course students will have an overview of the market conventions, of the analytical tools for fixed income securities and derivatives, such as Eurodollar futures and Interest Rate swaps.
Students will apply their knowledge to solve relevant problems related to fixed income markets, by implementing models on Matlab.


Prerequisites

Mathematics, Statistics, Coding

Program

Week 1: BASICS
Government Debt, Money Market, Repos, MBS, ABS, Derivatives
Discount Factors, Interest Rates, The Term Structure of Interest Rates
Week 2: INTEREST RATE RISK MANAGEMENT
Duration, Immunization, Asset-Liability Management
Week 3: INTEREST RATE DERIVATIVES
Forward, Swaps, Futures, Options
Week 4: INFLATION AND MONETARY POLICIES
The role of the central bank. Forecasting and interpreting the term structure.
Week 5: TERM STRUCTURE MODEL IN DISCRETE TIME
One-step binomial trees, multi-step binomial trees, Risk-neutral trees.
Week 6: TERM STRUCTURE MODELS IN CONTINUOUS TIME
Vasicek and Cox-Ingersoll-Ross models

Books

Veronesi, P. (2010). Fixed Income Securities. Wiley

Bibliography

Veronesi, P. (2010). Fixed Income Securities. Wiley

Teaching methods

Three lessons per week will be held with frontal teaching mode and one exercise in “flipped classroom” mode with the active participation of the students.

Exam Rules

The exam will consist of an oral interview and a written test.
Students are expected to actively participate in the course, by working on weekly home assignments. The students will receive bonus points that will be added to their exam grade to get the final grade of the course. The bonus points will only be valid until the end of the summer exam session.

Criteria for the formulation of the evaluation on a scale of 30:
o Unsuitable: significant deficiencies and/or inaccuracies in knowledge and understanding of the topics; limited capacity for analysis and synthesis, frequent generalizations.
o 18-20: barely sufficient knowledge and understanding of the topics with possible imperfections; sufficient capacity for analysis, synthesis, and autonomy of judgement.
o 21-23: Routine knowledge and understanding of the topics; Correct analysis and synthesis skills with coherent logical argumentation.
o 24-26: Fair knowledge and understanding of the topics; good capacity for analysis and synthesis with rigorously expressed arguments.
o 27-29: Comprehensive knowledge and understanding of the topics; Considerable ability to analyze, synthesize. Good autonomy of judgement.
o 30-30L: Excellent level of knowledge and understanding of the topics. Remarkable analytical and synthetic skills and independent judgement. Arguments expressed in an original manner.