Fixed Income: Securities and Derivatives

This course is designed as the principal introduction to Fixed Income securities, both primary and derivative ones.

It gives an overview of assets, markets, pricing techniques and risk management practices, mainly from the point of view of the end user, the Investor.

Course Objectives

We will study fundamental concepts about interest rates, learn about forwards, futures and swaps and apply simple option techniques in pricing.
During its course, we will study, in as much depth as time permits, modern paradigms and instruments that revolutionized Finance Theory and Practice.

Skills acquired include, among others, the correct use of Cash Flow pricing methods, pricing and hedging symmetric derivatives and get going with option pricing techniques.

Course Content

Overview:

  • Players
  • Securities

Basic concepts

  • Various Interest rates
  • YTM, spot rates, par yields, etc
  • Forward rates

Term structure:

  • Intuition – Conventions
  • “Bootstrapping” a yield Curve

Risk Measures:

  • Duration – convexity

Futures:

  • Short- and long-term

Swaps:

  • Structure and market of Interest rate Swaps (IRS)
  • Their use for risk management and speculation
  • Pricing and valuation of IRSs
  • Other swap families: cross currency swaps, forward swaps

Tools from Options:

  • A simple binomial model
  • Interest rate options: caps and floors.