FZ2017 Fixed-Income and Structured Products
- Juan Carlos Arismendi Zambrano
- Sep 13, 2017
- 3 min read
Objectives
The student will understand and use the fixed-income and interest rate term structure concepts, designing portfolios and investment strategies, presenting them in reports and oral presentations, and will have an introductory understanding of asset backed securities. This is a course where it is expected that the students have knowledge of financial markets, and dominate the quantitative and qualitative characteristics of fixed income instruments.
Course Program
1. A PRIMER ON BOND BASICS (3 weeks) (a) Description (b) Bond issuers (c) World bond markets (d) Non-conventional bonds (e) Pricing a conventional bond
(f) Clean and dirty bond prices (g) Market yield (h) Bond pricing and yield (i) The price/yield relationship (j) Duration, modified duration and convexity
2. AN INTRODUCTION TO SECURITISATION (1 week) (a) The concept of securitisation (b) Reasons for undertaking securitisation (c) Benefits of securitisation to investors (d) The process of securitisation (e) Illustrating the process of securitisation (f) Sample transactions
3. THE YIELD CURVE (4 weeks) (a) Using the yield curve (b) Yield to maturity curve (c) The coupon yield curve (d) The par yield curve (e) The zero-coupon (or spot) yield curve (f) The forward yield curve (g) The annuity yield curve (h) Analyzing and interpreting the yield curve (i) Interpreting the yield curve (j) Fitting the yield curve (k) Spot and forward rates in the market (l) Deriving the theoretical (spot) zero-coupon rate curve
4. REVIEW OF BOND MARKET INSTRUMENTS (2 weeks) (a) Floating rate notes (b) Inverse/reverse floating rate notes (c) Introduction to asset backed bonds (d) PIBS (e) Callable bonds (f) Index-linked bonds
5. HYBRID SECURITIES (1 week) (a) Indexed amortizing rate (b) Synthetic convertible note (c) Interest differential note
6. CORPORATE DEBT MARKETS (2 weeks) (a) Introduction (b) Determinants of the development of a corporate market (c) The primary market (d) The secondary market (e) Fundamentals of corporate bonds (f) Bond security (g) Redemption provisions (h) Corporate bond risks (i) High-yield corporate bonds
7. HIGH YIELD BONDS (1 week) (a) Growth of the market (b) High-yield securities (c) High-yield bond performance
8. MORTGAGE BACKED SECURITIES I (2 weeks) (a) Mortgage-backed securities (b) Cash ow patterns (c) Evaluation and analysis o mortgage-backed securities
Evaluation
Course evaluation will be done as following:
1. One case study (Goldman ITESM Investment Banking - Fixed Income Department) presented and evaluated by 9 written reports in English, and three presentations, that occur during the partial and fi nal exam dates.
There will be 3 (three) evaluations during the semester. The final grade will be a weighted average of the three exams:
1. Semana i - From 26/09/2016 to 30/09/2016 - 5% 2. Partial Exam 1 - 12/09/2016 - 30% (Reports of: 15/08/2016, 29/08/2016 and 12/09/2016). 3. Partial Exam 2 - 24/10/2016 - 30% (Reports of: 19/09/2016, 10/10/2016 and 24/10/2016). 4. Final Exam - 28/11/2016 - 35% (Reports of: 31/10/2016, 14/11/2016 and 28/11/2016).
There will be an special group that will cover the structured products instruments:
STRUCTURED PRODUCTS GROUP 1. Semana i - From 26/09/2016 to 30/09/2016 - 5% 2. Partial Exam 1 - 12/09/2016 - 15% (Reports of: 12/09/2016). 3. Partial Exam 2 - 24/10/2016 - 15% (Reports of: 24/10/2016). 4. Final Exam - 28/11/2016 - 65% (Reports of: 28/11/2016).
On each exam (Partial and Final), the groups will present jointly the reports (10 mins presentations in English), and this will have a weight of 30% of the reports for that exam, with the other 70% corresponding to the evaluation of written work. A report that is not presented on time will have zero grade.
It will be considered approved the student with minimum assistance that obtains a total grade superior to 70 from the three evaluations. Will be considered failed the student with less than 70 points (69.5, for example). The student with more than 3 weeks of nonattendance will not be able to participate in the fi nal exam.
References
[1] CHOUDHRY, Moorad. Corporate Bonds and Structured Financial Products. Oxford, El- sevier, 2004. [2] KNOP, Roberto. Structured Products, A complete Toolkit to Face Changing Financial Markets. Chichester, West Sussex, John Wiley and Sons, 2002. [3] FABOZZI, Frank J. The Handbook of Fixed Income Securities. Seventh Edition. New Jersey, McGraw-Hill, 2005.