Dr Andrea Tamoni OLD M2.09

This course is compulsory on the MSc in Financial Mathematics. This course is available on the MSc in Accounting and Finance, MSc in Finance and Economics, MSc in Finance and Economics (Research), MSc in Management and Regulation of Risk, MSc in Risk and Finance, MSc in Statistics (Financial Statistics) and MSc in Statistics (Financial Statistics) (Research). This course is not available as an outside option.

Students taking this course are expected to be familiar with the theory of asset evaluation at the level of FM430 Corporate Finance and Asset Markets and the theory and practice of derivative pricing at the level of FM441 Derivatives.

This advanced course is designed for students seeking an understanding of fixed income valuation and hedging methods, and a basic familiarity with the major markets and instruments.

Provides a thorough grounding in recent developments in fixed income securities pricing, hedging and portfolio management. By the end of the course, the students will be familiar with a variety of topics, including (i) the basic concepts of fixed-income instruments, such as yield, duration, convexity; (ii) the basic techniques to analyze and hedge fixed income products, such as "curve fitting", "bootstrapping", duration-based hedging and asset-liability management; (iii) the forces, or "factors", driving the variation in the entire spectrum of interest rates at different maturities; (iv) the main evaluation tools, which can be applied to evaluate a wide range of products (trees, no arbitrage trees, calibration and some continuous time models) ; (v) the main fixed income products such as government bonds, corporate bonds (convertible, callable, puttable), and their evaluation; (vi) plain vanilla interest derivatives (caps, floors and collars, swaps, swaptions, etc.) and their evaluation; (vii) mortgage backed securities and credit risk transfers; (viii) the analysis of the "destabilizing" effects related to the use of certain derivatives written on fixed income instruments.

20 hours of lectures and 10 hours of seminars in the LT.

Students will be expected to produce 10 problem sets in the LT.

The primary source for this course is a comprehensive set of Lecture Notes, tutorials and case studies, and a reading pack containing chapters from the following books: Sundaresan, S. (2001), Fixed Income Markets and Their Derivatives, South Western College Publishing. Duffie, D and Singleton, K (2003), Credit Risk: Pricing, Management, and Measurement, Princeton: Princeton University Press (Princeton Series in Finance). Tuckman B. and A. Serrat (2011), Fixed Income Securities: Tools for Today's Markets, 3rd Edition, John Wiley & Sons.  Veronesi, P. (2010), Fixed Income Securities: Valuation, Risk, and Risk Management, John Wiley & Sons.

Exam (100%, duration: 2 hours) in the main exam period.