Module: Fixed Income Securities

Module Specifications..

Current Academic Year 2023 - 2024

Please note that this information is subject to change.

Module Title	Fixed Income Securities
Module Code	EF507
School	DCUBS
Module Co-ordinator	Semester 1: Brian O'Kelly Semester 2: Brian O'Kelly Autumn: Brian O'Kelly
Module Teachers	Brian O'Kelly Mark Cummins Sandeep Keshava Rao
NFQ level	9	Credit Rating	5
Pre-requisite	None
Co-requisite	None
Compatibles	None
Incompatibles	None

None
Array

Description

The objective of this course is to develop a deeper understanding of the characteristics of fixed income securities and to introduce students to the practice of interest rate risk management.

Learning Outcomes

1. Apply the contingent claims framework to derive the prices of fixed income securities
2. Assess the sensitivity of fixed income securities to interest rate movements
3. Evaluate interest rate options using the models of Black and Black, Derman and Toy
4. Calculate the credit exposure arising from derivative counterparty exposures
5. Value credit default swaps and use the copula approach to value nth-to-default swaps
6. Explain how debt is securitised and how the resulting tranches are rated

*Type*	*Hours*	*Description*
Workload	Full-time hours per semester
Lecture	48	The lecturer will present the essential ideas and core concepts, pointing students towards resources where they can get further information.
Independent Study	48	Preparation for lectures and assigned readings.
Independent Study	29	Individual / group project on a topic approved by the Lecturer.
Total Workload: 125

All module information is indicative and subject to change. For further information,students are advised to refer to the University's Marks and Standards and Programme Specific Regulations at: http://www.dcu.ie/registry/examinations/index.shtml

Indicative Content and Learning Activities

Pricing of Bonds
Bond price formula; sensitivity of bond prices; time, yield and coupon rate; zero coupon bond prices.Bond Yield Measures: Gross redemption yield; current yield; yield to call; realised compound yield; grossed up net redemption yield.Bond Price Volatility, Duration and Convexity: Macauley Duration; duration and maturity for nonzero-coupon bonds; the effect of the yield level and coupon frequency; duration as time elapses; duration between maturity dates; modified duration; convexity.The Term Structure of Interest Rates: Factors determining the level of forward rates; influences on the short-term rate; the mathematics of inflation and interest: Fisher's Law; influences on the long-run interest rate; traditional theories of the yield curve; newer theories of the yield curve.Callable Bonds, Option Adjusted Yields: Option adjusted duration and convexity; call adjusted estimation technique; significance and diversity of the call provision.Mortgage Backed Securities: Mortgage and pass-through cash flows; comparison of features of mortgage pass-through securities with treasuries and corporates: payment delay, monthly payments, prepayment effects, seasoning.Convertible Bonds: Who issues convertibles? advantages and disadvantages to issuing firms; advantages and disadvantages to the investor; analysis of convertible securities; dilution of the convertible privilege; when should a convertible be converted or sold?Index Linked Securities: Characteristics; impact of inflation; effects of not holding to maturity; impact of duration on volatilityThe Swap Yield Curve: Short-term swaps; long-term swaps; swap spread boundary conditions; other factors affecting long-term spreads; term structure fitting; forward term structure estimation.

Assessment Breakdown
Continuous Assessment	100%	Examination Weight	0%

Type	Description	% of total	Assessment Date
Course Work Breakdown
Assignment	Individual / group project	25%	Week 10

Reassessment Requirement Type
Resit arrangements are explained by the following categories; 1 = A resit is available for all components of the module 2 = No resit is available for 100% continuous assessment module 3 = No resit is available for the continuous assessment component
This module is category 1

Indicative Reading List

Fabozzi, F.J.: 0, Bond Markets Analysis and Strategies Prentice Hall 1993Fabozzi, F.J., and I.M. Pollack, The Handbook of Fixed Income Securities Dow Jones Irwin 1987Francis, J.C. and A. Wolf., The Handbook of Interest Rate Risk Management Irwin 1994,

Other Resources

None

Programme or List of Programmes

MITB	MSc in Investment, Treasury & Banking

Date of Last Revision

15-FEB-10

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