Module Specifications.
Current Academic Year 2024 - 2025
All Module information is indicative, and this portal is an interim interface pending the full upgrade of Coursebuilder and subsequent integration to the new DCU Student Information System (DCU Key).
As such, this is a point in time view of data which will be refreshed periodically. Some fields/data may not yet be available pending the completion of the full Coursebuilder upgrade and integration project. We will post status updates as they become available. Thank you for your patience and understanding.
Date posted: September 2024
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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. | |||||||||||||||||||||||||||||||||||||||||||
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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 | |||||||||||||||||||||||||||||||||||||||||||
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 |
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Indicative Content and Learning Activities
Pricing of BondsBond 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. | |||||||||||||||||||||||||||||||||||||||||||
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Indicative Reading List
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Other Resources None | |||||||||||||||||||||||||||||||||||||||||||