Module Specifications..
Current Academic Year 2023 - 2024
Please note that this information is subject to change.
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Description This graduate course focuses on a rigorous treatment of models for pricing and hedging fixed-income securities, with emphasis on continuous-time. Interest-rate contracts: bonds, swaps, caps and floors, options, swaptions. Term-structure estimation: bootstrap, splines. Shortrate models: Vasicek, Cox-Ingersoll-Ross, and related models. Forward-rates and Heath-Jarrow-Morton approach. Market (LIBOR) models. | |||||||||||||||||||||||||||||||||||||||||||||||||||
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Learning Outcomes 1. Price fixed-income securities 2. Estimate the term structure 3. Prove main results in fixed-income theory 4. Design strategies to hedge and immunize liabilities linked to interest-rates 5. Evaluate critically relative advantages of various model specifications 6. Develop pricing and hedging methods for new interest-rate related products | |||||||||||||||||||||||||||||||||||||||||||||||||||
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
Interest Rates and Related ContractsZero-Coupon Bonds, Interest Rates, Money-Market Account and Short Rates, Coupon Bonds, Swaps and Yields, Market Conventions, Caps and Floors, SwaptionsEstimating the Term-StructureBootstrapping, Non-parametric Estimation Methods, Parametric Estimation Methods, Principal Component AnalysisShort-Rate ModelsDiffusion Short-Rate Models, Inverting the Forward Curve, Affine Term-Structures, Vasicek Model, CIR, Dothan Model, Ho–Lee Model, Hull–White ModelHeath–Jarrow–Morton (HJM) MethodologyForward Curve Movements, Absence of Arbitrage, Short-Rate Dynamics, HJM Models, Proportional Volatility, Fubini’s TheoremForward MeasuresT -Bond as Numeraire, Bond Option Pricing, Black–Scholes Model with Gaussian Interest RatesForwards and FuturesForward Contracts, Futures Contracts, Interest Rate Futures, Forward vs. Futures in a Gaussian SetupMarket ModelsHeuristic Derivation, LIBOR Market Model, LIBOR Dynamics Under Different Measures, Implied Bond Market, Implied Money-Market Account, Swaption Pricing, Monte Carlo Simulation of the LIBOR Market Model, Volatility Structure and Calibration, Continuous-Tenor Case | |||||||||||||||||||||||||||||||||||||||||||||||||||
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Indicative Reading List
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Other Resources None | |||||||||||||||||||||||||||||||||||||||||||||||||||
Programme or List of Programmes
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