| CODE | BKF5240 | ||||||||||||
| TITLE | Fixed Income Investments | ||||||||||||
| UM LEVEL | 05 - Postgraduate Modular Diploma or Degree Course | ||||||||||||
| MQF LEVEL | 7 | ||||||||||||
| ECTS CREDITS | 5 | ||||||||||||
| DEPARTMENT | Banking and Finance | ||||||||||||
| DESCRIPTION | This unit offers students interested in fixed-income security markets an opportunity to study this topic at considerable depth. From its very nature this unit will offer advanced material and will also try hard to link it with the most recent developments in bond markets. The recent financial crisis will shape most of the material covered in this unit, since we will have an in-depth analysis of important dimensions of risks in fixed income markets, especially credit risk (its nature, measures and hedging practices). Study-unit Aims: The first part of the unit will seek to discuss the relation between interest rates and bond prices and how one might model interest rate changes. Applications to most of the major debt markets are provided. Security valuation techniques and portfolio management techniques also are discussed. The next step will be having a very close analysis of the yield curve. We will then proceed to price bonds with complex cash flow structures. We will focus primarily on option-embedded bonds. Understanding how bonds are valued and their rates determined is fundamental to being able to evaluate and select bonds. We will then proceed to look at securitization and mortgage-backed securities, a very recent development that is receiving significant attention. Learning Outcomes: 1. Knowledge & Understanding: By the end of the study-unit the student will be able to: 1) intelligently discuss fixed-income issues with market participants. 2) price complex fixed income securities. 3) comprehend basic and complex bond trading strategies. 4) utilise in a practical way barbell strategies, bullet strategies and immunization strategies. 5) fully appreciate and understand credit risk and the financial tools that can be used to hedge credit risk. 2. Skills: By the end of the study-unit the student will have a very good grasp of the market’s institutional details, understand the concept of interest rate risk, be able to value securities with cash flows that are sensitive to interest rate changes, be aware of some of the more common fixed-income investment strategies, understand fully the process of securitization and price major securitized instruments and understand credit risk. Main Text/s and any supplementary readings: (availability at the Library or otherwise is indicated against each entry) Main Textbook: Bond Markets, Analysis and Strategies, 8th Edition, by Frank Fabozzi. (Availabe at the Library) Other Material: Reading Packet with Case Studies. Papers and Case Studies - Acharya, Viral V. and Matthew Richardson, 2009. “Causes of the Financial Crisis”, Critical Review, 21(2–3), 195–210. - Acharya, Viral V. and Philipp Schnabl, 2009. “How Banks Played the Leverage ‘Game’”, Chapter 2 in Acharya, Viral V. and Matthew Richardson (editors), 2009. “Restoring Financial Stability: How to Repair a Failed System”, New York University Stern School of Business, John Wiley & Sons. - Case Study: “The Harvard Management Co. and Inflation-Protected Bonds” by Viceira Luis M. - Case Study: “Enron Corp – Credit Sensitive Notes”. - Gorton, Gary, 2008, “The Panic of 2007”, Yale University working paper. - Gorton, Gary, 2009, “Slapped in the Face by the Invisible Hand: Banking and the Panic of 2007”, Working Paper, Yale University working paper. - “Report on Special Purpose Entities”, Basel Committee. - “Securitization: A Primer”, JP Morgan. |
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| STUDY-UNIT TYPE | Lecture | ||||||||||||
| METHOD OF ASSESSMENT |
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| LECTURER/S | Andrew Ellul |
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The University makes every effort to ensure that the published Courses Plans, Programmes of Study and Study-Unit information are complete and up-to-date at the time of publication. The University reserves the right to make changes in case errors are detected after publication.
The availability of optional units may be subject to timetabling constraints. Units not attracting a sufficient number of registrations may be withdrawn without notice. It should be noted that all the information in the description above applies to study-units available during the academic year 2023/4. It may be subject to change in subsequent years. |
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