FIXED INCOME SECURITIES
This course examines the concepts that are most frequently encountered in the market for fixed income securities. Specifically, the course describes the most important fixed income securities and markets and develops tools for valuing these securities and managing their interest rate and credit risk. Historically, "fixed-income" refers to securities which promise fixed cash flows over their lives such as a fixed-rate coupon bond. Now, it is generally accepted that a fixed income instrument is one whose value is driven by the level of interest rates and/or the value of a related underlying asset. This classification would include floating rate bonds, callable bonds, bond futures, bond options, caps, floors and collars, interest rate swaps, credit derivatives and asset-backed securities. The analysis of fixed income securities is quantitative in nature. We will focus on the intuition behind the various concepts presented in class but there will be a fair amount of computation involved. Students should be comfortable with linear algebra, calculus, probability distributions, regression analysis and statistical concepts like mean, variance and correlation (covariance). The course will also assume a high level of familiarity with a spreadsheet package like microsoft excel.