This course provides a thorough understanding of fixed income markets and the analysis and valuation of fixed income securities.
1. Fixed-Income Securities: Defining Elements
The first section discusses the various features of debt securities, the affirmative and negative covenants, and various legal, regulatory and tax considerations. It also discusses the provisions for redemption and retirement of bonds, as well as the common options embedded in a bond issue.
2. Fixed Income Markets: Issuance, Trading and Funding
The focus of this section is on how fixed income securities are issued, traded and funded in the fixed income market. You will learn about how various types of securities are distributed, the primary and secondary market for bond markets. The section also explains the features and structure of various types of securities.
3. Fixed Income Valuation
This section introduces the general principles for valuation
of fixed income securities. You will learn about how to value a bond, and the
factors affecting the price of a bond. You will also learn about the
arbitrage-free valuation approach and how a dealer can generate arbitrage
profits from mispriced securities. You will apply the time value of money (TVM)
skills to calculate the value of a
bond. You will also learn about the yields and spreads and the effect of
monetary policy on financial markets. You will learn about the shapes of yield
curve, and the theories of term structure of interest rates. You will also
learn about spot rates, yield spread measures and credit spreads. The impact of
various factors such as embedded options, liquidity, and issue size on yield
spreads is discussed. The section also explains the tax implications on
securities' yields. Finally you will learn about LIBOR and its importance.
4. Introduction to Asset-backed Securities
This section provides an introduction to the asset-backed securities. You will learn about various types of securities such as mortgage-backed securities, collateralized mortgage obligations, auto loan backed securities, student loan backed securities, home equity loan backed securities, credit card receivables backed securities and more.
5. Understanding Fixed Income Risk and Return
In this section you will learn about the measurement of
interest rate risk using two key concepts, namely, duration and convexity. You
will learn about how to calculate and interpret duration and convexity, and
other related concepts. It’s an important section and you should get a good
grasp on these concepts.
6. Fundamentals of Credit Analysis
This section introduces the readers to credit analysis of
bonds. You will learn about credit analysis for corporate bonds and also credit
risk characteristics of other securities such as sovereign bonds, high yield
bonds, and municipal bonds.