FNC 686 - Advanced Fixed Income and Derivatives, 3 credit hours

This course covers the valuation of a wide variety of fixed income securities and derivatives including pure discount bonds, coupon bonds, forwards and options on fixed income securities, interest-rate swaps, floating-rate notes, and mortgages. The course focuses on analytic tools used in bond portfolio management and interest rate risk management. These tools include yield curve construction, duration and convexity, and formal term structure models. Some other interesting topics covered include interest rate derivatives such as interest rate swaps, bond options and interest rate options, including caps, floors and swaptions, and the management of callable debt. We then look beyond interest rate risk and study other risks that can be inherent in fixed income securities such as credit risk, illiquidity risk, and the risk stemming from securitization. The course concludes with a discussion about credit default swaps - a fixed income derivative that is popular for transferring credit risks among market participants.