Imt nagpur
Course Outline
Batch:2014-16Term:VI
Course: Fixed Income SecuritiesCredits: 2.5Course Instructors:
Prof. Hanish Rajpal
1. Program level Goal: Demonstrate decision making skills in
solving business problems
2. Objectives of the Course: The basic objective of this course
is to familiarize students with fixed income securities and their
derivatives. The specific objectives are as follows: To identify
various products under fixed income domain. To promote an
understanding of the functioning of fixed income market. To
introduce the valuation techniques for fixed income securities and
apply the same to plain-vanilla bonds and complex securities. To
analyze various risk associated with investing in fixed income
securities. To teach the techniques for hedging the risks.
3. Student Learning Outcomes:
At the end of the course, the students would be able to: 1.
Understand structure of fixed income securities and fixed income
markets.2. Identify cash flow streams of simple and complex fixed
income instruments3. Value simple as well as complex fixed income
securities and their derivatives4. Assess the risk associated with
investing fixed income securities5. Measure the risk using
techniques such as duration, convexity, VaR and expected
shortfall6. Apply valuation and risk management tools for fixed
income portfolio management
4. Prerequisites:
Students undergoing this course are expected to have a good
understanding of concept of time value of money
5. Basic Text Book:
Fabozzi, F. J.,(2011). Bond markets: Analysis and Strategies,
Pearson, New Delhi.
6. Reference Books:
1. Tuckman, B., (2002). Fixed Income Securities: Tools for
todays market, John Wiley & Sons, New Jersey, USA.2.
Sundaresan, S., (2011). Fixed Income Markets and Their Derivatives,
Elsevier, Gurgaon.
7. Session Plan:
Session NoTopicPre class preparation details for students
1Introduction to bonds and its features and Indian Debt
market
2 & 3Pricing of bondsCh.2
4Measuring YieldCh.3
5Bond Price Volatility DurationCh.4
6Bond Price Volatility ConvexityCh.4
7 & 8Term structure of interest rates Risk Premium, Yield
curve and constructing theoretical spot rate curveCh.5Case:
Deutsche Bank: Finding Relative Value Trade (HBSP: 9-205-059)
9Term structure model Forward rates and Determinants of term
structureCh. 5
10 & 11Analysis of bonds with embedded option Callable &
puttable bondsCh. 16Case: TComm Ltd.
12Analysis of convertible bondsCh.18Case: STMicroelectronics
N.V.,2003 Convertible Bond Offering (9-204-092)
13Simulation
14 & 15Mortgage Pass through Securities & CMOsCh.11Case:
Valuation of Mortgage Pass-Through Securities
16Active Bond portfolio managementCh.19
17Bond performance measurement and evaluationCh.22
18Interest rate SwapsCh.23 & 24
19Guest Lecture
20Guest Lecture
8. Pedagogy: The Pedagogy consists of a mix of lectures,
exercise, individual & group work, real life situation &
case analysis and guest lectures.
9. Evaluation Scheme: Sr. No.
ComponentsWeightagesRelated Learning Outcomes
1Class test 20%Learning outcomes 1,2 & 3
2Simulation20%
Learning outcomes 2, 3 & 4
4Mid-Term Examination20%Learning outcomes 1, 2, 3, 4 & 5
5End Term Examination40 %Learning outcomes 1,2,3,4,5 & 6
10. Career Focus: (only in the case of Electives, not for core
courses) Fixed income securities is a specialized field in the
domain of investment management and requires an in-depth
understanding for their valuation and risk management. One would
find dedicated teams for trading and investing in such securities
in an investment management/consultancy firms. Anyone who aims at a
career in investment/portfolio management, consultancy, financial
services and banking would find this course very helpful.
11. Any other Remarks:
Simulation exercise would be group work. The simulation aims to
replicate the real life scenario of asset-liability management in
banks using fixed income securities. It will be an excel-based
simulation where the students would be required to input their
responses in the excel spreadsheet. The results of the simulation
would be announced after one week.
