Fixed Income Securities
Fixed Income Securities Peking University
Class meetings: MTh 1:30-3:20 p.m. HSBC Business School
Classroom: C-105 Fall 2011
1
Instructor: Heungju Park
Email: hpark@phbs.pku.edu.cn
Class Website: http://www.finpeople.org:8080/Coursenotes.php?product_id=169&type_id=133
Office hours: MTh 4:00-5:00 p.m. or by appointment
I strongly encourage you to contact me on a regular basis and discuss the topics of our
class. Regardless of my office hours, you can always contact me via email and I will
respond as soon as possible.
Objectives:
The purpose of this course is to study the concepts and tools required to price and risk
management of fixed income securities. We will discuss basic fixed income securities and fixed
income derivatives with a focus on popular interest rate models used to value them. Throughout,
the emphasis in the course will be on practical applications of the analytical concepts to real data
and securities.
Prerequisites:
Students are required to have completed the prerequisite courses, as specified by HSBC Business
School. It is a good idea to study the courses of Investments and Derivatives first. Those of you
without this course may require additional time reviewing the material and working on the
assignments. Also, fixed income analysis is generally mathematical in nature, so students are
advised that the class will have a lot of quantitative material.
Course material:
Required: Bruce Tuckman, Fixed Income Analysis: Tools for Today’s Market, 2nd edition
Additional supporting material may be distributed (hard copy or electronic) as reading
assignments throughout the semester.
Financial Calculator. Any financial calculator will suffice, but you are responsible for
understanding how to operate it. You should know how to operate your calculators prior to
exams. Calculator manuals are NOT authorized references for examinations. Sharing calculators
during exams is prohibited.
Microsoft Excel. There will be a heavy focus on using Excel in this course, since that is the tool
of choice in most entry-level finance jobs. Most problems that I work through in class will be in
Excel. Even though we will not be using Excel in the exams, knowledge of Excel will help you
understand the material better, and it will greatly strengthen your application as you look for a job
and begin your career in finance.
Fixed Income Securities Peking University
Class meetings: MTh 1:30-3:20 p.m. HSBC Business School
Classroom: C-105 Fall 2011
2
Exams and grading:
1) The final evaluation for your performance in this course will be based on a midterm exam, a final
exam, two assignments and participation. The grading will be based on:
G=Max[.40×M+.40× F, .30×M+.50 ×F]+.15× HW+.05× P
2) Exams - There will be two exams: a midterm and a final. The midterm exam will cover the
material up to that day. The final exam will be comprehensive but its focus will be the
material after the midterm.
3) Makeup exams will only be permitted 1) if requested in advance, and/or 2) for very serious
reasons. Such serious circumstances must be validated in writing by an appropriately accredited
professional (e.g. medical doctor etc.). If the absence is not excused according to the university
guidelines, the exam grade will be recorded as zero. The make-up exam should be taken within
one week after the regularly-scheduled exam time.
4) Exams are closed book, but you may bring one A4 sized “crib sheet” of your own making for
each exam. The notes on your crib sheet must be HANDWRITTEN. I will take up the sheets after
the exam and give them back with the graded exam.
5) Assignments – There will be two assignments during the semester. The solutions will be
distributed on the assignment’s due date, and I cannot accept late submissions. If you are out of
town, you must make arrangements to submit the assignment through another student, or before
the due date to me.
Keys to Success:
1) Class participation – I do not take roll, but I do expect you to come to class and take an active part
in discussions. In order to do so, you are expected to read the assigned material prior to the date it
is covered in class. This will both facilitate your learning and help your preparation for exams.
2) Working problems outside of class – I will work a few problems in class and recommend some
others for you to work on your own. These problems and practices are not required, but working
them will greatly improve your chances of performing well on exams.
Classroom Etiquette:
1. Be on time.
2. Be prepared.
3. Be respectful of your fellow classmates.
4. No private conversations – direct questions and/or comments to the entire class.
5. Turn off all electronic devices prior to class (i.e. cell phones, pagers, etc).
6. Sleeping – if you can’t keep your eyes open, please stand at the back of the class for a few
minutes until you wake up.
7. Food and/or drinks in the classroom are strictly prohibited
Fixed Income Securities Peking University
Class meetings: MTh 1:30-3:20 p.m. HSBC Business School
Classroom: C-105 Fall 2011
3
Tentative Schedule (subject to change)
Week Topic Chapter
1 Introduction to Bond Market
Basic Bond Pricing Concept
2, 3
2 Spot and Forward Rates and PV Factors
Term structure of Interest Rate
1, 4
3 Duration, Convexity, and Other Basic Risk Measures 5,6
4 Measure of Price Sensitivity: Regression Based Hedging 7,8
5 Review (Due date of the 1st Assignment)
Midterm Exam
6 Euro Currency Markets 16, 17
7 Interest Rate Swaps 18
8 Interest Rate Models 9, 11
9 Interest Rate Models
Review (Due date of the 2nd Assignment)
12,13
Class meetings: MTh 1:30-3:20 p.m. HSBC Business School
Classroom: C-105 Fall 2011
1
Instructor: Heungju Park
Email: hpark@phbs.pku.edu.cn
Class Website: http://www.finpeople.org:8080/Coursenotes.php?product_id=169&type_id=133
Office hours: MTh 4:00-5:00 p.m. or by appointment
I strongly encourage you to contact me on a regular basis and discuss the topics of our
class. Regardless of my office hours, you can always contact me via email and I will
respond as soon as possible.
Objectives:
The purpose of this course is to study the concepts and tools required to price and risk
management of fixed income securities. We will discuss basic fixed income securities and fixed
income derivatives with a focus on popular interest rate models used to value them. Throughout,
the emphasis in the course will be on practical applications of the analytical concepts to real data
and securities.
Prerequisites:
Students are required to have completed the prerequisite courses, as specified by HSBC Business
School. It is a good idea to study the courses of Investments and Derivatives first. Those of you
without this course may require additional time reviewing the material and working on the
assignments. Also, fixed income analysis is generally mathematical in nature, so students are
advised that the class will have a lot of quantitative material.
Course material:
Required: Bruce Tuckman, Fixed Income Analysis: Tools for Today’s Market, 2nd edition
Additional supporting material may be distributed (hard copy or electronic) as reading
assignments throughout the semester.
Financial Calculator. Any financial calculator will suffice, but you are responsible for
understanding how to operate it. You should know how to operate your calculators prior to
exams. Calculator manuals are NOT authorized references for examinations. Sharing calculators
during exams is prohibited.
Microsoft Excel. There will be a heavy focus on using Excel in this course, since that is the tool
of choice in most entry-level finance jobs. Most problems that I work through in class will be in
Excel. Even though we will not be using Excel in the exams, knowledge of Excel will help you
understand the material better, and it will greatly strengthen your application as you look for a job
and begin your career in finance.
Fixed Income Securities Peking University
Class meetings: MTh 1:30-3:20 p.m. HSBC Business School
Classroom: C-105 Fall 2011
2
Exams and grading:
1) The final evaluation for your performance in this course will be based on a midterm exam, a final
exam, two assignments and participation. The grading will be based on:
G=Max[.40×M+.40× F, .30×M+.50 ×F]+.15× HW+.05× P
2) Exams - There will be two exams: a midterm and a final. The midterm exam will cover the
material up to that day. The final exam will be comprehensive but its focus will be the
material after the midterm.
3) Makeup exams will only be permitted 1) if requested in advance, and/or 2) for very serious
reasons. Such serious circumstances must be validated in writing by an appropriately accredited
professional (e.g. medical doctor etc.). If the absence is not excused according to the university
guidelines, the exam grade will be recorded as zero. The make-up exam should be taken within
one week after the regularly-scheduled exam time.
4) Exams are closed book, but you may bring one A4 sized “crib sheet” of your own making for
each exam. The notes on your crib sheet must be HANDWRITTEN. I will take up the sheets after
the exam and give them back with the graded exam.
5) Assignments – There will be two assignments during the semester. The solutions will be
distributed on the assignment’s due date, and I cannot accept late submissions. If you are out of
town, you must make arrangements to submit the assignment through another student, or before
the due date to me.
Keys to Success:
1) Class participation – I do not take roll, but I do expect you to come to class and take an active part
in discussions. In order to do so, you are expected to read the assigned material prior to the date it
is covered in class. This will both facilitate your learning and help your preparation for exams.
2) Working problems outside of class – I will work a few problems in class and recommend some
others for you to work on your own. These problems and practices are not required, but working
them will greatly improve your chances of performing well on exams.
Classroom Etiquette:
1. Be on time.
2. Be prepared.
3. Be respectful of your fellow classmates.
4. No private conversations – direct questions and/or comments to the entire class.
5. Turn off all electronic devices prior to class (i.e. cell phones, pagers, etc).
6. Sleeping – if you can’t keep your eyes open, please stand at the back of the class for a few
minutes until you wake up.
7. Food and/or drinks in the classroom are strictly prohibited
Fixed Income Securities Peking University
Class meetings: MTh 1:30-3:20 p.m. HSBC Business School
Classroom: C-105 Fall 2011
3
Tentative Schedule (subject to change)
Week Topic Chapter
1 Introduction to Bond Market
Basic Bond Pricing Concept
2, 3
2 Spot and Forward Rates and PV Factors
Term structure of Interest Rate
1, 4
3 Duration, Convexity, and Other Basic Risk Measures 5,6
4 Measure of Price Sensitivity: Regression Based Hedging 7,8
5 Review (Due date of the 1st Assignment)
Midterm Exam
6 Euro Currency Markets 16, 17
7 Interest Rate Swaps 18
8 Interest Rate Models 9, 11
9 Interest Rate Models
Review (Due date of the 2nd Assignment)
12,13