Course Syllabus

Fixed Income Analytics

November – December2017

CourseFixed Income Analytics

ProfessorBill Reese

Office Phone: 504-865-5465

E-mail:

TextFixed Income Analysis 3rd Edition by Petitt

PrerequisitesFinancial Management 1 and 2

GradingTake-Home Exam55%

Homeworks40%

Attendance5%

Objectives: The purpose of this course is to give students the skills necessary to analyze fixed income securities. A thorough understanding of this material is needed to effectively manage and/or evaluate a fixed income portfolio.We will discuss how to price various types of fixed income securities and how to measure their interest rate risk. We’ll look at mortgages and the market for pass-through securities. We’ll learn how to hedge interest rate risk, and how to incorporate call and conversion features into a bond’s price. We’ll also examine various theories about the term structure of interest rates, fitting yield curves and deriving implied forward interest rates.

.

WebsiteI will be maintaining a website for this course at

On it, I will be posting announcements that you will want to read,homework problems, class notes, and other worthwhile information. I strongly encourage you to visit the website regularly to keep up with what’s going on in class. In particular, if you print out the class notes and bring them to class with you, I think you’ll find it easier to follow the lectures and you will not have to spend as much time writing everything down.

PreparationPrior to the first weekend, please review the material on bonds which we covered in Financial Management 1 (Chapter 8 in the 10th edition of Ross, Westerfield and Jaffe) as well as the chapters in the Petitttext that the syllabus indicates.

Tentative Course Schedule

Date / Material / Readings
First Friday / Review of Bond Basics / RWJ chapter 8
Petitt 1
First Saturday / Invoice Prices, T-Bill Quotes, Bond Prices and Yields in Excel, TIPS, FRNs, Strips, Repos, Treasury Issue Process / Petitt2, 3
Second Friday / Implied Forward Rates, Yield Curve Analysis, Bootstrapping, Par-Bond Yield Curve / Petitt 10
Second Saturday / Factors Affecting Interest Rate Risk, Duration, Modified Duration, Convexity,PVBP / Petitt4, 5
Third Friday / Yield Volatility, Hedging Duration Risk, Interest Rate Futures, Interest Rate Futures Options / Petitt11, 12
Third Saturday / Interest Rate Swaps,
Interest Rate Caps, Floors, and Collars
Fourth Friday / Callable Bonds / Petitt8, 9
Fourth Saturday / Mortgage Backed Bonds, Convertible Bonds / Petitt7