Training Courses

Advanced Fixed Income

Category: Fixed Income

Course level: Advanced

In house

This one-day course is designed to follow on from the one-day Introduction to Fixed Income module (or will assume the basics covered in that course are understood). The course will look in more detail at fixed income pricing, the impact of economic and monetary factor on prices, exotic fixed income products, fixed income derivative contracts and the use of fixed income products in client portfolios.

Case studies form an integral part of the course, to allow the delegates to consolidate the information and provide the basis for group discussions.

Objectives

By the end of the course, delegates will be able to:

  • Understand the full range of ABSs
  • Understand bond stripping
  • Understand the term structure of interest rates
  • Calculate the zero yield curve
  • Calculate swap spreads

Length

1 day

Course Content

Strips and asset-backed securities

Tigers, Lions, Cats, Dogs, Strips
Collateralised Mortgage Obligations (CMOs)
Securitising car receivables, film receivables and credit card receivables
Securitising royalty receivables (Star bonds)

Bond pricing revisited

Bond stripping
Bootstrapping and zero coupon pricing

Term-structure of interest rates

Creating the yield curve
Different shapes of the yield curve
Flat yield curve, and negative vs positive yield curve   
The importance of the par curve
How to create the zero curve
How to calculate the forward curve

Credit markets and interest rates

Creating a full term-structure of interest rates for:
   Government credit
   Bank credit   
   Corporate credit
Review the interplay between the curves

Introduction to interest rate and currency swaps

Explanation of the principals behind a swap 

Efficient use of capital

Different types of swaps

Coupon swaps
Basis swaps
Interest rate swaps
Currency swaps

Uses of swaps

How to speculate with swaps                                                        
How to hedge using swaps
Applications for asset and liability management
Market making for swaps
How to use swaps to manage interest rate risk
Trading profits from arbitrage (for borrowers and investors)
Cost reduction in debt origination by using swaps
Increasing value of an investment with asset swaps
Creating new synthetic products

The principal of swap pricing and valuation

Valuing the Floating Leg
Valuing the Fixed Leg
Input factors required for pricing a swap
Swap rates and yield to maturity
PVBP

The term-structure of interest rates (II)

Comparing yield to maturity with swaps
The inherent relation between swaps and bonds
Correlations between different credits

Asset swap pricing

Pricing par-par structures
Pricing premium-par structures
Pricing discount-par structures
Pricing structured bonds
Using Asset Swap Margin for benchmarking

New issue arbitrage

The debt origination process
Pricing a new issue based fixed price re-offer (Eurobond Issue)
The advantage of a adding a swap to the bond
Overview of financial markets
Arbitrage possibilities between products

 

REQUIRED EQUIPMENT – IMPORTANT

Due to the practical nature of the seminar, it is important that all delegates bring with them a bond or scientific calculator (preferably a HP 17BII, HP 19BII or equivalent) and are familiar with how to perform scientific functions such as the power (xy) and inverse functions(1/x).  Alternatively, they should have a computer with Excel.

 

This course would be suitable for:

  • Finance and accounting
  • Investment professionals
  • IT and software developers
  • Legal & Compliance
  • New entrants
  • Risk management
  • Sales and marketing

This course would be suitable for these exams:

  • CFA - Level 1
  • CFA - Level 2
  • IMC
  • SII Diploma - Bond and Fixed Interest Markets
  • UKSIP - Introduction to Investment
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