This core course describes the main fixed income securities, both the short term money market and the long term bond market. We develop tools for valuing these securities and managing interest rate risk. The course covers traditional bonds and term structure concepts, as well as fixed income derivatives and financial engineering.

Learning outcomes

This course aims to provide a detailed introduction on fixed income, money market instruments and main players. We will start with basic definitions and conventions on interest rates and discounting. The instruments of the money market are described in detail, with an emphasis on the daily financing of a trading desk through repo operations. We describe in details how to construct a discount curve from interbank market quotes based on LIBOR or OIS rates. We study the securities and analytical tools of the fixed income market with an introduction to hybrid securities such as convertible bonds and mandatories. We give an overview of the major interest rate futures and option contracts and how they are used as hedging instruments.