FINANCE 653 - Fixed Income Securities and Risk Management

Course Description

Effective risk management is essential in today's uncertain business environment. Derivatives and especially fixed income derivatives are standard instruments for managing financial risk. More than 90% of the World's largest 500 companies use fixed income derivatives to manage interest rate risk exposure. While vanilla swap contacts are by far the most common fixed income derivative, financial engineers keep inventing new fixed income derivatives to help firms transfer risks more effectively and selectively. It is critical for anyone involved in corporate or financial risk management to have a deep-rooted understanding of fixed income and financial engineering.

This course explores key issues in fixed income, financial engineering, and risk management. It develops tools for valuing and modeling the risk exposures of fixed income securities and their derivatives, with the ultimate goal of deploying these instruments in a corporate or financial risk management setting. The course is divided into 3 parts, covering separately (1) basic fixed income securities, (2) fixed income derivatives and financial engineering, and (3) risk management. To make the material broadly accessible, concepts are, whenever possible, explained through hands-on applications and examples, rather than through advanced mathematics. The course also develops a basic command of the Bloomberg Professional data terminal.

Course Textbooks

Required: Fixed Income Securities, Bruce Tuckman, 2nd edition.