AY 2016 Course Summary
MSc in Finance Program
Instructor
Toshiki Yotsuzuka
Course Title
Fixed Income Investments
Overview: Course Description
This course focuses on fixed income securities (bonds, interest rate derivatives and other related
securities) whose valuation is mostly determined by interest rates. The concepts and analytical tools
covered in the course are essential for anyone who wants to make effective use of fixed income
markets for the purpose of financing, investment, market making or risk management. The types of
securities discussed in class include fixed-coupon bonds, floating-rate notes, interest rate swaps, bond
futures and options, callable bonds and mortgage-backed securities (MBS). Analytical topics, such as
yield curve construction, factor analysis of the yield curve, the duration and convexity of bonds,
mortgage calculations and credit risk valuation, are discussed in conjunction with actual data from US
and Japanese fixed income markets. The course assumes some knowledge of elementary calculus and
statistics.
Objective of this course
The primary objective of this course is to provide students with a solid background in fixed income
securities. At the end of the course, students will be (i) familiar with the basic concepts of fixed income
securities, such as yields, duration and convexity; (ii) capable of applying analytical techniques to
extract information (such as spot, forward and par rates) from bond price data; (iii) comfortable with the
use of basic term structure models and risk-neutral probabilities for derivatives pricing; (iv) able to
understand the pricing of a wide array of fixed income securities, such as zero-coupon bonds,
fixed-coupon bonds, floating-rate notes, interest rate swaps, bond futures and options, callable bonds,
MBS, and bonds with credit risk; and (v) thus sufficiently equipped to understand the interest rate risks
of typical bond portfolios.
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