NEW ECONOMIC SCHOOL
Masters in Finance
Fixed Income Management
Module 2, 2015-2016
Maria Krasnikova
Maria.krasnikova@gmail.com
Course description
The course is designed to provide a theoretical framework for the practical analysis of fixed
income instruments. While the primary focus is the valuation of the specific bond issue, the
course also applies to the general principles of the credit analysis (including analysis of HY
bonds) & basic concepts of the portfolio management. We'll discuss valuation of Russian
Eurobonds, compare Russian issues with LATAM & Asian peers and develop a model of EM bond
portfolio. Following recent sell-off in Russian bond space, we’ll focus on the analysis of HY &
even distressed bonds and introduce several scenarios of corporate debt restructuring.
Specifically we'll cover three major topics:
 Valuation of fixed income instruments (is a MUST). Following the lectures you should be
able to calculate bond prices, duration, understand yield spreads & nature of shifts in the
yield curve;
 Bond portfolio management strategies. Based on our valuations we'll discuss portfolio
strategies of hedge funds & traditional institutional asset managers. Finally we'll build a
model portfolio of EM bonds at beg of Y2013 & follow its dynamic for 9m2014;
 HY bonds is one of the most profitable segments and your goal is to understand the
fundamental principles of HY bond valuation. We'll discuss the practice of work with CIS
distressed debt, the background of exchange offers & restructurings. During the last
lecture we'll have simulation game following case discussion.
Course requirements, grading, and attendance policies
Your course grade will be determined by results of your quizzes, case preparation, class
participation & final exam.
(30%) Quizzes. You'll have a 10-min quiz at the beginning of each class. Don't be shy, don't
panic, it is just a simple check of the lecture materials we discussed the class before. You'll get a
score for each quiz (max 10 points – 10 questions).
(10%) Case write-up. There is only one case on restructuring & we'll use this case for the
simulation game. According to the conditions of the game there are 2 groups of participants
(investors & the Company). Although I would ask you to form 2 groups for the game, I'll expect
that each of you would prepare individual write-up before the class to be well-prepared for the
case discussion. So, your total grade for the case would be based on your home write-up & class
participation.
(10%) Class participation. I expect you to attend all classes & to be ready to answer even
unexpected questions.
(50%) Final exam covers core topics from the course. It'll test your ability to apply the basic
concepts of fixed income theory we discussed to the practical problems. You are allowed to have
1 page of notes during the final & calculator.
NEW ECONOMIC SCHOOL
Masters in Finance
Course contents
Class 1. Bond fundamentals
Features of debt securities
Classifications of bond instruments (types & sectors)
Applications in bond structuring (options, calls, etc)
Practical example: Structure of the bond issue
Class 2. Valuation of debt securities
Valuation of bonds
Term structure theory & volatility of interest rates
Bond indexes & credit ratings
Credit spreads: specific of relative bond pricing
Practical example: valuation of the bond
Class 3. Portfolio management
Basics of the corporate credit analysis (implications of defaults)
Asset allocation decisions on the bond market
Bond portfolio strategies: passive, active, global fixed-income
Practical example: Portfolio modeling
Class 4. High-yeld bonds
Structure of the asset management industry
Hedge funds: strategies & risk appetite
Distressed debt & restructurings
Bonds vs equity: conflict of interests
Case study: Restructuring of Mechel's debt
Academic integrity policy
Cheating, plagiarism, and any other violations of academic ethics at NES are not tolerated.