CHAPTER 1 MARTELLINI, et. al.
BONDS AND MONEY MARKET INSTRUMENTS
BONDS
Bond = financial claim by the issuer must pay the principal plus periodic interest
payments as promised during a given time period.
Standard bond = a fixed coupon bond without any embe
CHAPTER 9 MARTELLINI
PERFORMANCE MEASUREMENT ON FIXED
INCOME PORTFOLIOS
RETURN MEASURES
To calculate the return on an investment that involves one time period, must use the
following formula:
rt, t + 1 = (Vt + 1 V t + Dt, t + 1) / V t
V t = value of portf
CLASS PROBLEMS CHAPTER 11
MARTELLINI
1. If a futures contract is $1,000,000 and the price is 97, while the conversion factor
is 107.548%, and the accrued interest is 2%, what will the invoice price be?
2. A futures contract for $1,000,000 has a price of 9
CHAPTER 11 MARTELLINI
FORWARDS AND FUTURES
A forward contract or a futures contract is:
An agreement made on a date t to buy (long position) or
To sell (short position) a security on a future date T
The future date is the delivery date
At a given pric
CHAPTER 17 MARTELLINI
MORTGAGE BACKED SECURITIES
Mortgage backed securities (MBSs):
Securities backed by the cash flows of a mortgage or a pool of mortgages
Three types of MBSs:
1. Mortgage pass through securities
2. collateralized mortgage obligations
FIXED-INCOME SECURITIES
Chapter 1
Bonds and Money-Market
Instruments
Outline
Overview of Bond Markets
Bond Characteristics
Floating-Rate Notes
Inflation-indexed bonds
Issuers of Bonds
Size of fixed-income markets
Government Bonds
Municipal Bonds
Mort
FIXED-INCOME SECURITIES
Chapter 2
Bond Prices and Yields
Outline
Bond Pricing
Time-Value of Money
Present Value Formula
Interest Rates
Frequency
Continuous Compounding
Coupon Rate
Current Yield
Yield-to-Maturity
Bank Discount Rate
Forward Rates
Bond Prici
FIXED-INCOME SECURITIES
Chapter 3
Term Structure of Interest
Rates: Empirical Properties
and Classical Theories
Outline
Types of TS
Shapes of the TS
Dynamics of the TS
Stylized Facts
Theories of the TS
Types of Term Structures
The term structure of inter
Information Technology for Managers
Spring 2012 - Project/Report Guidelines
You are required to work on an individual project, submit a final report and present your
findings/work to the class at the end of the semester. Here are the specific guidelines:
Information Technology for Managers
Spring 2012 - Project/Report Guidelines
You are required to work on an individual project, submit a final report and present your
findings/work to the class at the end of the semester. Here are the specific guidelines:
CHAPTER 8 MARTELLINI
ACTIVE FIXED INCOME PORTFOLIO
MANAGEMENT
There are generally two types of active strategies:
Trading on interest rate predictions, called Market Timing
Trading on market inefficiencies, called Bond Picking
MARKET TIMING: TRADING ON IN
CHAPTER 1 TUCKMAN
BOND PRICES, DISCOUNT FACTORS, AND
ARBITRAGE
Well start off dealing with Treasury securities.
Key assumptions:
T-securities are default free in which any and all promised payments will be made
Securities other than T-securities, such a
CHAPTER 2 MARTELLINI, et. al.
BOND PRICES AND YIELDS
INTRODUCTION TO BOND PRICING
Bond pricing is a three step processes:
1. obtain the cash flows the bondholder/lender is entitled to
2. obtain the discount rates for the maturities corresponding to the ca
CLASS PROBLEM CHAPTER 2
TUCKMAN
1. If you made an investment of $10,000 which eventually became $30,000 20 years
from today, how much would your return be? Assume that interest is
compounded semi-annually?
2. Using the same information from the previous p
CHAPTER 2 TUCKMAN
BOND PRICES, SPOT RATES, and
FORWARD RATES
SEMIANNUAL COMPOUNDING
A complete description of a fixed income investment includes the annual rate and how
often that rate will be compounded during the year.
Depends when the interest is compo
CHAPTER 3 MARTELLINI, et. al.
EMPIRICAL PROPERTIES and CLASSICAL
THEORIES of the TERM STRUCTURE
DEFINITION AND PROPERTIES OF THE TERM STRUCTURE
The term structure of interest rates, also known as the yield curve, is the graphing of
interest rates correspo
CHAPTER 5 MARTELLINI
HEDGING INTEREST RATE RISK WITH
DURATION
Need to understand how bond prices change, given a change in interest rates.
BASICS OF INTEREST RATE RISK: QUALITATIVE INSIGHTS
Using the information on page 163, Table 5.1, the following obser
VALUATION AND DEAL EXECUTION
by Peter Lee
peter_s_lee@brown.edu B01021050
Course Description:
This course aims to provide both a theoretical and technical introduction to
the valuation and deal execution process. It will be partitioned into three
parts: a