Lecture 11 Part III
Bond Prices, Credit Spreads and
Implied Default Risk
Implied Default Probabilities and Hazard Rates
Topics in Quantitative Finance: Structured and
Hybrid Products
Instructor: Iraj Kani
Credit Spreads and Implied Default Risk
In part II
Lecture 11 Part I
Overview of Credit Derivatives and
Credit Structured Products
Credit Default, Spread and Structured Products
Topics in Quantitative Finance: Structured and
Hybrid Products
Instructor: Iraj Kani
Credit Derivatives and Structured Products
Lecture 10 Part II
Overview of Credit Derivatives
Market Structure and Risk Components
Topics in Quantitative Finance: Structured and
Hybrid Products
Instructor: Iraj Kani
Overview of Credit Derivatives
In this lecture we will present a broad overview of
Lecture 11 Part II
Overview and Pricing of
Exotic Credit Derivatives
Exotic Single-name and Portfolio Credit Derivatives
Credit Risk and Credit Derivatives
Instructor: Iraj Kani
Overview and Pricing of Exotic Credit Derivatives
In part II of this lecture
Lecture 9 Part II
Pricing Inflation-Indexed Derivatives
Topics in Quantitative Finance: Structured and
Hybrid Products
Instructor: Iraj Kani
Pricing Inflation-Indexed Derivatives
In part II of this lecture we will review Jarrow-Yildrim Model for pricing i
Lecture 7 Part II
Fixed-Income Structured Products
Interest Rate Derivatives and Structured Notes
Topics in Quantitative Finance: Structured and
Hybrid Products
Instructor: Iraj Kani
Fixed-Income Structured Products
In part II of this lecture we will revi
Lecture 10 Part I
Inflation-Indexed Hybrid Structures
Topics in Quantitative Finance: Structured and
Hybrid Products
Instructor: Iraj Kani
Inflation-Indexed Hybrid Structures
In this lecture we will examine hybrid inflation-linked structures, including eq
Lecture 8 Part II
Fundamentals of Inflation-Indexed
Derivatives
Inflation-Linked Swaps and Options
Topics in Quantitative Finance: Structured and
Hybrid Products
Instructor: Iraj Kani
Fundamentals of Inflation-Indexed Derivatives
In part II of this lectur
Lecture 8 Part I
Fundamentals of Inflation-Indexed
Securities
Inflation-Linked Bond Markets
Topics in Quantitative Finance: Structured and
Hybrid Products
Instructor: Iraj Kani
Fundamentals of Inflation-Indexed Securities
In part I of this lecture we will
Lecture 9 Part I
Nominal and Real Bond Prices
And Inflation Breakevens
Implying Inflation Expectations from Bond Prices
Topics in Quantitative Finance: Structured and
Hybrid Products
Instructor: Iraj Kani
Bond Prices and Inflation Breakevens
In part I of
Lecture 5
Interest Rate Fundamentals
Topics in Quantitative Finance: Structured and
Hybrid Products
Instructor: Iraj Kani
Interest Rate Fundamentals
In part II of this lecture we will consider fundamental concepts of interest rates, including
risk-free ra
Lecture 7 Part I
Heath-Jarrow-Morton (HJM)
Framewrok
Arbitrage-based Term Structure Models
Topics in Quantitative Finance: Structured and
Hybrid Products
Instructor: Iraj Kani
Heath, Jarrow and Morton (HJM) Framework
In part I of this lecture we present a
Lecture 4 Part I
Structured Convertible Securities
Standard, Synthetic and Mandatory Convertibles
Topics in Quantitative Finance: Structured and
Hybrid Products
Instructor: Iraj Kani
Standard and Structured Convertible Securities
In this lecture we will a
Lecture 6 Part II
Exogenous Short Rate Models
Modeling Consistent with the Yield Curve
Topics in Quantitative Finance: Structured and
Hybrid Products
Instructor: Iraj Kani
Exogenous Short Rate Models
In part II of this lecture we discuss solutions of bond
Lecture 4 Part II
Commodity-Linked Structured Products
Commodity Derivatives and Structured Notes
Topics in Quantitative Finance: Structured and
Hybrid Products
Instructor: Iraj Kani
Commodity-Linked Structured Products
In part II of this lecture we will
Lecture 6 Part I
Fundamentals of Short Rate Models
Endogenous Short Rate Models
Topics in Quantitative Finance: Structured and
Hybrid Products
Instructor: Iraj Kani
Endogenous Short Rate Models
In part I of this lecture we present a brief review of short
Lecture 2 Part II
Index-Linked Structured Products
Principal Protected Index-Linked Notes
Topics in Quantitative Finance: Structured and
Hybrid Products
Instructor: Iraj Kani
Principal Protected Index-Linked Notes
In part II we will analyze principal-prot
Lecture 3 Part II
Digital and Coupon Bearing Notes
Digitized Payoffs and Index-Linked Coupons
Topics in Quantitative Finance: Structured and
Hybrid Products
Instructor: Iraj Kani
Digital and Coupon Bearing Notes
In part II we will analyze index-linked dig
Lecture 2 Part I
Index-Linked Structured Products
Index-Linked Bull Notes
Topics in Quantitative Finance: Structured and
Hybrid Products
Instructor: Iraj Kani
Index-Linked Structured Products
In part I we will analyze index-linked notes, buy-writes and ot
Lecture 3 Part I
Market Timing and Non-Bullish Views
Bear, Mixed, Neutral and Range Accrual Notes
Topics in Quantitative Finance: Structured and
Hybrid Products
Instructor: Iraj Kani
Market Timing and Non-Bullish Views
In part I we will analyze index-link
Lecture 1 Part II
Structured Products Fundamentals
Index-Linked Cash flows
Topics in Quantitative Finance: Structured and
Hybrid Products
Instructor: Iraj Kani
Index-Linked Cash flows
In part II of this lecture we review construction of index-linked cash
Lecture 1 Part I
Structured Products Fundamentals
Overview of Structured Products
Topics in Quantitative Finance: Structured and
Hybrid Products
Instructor: Iraj Kani
Fundamentals of Structured Products
In part I of this lecture we will review fundamental
Homework Assignment 5:
The purpose of this assignment is to perform Monte Carlo-based simulation of the HJM
forward rate dynamics and use it to (spot and forward) bond prices (whose values are
known from current yield curve) and interest rate derivatives
Homework 6:
1. In our first exercise we would like to compute implied spot and forward inflation
breakeven rates from a given nominal and real yield curves. We assume (annuallycompounded) zero-coupon nominal and real rates shown in the table below:
Maturi
Homework 7:
In this exercise we compute (zero-recovery) implied survival probabilities, implied
default probabilities and discrete implied hazard rates of default for an obligor from the
term structure of defaultable and default-free zero bond prices. Ass
Homework 4:
In this assignment we will derive forward and (par) swap rates from a specified yield
curve, and look at valuation (using standard market models for caps and swaptions) of
caps, swaptions, and callable bonds (viewed as a combination of straigh
Homework 3:
In this assignment we will examine principal protected neutral and range accrual notes,
the price and sensitivities of these structures, the trade-offs between various parameters
defining them, and the behavior of coupon-bearing versions of th
Homework 2:
In this assignment we will extend our Assignment 1 by examining pricing and
sensitivities of more complex index-linked products, with embedded piecewise-linear,
digital, barrier and (arithmetic) average index-linked features. We examine differ
Homework Assignment 1:
The purpose of this assignment is to examine pricing and sensitivities of a prototypical
structured product using analytical methods (Black Scholes). We will examine pricing
and risk characteristics of a zero-coupon principal-protec