5311: Fixed Income Modelling ( efterår 2011 - 5 ECTS )
Rammer for udbud
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Uddannelsessprog:
engelsk
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Niveau:
Elective MSc/ImSQE course
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Semester/kvarter:
fall 2011, 1. quarter/first half of semester.
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Timer per uge:
2x2 hours of lectures a week for 5½ weeks, supplemented by a limited amount of project work during the semester. This is equivalent to 24 lectures. Timetables can be found at: http://econ.au.dk/studies/teaching-and-examination/teaching/timetables/
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Deltagerbegrænsning:
None
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Undervisningssted:
Århus
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Hovedområde:
Det Samfundsvidenskabelige Fakultet
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Udbud ID:
34047
Formål
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On successful completion of the course, the students are able to:
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Explain and relate bond prices, bond yields, and the term structure of interest rates.
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Describe the payoffs, practical applications, and general pricing results of interest rate forwards and futures, Eurodollar-futures, bond options, caps, floors, collars, swaps, and swaptions, and explain relations between these derivative securities.
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Explain, analyze, and compare selected continuous-time models of the term structure of interest rates, and derive the prices of selected interest rate derivatives in these models.
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Explain how interest rate risk can be measured and managed using popular continuous-time models of the term structure of interest rates.
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Describe mortgage-backed bonds and explain and compare selected models for the pricing of mortgage-backed bonds.
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Explain and apply selected numerical methods (binomial/trinomial trees, finite difference solutions of partial differential equations, Monte Carlo simulation) to the pricing of derivatives in selected models.
Indhold
This course provides techniques for modelling and analysing interest rate risk. The models considered are used to describe the default-free term structure of interest rates and to price default-free fixed income securities. Besides bonds also interest rate forwards and futures, Eurodollar-futures, bond options, caps, floors, collars, swaps, and swaptions are analysed. The question of how to measure and manage interest rate risk is also studied. For financial contracts in practise there is a chance that either counterparty will default on the required payments but we abstract from this important issue here. Students interested in this area are referred to the course "Credit Risk Modelling".
Course subject areas:
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Bonds, yield curves, and interest rate derivatives
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Models of the term structure of interest rates
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Interest rate risk management
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Mortgage-backed bonds
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Numerical methods: trees, finite differences, Monte Carlo simulation
Faglige forudsætninger
4088: Derivatives and Risk Management
Underviser
Simon Lysbjerg Hansen
Undervisnings- og arbejdsform
Lectures with in-class discussions
English
Litteratur
Munk, Claus: "Fixed income modelling", Oxford University Press, 2011.
Bedømmelse
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Mundtlig, bedømt efter 7-skala med intern censur
5 xxxxx
Oral exam (20 mins. exam with 20 mins. for preparation)
Examination requirements: Before taking the exam the student has to pass an assignment. The assignment is only offered in the term the course is being taught. The assignment is to be solved in a group of two students unless the lecturer explicitly grants an exemption. The assignment is evaluated internally on a pass/fail basis. The purpose of the assignment is to test the student in learning objectives less suited for oral examination. The oral exam tests the student's ability to meet the learning objectives by random check.
Examination aids allowed: All - except for any means of electronic communication, including calculators, mobile phones and PCs
Students who wish to sit for the exam in both '5311: Fixed Income Modelling' & '5312: Credit Risk Modelling' must sign up for the 10 ECTS exam in '5310: Fixed Income and Credit Risk Modelling'.
