Interest Income Securities

The course aims to explore various interest income securities and how they can be of use to investors and corporations. It covers valuation of different interest income securities and using the securities for hedging purposes. Topics covered include: bonds with embedded options, mortgage-backed securities, repos, interest rate derivatives, interest rate risk, yield curve risk, and credit risk.

Knowledge:

The course will provide an understanding of various characteristics of interest income securities including bonds with embedded options and mortgage-backed bonds. It will also provide an appreciation of various valuation approaches available to value various interest income securities, and an assessment of the risks associated with each security. Moreover, the use of various derivatives to manage the risks will also be discussed.

Skills:

Students are expected to be able to: understand the approaches available to value different types of interest income securities, estimate the value of various types of interest income securities, appreciate the risks associated with such securities, and use the securities for hedging purposes.

Lectures and assignment