FINA6121: Debt Markets, Interest Rates, and Hedging

This class introduces the tools and concepts needed to analyze fixed income securities. Topics include the pricing and hedging of fixed-rate Treasuries, floating rate bonds, bonds with embedded options, defaultable bonds, mortgage-backed securities and their derivatives, inflation-indexed bonds, duration analysis, and the Federal Reserve’s impact on interest rates. This course is extremely computationally intensive. Most of the assignments entail statistical modeling via regression analysis on historical data such as the term structure of interest rates, credit spreads, and other fixed income instruments. We also investigate how well future interest rates can be forecasted using forward rates and other observables. Advanced mathematical techniques such as principal component analysis and attribution analysis are investigated. Stochastic modeling of interest rate dynamics via Brownian Motion and Monte Carlo analysis is also introduced. Every class begins by discussing current headline news regarding fixed income markets, and how they relate to the concepts being taught. prereq: MBA student, MBA 6231 (previously MBA 6230)

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