NYU Stern School of Business

Undergraduate College

FINC-UB.0026.002 (C15.0026): DEBT INSTRUMENTS

Spring 2013

Instructor Details

Smith, Josephine


Wednesdays from 3:00pm to 5:00pm or by appoin

KMC 9-86


Vikram Nayar





Course Meetings

TR, 3:30pm to 4:45pm

Tisch T-LC21

Final Exam:Thursday, May 16th from 4:00pm to 5:50pm in Tisch LC21


Course Description and Learning Goals

This course describes important fixed income securities and markets and develops tools for valuing fixed income securities and managing interest rate risk.  The course covers traditional bonds and term structure concepts, as well as fixed income derivatives and financial engineering.


Course Pre-Requisites

Foundations of Financial Markets


Course Outline

Tentative Outline of Lectures

The schedule below is meant to be a guideline of the topics covered in this course.  Changes may occur with notice from the professor.


Date of Lecture

Topics Covered

Tuesday, January 29

Course overview, coupon bonds, zero-coupon bonds

Thursday, January 31

Rate of return, zero rates

Tuesday, February 5

Yield to maturity

Thursday, February 7


Tuesday, February 12


Thursday, February 14


Tuesday, February 19

Forward contracts

Thursday, February 21

Forward rates

Tuesday, February 26

Floating rate notes

Thursday, February 28


Tuesday, March 5

Swap spreads, forward rate agreements

Thursday, March 7

Repurchase agreements

Tuesday, March 12


Thursday, March 14

No-arbitrage pricing

Tuesday, March 26

Risk-neutral probabilities

Thursday, March 28

Dynamic trading strategies

Tuesday, April 2

Financial engineering

Thursday, April 4

Hedging, options

Tuesday, April 9


Thursday, April 11

Floors, collars

Tuesday, April 16

Treasury bond futures

Thursday, April 18

Eurodollar futures

Tuesday, April 23

American options

Thursday, April 25

Callable bonds

Tuesday, April 30


Thursday, May 2

Mortgage market

Tuesday, May 7


Thursday, May 9


Thursday, May 16

FINAL EXAM (from 4:00pm to 5:50pm in Tisch LC21)


Required Course Materials


Lecture notes and problem sets



P. Veronesi, Fixed Income Securities: Valuation, Risk, and Risk Management, Wiley, 2010.
B. Tuckman, Fixed Income Securities, Wiley, 2002, 3rd ed.


Assessment Components

Final Exam (50%)

Midterm (40%)

Problem Sets (5%)

Class Participation (5%)


Group Projects

Guidelines for Group Projects

Business activities involve group effort. Consequently, learning how to work effectively in a group is a critical part of your business education.

Every member is expected to carry an equal share of the group’s workload. As such, it is in your interest to be involved in all aspects of the project. Even if you divide the work rather than work on each piece together, you are still responsible for each part. The group project will be graded as a whole:   its different components will not be graded separately. Your exams may contain questions that are based on aspects of your group projects.

It is recommended that each group establish ground rules early in the process to facilitate your joint work including a problem-solving process for handling conflicts. In the infrequent case where you believe that a group member is not carrying out his or her fair share of work, you are urged not to permit problems to develop to a point where they become serious. If you cannot resolve conflicts internally after your best efforts, they should be brought to my attention and I will work with you to find a resolution.

You will be asked to complete a peer evaluation form to evaluate the contribution of each of your group members (including your own contribution) at the conclusion of each project. If there is consensus that a group member did not contribute a fair share of work to the project, I will consider this feedback during grading.



At NYU Stern we seek to teach challenging courses that allow students to demonstrate their mastery of the subject matter.  In general, students in undergraduate core courses can expect a grading distribution where: 



Note that while the School uses these ranges as a guide, the actual distribution for this course and your own grade will depend upon how well you actually perform in this course.



The process of assigning grades is intended to be one of unbiased evaluation. Students are encouraged to respect the integrity and authority of the professor’s grading system and are discouraged from pursuing arbitrary challenges to it.


If you believe an inadvertent error has been made in the grading of an individual assignment or in assessing an overall course grade, a request to have the grade re-evaluated may be submitted. You must submit such requests in writing to me within two class days of receiving the grade, including a brief written statement of why you believe that an error in grading has been made.


If you do request to have a problem set or exam re-graded, I will re-grade it in its entirety.  Therefore, it is under your best interest to be sure you are willing to accept a lower grade if it is deemed necessary upon another review of the submission.


Professional Responsibilities For This Course




In-class contribution is a significant part of your grade and an important part of our shared learning experience. Your active participation helps me to evaluate your overall performance.
You can excel in this area if you come to class on time and contribute to the course by:




Classroom Norms


Stern Policies

General Behavior
The School expects that students will conduct themselves with respect and professionalism toward faculty, students, and others present in class and will follow the rules laid down by the instructor for classroom behavior.  Students who fail to do so may be asked to leave the classroom. 


Collaboration on Graded Assignments
Students may not work together on graded assignment unless the instructor gives express permission. 


Course Evaluations
Course evaluations are important to us and to students who come after you.  Please complete them thoughtfully.


Academic Integrity

Integrity is critical to the learning process and to all that we do here at NYU Stern. As members of our community, all students agree to abide by the NYU Stern Student Code of Conduct, which includes a commitment to:

The entire Stern Student Code of Conduct applies to all students enrolled in Stern courses and can be found here:

Undergraduate College: http://www.stern.nyu.edu/uc/codeofconduct
Graduate Programs: http://w4.stern.nyu.edu/studentactivities/involved.cfm?doc_id=102505

To help ensure the integrity of our learning community, prose assignments you submit to Blackboard will be submitted to Turnitin.  Turnitin will compare your submission to a database of prior submissions to Turnitin, current and archived Web pages, periodicals, journals, and publications.  Additionally, your document will become part of the Turnitin database.


Recording of Classes

Your class may be recorded for educational purposes


Students with Disabilities

If you have a qualified disability and will require academic accommodation of any kind during this course, you must notify me at the beginning of the course and provide a letter from the Moses Center for Students with Disabilities (CSD, 998-4980, www.nyu.edu/csd) verifying your registration and outlining the accommodations they recommend.  If you will need to take an exam at the CSD, you must submit a completed Exam Accommodations Form to them at least one week prior to the scheduled exam time to be guaranteed accommodation.


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