NYU Stern School of Business

Undergraduate College


Fall 2010

Instructor Details

Elton, Edwin


(212) 998-0361

Monday 10:00-12:00; Wednesday 10:00-12:00

KMC 9-70


Course Meetings

MW, 2:00pm to 3:15pm

Tisch T-201

Final Exam:

Schedule exceptions
    Class will not meet on:
    Class will meet on:


Course Description and Learning Goals


The study of fixed income securities is quantitative by nature and the material in this course is very technical. Students should have a background in basic finance and should be comfortable using math and working with numbers. Please keep this in mind in deciding whether to take this course.


Course Pre-Requisites

Students should have a background in basic finance and should be comfortable using math and working with numbers.


Course Outline

I. Background (1)

Fixed Income Securities

II. Simple Analytics (2)

Understanding Bond Conventions

III. Spot and Forward Rates (3)

The Multiplicity of Rates

What Changes the Term Structure

IV. The Repo Market (1)

The Repo Market

V. Treasury Bond Valuation (1)

Treasury Bond Valuation

VI. Tax and Accounting Issues (1)

Tax Treatment

VII. Protecting Against Term Structure Shifts (3)

Protecting Against Term Structure Shifts

VIII. Forward Contracts (2)

Forwards and Futures

IX. Floating Rate Notes and Swaps (2)

Floaters and Inverse Floaters

Interest Rate Swaps

X. Bond Options (3)

Option Valuation

Caps, Floors and Collars

IX. Corporate Bonds (2)

Corporate Bonds

Credit Swaps

XII. Mortgages (2)

Mortgage-Backed Securities

Trends in the Mortgage Market

XIII International Bond Management (2)

International Diversification

XIV. Active Bond Strategies (2)

Bond Portfolio Management

XV. Bond Evaluation (1)

Evaluating Bond Funds


Required Course Materials

Packets of lecture notes are available at the bookstore or on blackboard. The grade will depend on the mid-term, final, and the problems. There will be problems assigned from time to time. Prior exams with answers are on the blackboard.


Assessment Components

Grades: Grades will be based on the following:

Class Participation (5%)

Problem Sets (5%)

Midterm (40%)

Final (50%)

Problem Sets:

Because the material is analytical and new concepts build on old ones, it will be essential to do the problem sets in order to follow the lectures and succeed in the exams. To facilitate learning, I encourage students to work together on these problem sets. Groups of students working together should submit just one assignment. All students in the same group will get the same grade. I will not accept late assignments.


You must take each of our exams as schedules. Otherwise with the following two exceptions, your grade for the exam will be zero.

1.) In case of legitimate, foreseeable conflict, in order to take the exam at a different time, you must make a request in writing or by email at least one week prior to the exam and obtain my written or email permission prior to the exam.

2.) In case of an emergency, you must provide formal, written verification, such as a letter from a doctor. Although sections may vary somewhat, the Department of Finance suggests a grade distribution of:

A/A- 20-25%

B 55-70%

C & Below 10-20%

This distribution is intended to make standards comparable across advanced classes, as required by the school. I intend to follow this distribution on average. 


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 7 days of receiving the grade, including a brief written statement of why you believe that an error in grading has been made.


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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