Monday 5-6 or by appointment
MW, 2:00pm to 3:15pm
Final Exam: Dec 19 2-3:50
Final Exam: Dec 19 2-3:50
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.
Foundations of Financial Markets, C15.0002
Tentative Schedule of Lectures
Sep 7 Coupon bonds and zeroes
Sep 12 Zero rates vs. Rate of return
Sep 14 Yield to maturity
Sep 19 Duration
Sep 21 Immunization
Sep 26 Convexity
Sep 28 Forward contracts
Oct 3 Forward rates
Oct 5 Repos
Oct 12 Floating rate notes
Oct 17 Swaps
Oct 19 Swap spreads, Forward rate agreements
Oct 24 Midterm
Oct 26 No-arbitrage pricing
Oct 31 Risk-neutral probabilities
Nov 2 Dynamic trading strategies
Nov 7 Financial engineering
Nov 9 Hedging, Options
Nov 14 Caps
Nov 16 Floors and collars
Nov 21 American options
Nov 23 Callable bonds
Nov 28 Swaptions
Nov 30 Mortgage market
Dec 5 Passthroughs
Dec 7 CMOs
Dec 12 Treasury bond futures
Dec 14 Eurodollar futures
Dec 19 2-3:50 Final Exam
Lecture notes and problem sets.
A. Veronesi, Fixed Income Securities: Valuation, Risk, and Risk Management, Wiley, 2010.
B. Tuckman, Fixed Income Securities, Wiley, 2002, 2nd ed.
Class Participation (5%)
Problem Sets (5%)
Closed note, closed book. Please bring a calculator.
You must take each of your exams as scheduled. Otherwise, with the following two exceptions, your grade for the exam will be zero.
1) In case of a 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.
Because the material is technical and new concepts build on old ones, it will be essential to do the problem sets in order to follow the lectures and succeed on 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 cannot accept late assignments.
The study of fixed income securities is quantitative by nature and this course will be taught very rigorously. The course will require a consistent commitment of time, energy, and concentration, both in and outside class, throughout the semester.
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.
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.
Your class may be recorded for educational purposes
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.
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.
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:
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 are important to us and to students who come after you. Please complete them thoughtfully.