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Fixed Income Securities (BA215IU)

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  • NOTICE: Course cancellation Dear AllDue to low student registration.  This course has been cancelled.RegardsDiep
    Posted 16 Feb 2014, 20:12 by Diep Ho
  • Welcome to the Fixed Income Securities Course Resource Web-Page Spring 2014!!
    Posted 13 Jan 2014, 00:31 by Diep Ho
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  • Lecture 1 - Introduction.pptx   0k - 6 Feb 2017, 08:39 by Diep Ho (v1)
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COURSE DETAILS: 

Lecturer: Dr. Ho, Diep, PhD [email protected] (Tel. 0946 317 379, Room A207)

Should the students wish to meet the staff outside the consultation hours, they are advised to make appointment in advance. 

Course Aims:
This course is an upper finance class that helps students to understand and evaluate the basic fixed-income securities, their applications and their derivatives for financial risk management and investment. Students will learn about the theoretical underpinnings and the practical applications in real world of fixed-income securities and their derivatives. The course is divided into two parts, covering (1) basic fixed income securities and (2) fixed income derivatives with a focus on popular interest rate models used to value them. To make the material broadly accessible, concepts are, whenever possible, explained through hands-on applications and examples.

Fixed-income is a technically demanding area, and although no math other than algebra and basic calculus is required, students should be comfortable with basic statistics (such as variance, correlation, linear regression, and probability distributions) and fundamental financial ideas (time value of money, compounding interest, carry). Occasionally, concepts will be explained using some calculus, but this should only require a basic conceptual understanding.

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More than 90% of the World’s largest 500 companies use fixed income derivatives to manage interest rate risk exposure. While vanilla fixed for-floating swap contacts are by far the most common fixed income derivative, financial engineers keep inventing new fixed income derivatives to help firms transfer risks more effectively and selectively. It is critical for anyone involved in corporate or financial risk management to have a deep-rooted understanding of interest rate risk and fixed income securities.

The Vietnam's bond (fixed income security) market is an important source of financing for government and municipal borrowing; as well as become a very popular alternative source of financing for many companies. Although it's bond market is still immature, Vietnam continue making inroad to developing it's fixed-income industries. This is a sign that its capital market is on track to compete with more developed economies.

Prerequisite course: 

Fundamental of Financial Management – BA016IU
Financial Institutions and Markets – BA134IU
Quantitative Methods for Finance – BA191IU
Derivatives and Risk Management – BA216IU

Units of Credit:
This course is worth 3 credits. 

Teaching times and Locations:
Lecture time: Tues8:00pm-11:00am
Venue:  A2.313

Academic Integrity:
Integrity is critical to the learning process and to all that we do here at HCMIU. A student’s responsibilities include, but are not limited to:

Attendance:
Regular and punctual attendance at lectures and seminars is expected in this course. University regulations indicate that if students attend less than eighty per cent of scheduled classes they may be refused final assessment. Exemptions may only be made on medical grounds. 

While we do not penalise occasional tardiness, a pattern of repeated unexplained late arrivals and non-attendance shall negatively impact the student's class participation grade. Understandably, job search or other obligations may occasionally conflict with class.  It is each student’s responsibility to find out from his/her classmates what has been missed during the absence.

Homework:
Homework and other assignments are expected to be completed on time. Late Assignments will not be accepted unless due to documented serious illness or family emergency.

All electronic devices must be turned off prior to the start of each class meeting.

Laptops, tablets, ipad, cell phones, smartphones and other electronic devices are a disturbance to both students and the lecturers.

Calculator:
You need a calculator for this class. A scientific calculator is good enough; you do not need to buy a financial one. As a rule, you will use spreadsheets for homework assignments, and the calculator for the simple examples in class, and, most importantly, for the exams. It is a very bad idea to wait for the last week before buying a calculator.

Study Groups:
It is highly encourage that you regularly review the readings and class notes in a study group. Don’t wait until exam week to set up such a study group. By then it’s too late. You are encouraged to work on the problem sets with your study group, but you must hand in your own answers for individual tasks.

Attendance:
Regular and punctual attendance at lectures and seminars is expected in this course. University regulations indicate that if students attend less than eighty per cent of scheduled classes they may be refused final assessment. Exemptions may only be made on medical grounds. 

While we do not penalise occasional tardiness, a pattern of repeated unexplained late arrivals and non-attendance shall negatively impact the student's class participation grade. Understandably, job search or other obligations may occasionally conflict with class.  It is each student’s responsibility to find out from his/her classmates what has been missed during the absence.

Assessment Details:
The final grade is computed as follows:
Class Participation                       5%
Mid-Term Exam (One Hour) 30%
Written Assignment                  25%
Final Exam (Two Hours)          40%
Total                                        100%

Exams shall be semi-open book.  Each student, may bring in a calculator and one A4 cheat sheet.  Two sides of the sheet may be filled with anything the student wishes, but must be handwritten by him/her (no photocopying).

In addition, since I wish to emphasize practical skills, students shall complete an assignment that use actual data--and to reflect how most companies conduct business, students shall form groups to handle these assignments.  Groups shall comprise three to five students – no less, no more.  In addition, all group members shall score their team mates on how well they have contributed to the assignment (see "Peer Group Participation Form.doc" in the file cabinet section).

Class participation is important and will be explicitly rewarded (5% of the total grade). Effectively, the class participation grade may change a grade near a cutoff.  While we do not penalise occasional tardiness, a pattern of repeated unexplained late arrivals and non-attendance shall negatively impact the class participation grade.  Understandably, job search or other obligations may occasionally conflict with class.  It is each student’s responsibility to find out from his/her classmates what has been missed during the absence.

Textbook: 
  1. Frank J. Fabozzi, Fixed Income Analysis. 2nd edition. John Wiley. (FIA)
  2. John C. Hull, 2009. Options, Futures, and Other Derivative Securities. 7th edition. Prentice Hall. (OFODS)
  3. Lionel Martellini, Philippe Priaulet, Stéphane Priaulet. Fixed-Income Securities: Valuation, Risk Management and Portfolio Strategies. Wiley. (FIS)
Course outline:
WeekTopicsTextbook
 Part I: Basic fixed income securities  
    1      Course introduction and introducing debt securitiesFIA Chapter 1
    2      Risk associated in investing in fixed income securitiesFIA Chapter 2
    3      Overview of the bond marketFIA Chapter 3
    4      Bond ValuationFIA Chapter 5
    5      Term structure of interest rates
    6Mid-Term Exam 
 Part II: Fixed income derivatives  
    7      Price sensitivity and hedging I
    8      Price sensitivity and hedging II
    9      Forwards and Futures
   10       Interest rate swaps, FRAs and repos
   11      Options on Bonds, Converts Caps, Floors, Collars, Swaptions
   12      Credit Risk and Credit Default Swaps
   13      Revision