Advanced Fixed Income Professional Certificate

New York Institute of Finance

How long?

  • 5 days
  • in person, online

New York Institute of Finance

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Who should attend

  • Portfolio managers
  • fixed income traders
  • fixed income desk quants
  • research analysts and financial analysts
  • term structures

About the course

Develop advanced desk-ready skills for fixed income professionals. Learn the essential mathematics for term structure modeling and interest rate derivatives valuation in an accessible and intuitive fashion. Understand and apply the various approaches to constructing yield curves. Build interest rate models in discrete and continuous time. Develop expertise in the theory and application of numerical methods to price interest rate instruments including the use of finite difference techniques. The Bloomberg Professional terminal is used extensively.

Prerequisite knowledge:

  • Intermediate to advanced MS Excel skills
  • Some knowledge of differential and integral calculus
  • Intermediate probability and statistics
  • Basic linear algebra
  • Familiarity with fixed income instruments, term structures, etc.

CURRICULUM

Day 1

MODULE 1: REVIEW OF FIXED INCOME BASICS

  • The no-arbitrage pricing principle
  • Pricing vanilla fixed income instruments
  • Risk measures: Duration and convexity
  • Forwards and futures
  • Swaps
  • Options

MODULE 2: YIELD CURVE FUNDAMENTALS

  • Term structures: spot and forward rates
  • Instantaneous interest rates
  • Theories of the yield curve
  • Economic implications of the shape of the yield curve

MODULE 3: A TAXONOMY OF YIELD CURVES

  • Spot rate curves
  • Swap curves
  • Corporate curves
  • Mortgage curves

MODULE 4: YIELD CURVE FITTING

  • Fitting a curve to the bond market
  • Nelson-Siegel and Nelson-Siegel-Svensson functions
  • Polynomial and exponential splines
  • Plotting bond yields against the fitted curve
  • Yield spreads to the fitted curve

MODULE 5: TRADING THE CURVE

  • Interpretation and forecasting yield curve movements
  • Fiscal and monetary policy
  • Parallel yield curve shifts
  • Non-parallel curve shifts (steepening/flattening/barbell)
  • Econometric forecasting models
  • Understanding and interpreting yield curves
  • Yield curve strategies
  • Total return analysis for yield curve shifts

Day 2

MODULE 1: TAXONOMY OF INTEREST RATE MODELS

  • One factor vs. multi-factor models
  • Equilibrium models
  • No-arbitrage models
  • Spot rate models
  • Term structure models

MODULE 2: DISCRETE TIME INTEREST RATE MODELS

  • Discrete time vs. continuous time
  • Objective vs. risk-neutral probabilities
  • No-arbitrage in discrete time
  • Binomial models
  • Recombining vs. non-recombining trees
  • Normal vs. log-normal models
  • Risk-neutral valuation on a binomial tree
  • Risk-neutral expectation of future interest rates
  • Trinomial trees

Day 3

MODULE 1: CONTINUOUS TIME STOCHASTIC PROCESSES

  • The Wiener process as the limit of a random walk
  • Brownian motion and Ito processes
  • Functions of stochastic processes
  • Ito's lemma

MODULE 2: CONTINUOUS TIME INTEREST RATE MODELS

  • No-arbitrage in continuous time
  • The Black-Scholes-Merton partial differential equation
  • Black's model for fixed income derivatives
  • Vasicek bond pricing formula
  • Cox, Ingersoll and Ross model
  • Forward risk neutral pricing
  • The Libor Market model

MODULE 3: MULTI-FACTOR INTEREST RATE MODELS

  • Ito's lemma with independent factors
  • A two-factor Vasicek Model
  • Black's model for fixed income derivatives
  • Vasicek bond pricing formula
  • Cox, Ingersoll and Ross model

Day 4

MODULE 1: PRICING AMERICAN OPTIONS

  • Callable bonds
  • American swaptions
  • Prepayment options

MODULE 2: OVERVIEW OF NUMERICAL METHODS

  • Valuation techniques for path dependent options
  • Monte Carlo basics
  • Finite difference methods
  • Numerical Integration

MODULE 3: MONTE CARLO SIMULATION: DISCRETE MODELS

  • Exotics: Path dependency
  • Monte Carlo simulation for Asian interest rate options
  • Spot rate duration by Monte Carlo simulation

Day 5

MODULE 1: MONTE CARLO SIMULATION: CONTINUOUS MODELS

  • Simulating continuous interest rate processes
  • Pricing a range floater
  • Hedging with Monte Carlo simulation
  • Convexity by Monte Carlo simulation
  • Techniques for accelerating convergence
  • Pros and Cons of Monte Carlo techniques

MODULE 2: FINITE DIFFERENCE METHODS: ONE FACTOR MODELS

  • The fundamental PDE and boundary conditions
  • Explicit finite difference methods
  • Implicit finite difference methods
  • Crank-Nicolson method
  • Pricing bond options by Crank-Nicolson

MODULE 3: FINITE DIFFERENCE METHODS: TWO FACTOR MODELS

  • Explicit finite difference methods
  • Alternating direction implicit method
  • Hopscotch method

MODULE 4: DESK READY SKILLS KNOWLEDGE CHECK

WHAT YOU'LL LEARN

  • Understand the 'no-arbitrage' principle employed in the valuation of fixed income securities
  • Understand and use basic elements of stochastic calculus for rate modeling and valuation
  • Build yield curves using a variety of techniques including splines and curve-fitting
  • Understand the relationship between spot rates, forward rates and expected future spot rates
  • Build discrete and continuous time rate models
  • Understand calibration techniques for rate models
  • Price interest rate instruments using numerical methods including Monte Carlo techniques and finite differences

Advanced Fixed Income Professional Certificate at New York Institute of Finance

From  $5,995

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