SemesterFall Semester, 2019
DepartmentJunior Class A, Department of International Business Junior Class B, Department of International Business Senior Class A, Department of International Business Senior Class B, Department of International Business
Course NameFixed Income Securities: Analytics and Derivatives
InstructorFU YEE-TIEN
Course TypeElective
Course Objective
Course Description
Course Schedule

Fall 2020 Classes meet on Thursdays

Weekly Topics

Introduction – 

Week 1 

Bond Mathematics – 

Weeks 2 and 3 

We will examine the relationship between the price and yield of a bond. Measures of risk such as duration and convexity will also be discussed.

Term Structure of Interest Rates – 

Weeks 4 and 5 

We will examine the relationship between yields on bonds of different maturities. We will also attempt to understand the link between interest rates and other economic variables.

Market Sectors – 

Week 6 Default-free Bonds

Week 6 Corporate and Municipal Bonds 

Week 6 Foreign Bonds 

Weeks 7, 8, and 9 Mortgage and Asset-Backed Securities 

The various segments of the market and the characteristics of the securities and the risk of each type of security will be the focus.

Valuation: Bonds with Embedded Options + Fixed Income Derivatives – 

Weeks 10 and 11 Callable Bonds, Convertible Bonds and Prepayment

Weeks 12 and 13 Fixed Income Derivatives 

Week 14 Credit Risk and Credit Derivatives

Most corporate bonds are callable bonds. Mortgages contain a prepayment option. What do these statements mean? How does one evaluate the risks involved? Interest rate derivatives are often used to manage the risk inherent in fixed income portfolios. What are the types of derivative securities available? How are they priced?

Portfolio Management Strategies – 

Weeks 15 and 16 

What are the typical objectives of portfolio management? What are the risks involved? How are portfolios formed to achieve the objectives? How is performance evaluated?

Risk Management – 

Week 17 Notes on VaR, and Risk Management at LTCM

Financial institutions can greatly increase the level of business that can be supported by a given amount of capital if they can accurately quantify and manage risk.

Review/Final Exam 

The final exam will be handed out four weeks before the last class and will be due in the last class.

Teaching Methods
Teaching Assistant



Four Quizzes 20%, Midterm Exam 40%, Final Exam 40%

Textbook & Reference

Required: Frank Fabozzi, Bond Markets, Analysis and Strategies, 9th Edition, Prentice Hall, 2016.


Required: John Hull, Options, Futures, and Other Derivatives, 10th Edition, Prentice-Hall, 2018.


Recommended for a group of four participants: Simon Benninga. Financial Modeling, 4th Edition, The MIT Press, 2014. ISBN: 978-0-262-02728-1.


Reference: Mark J.P. Anson and Frank J. Fabozzi, Fixed Income Readings for the Chartered Financial Analyst Program: Second Edition, Wiley, 2003.


(Handy) Reference: Frank J. Fabozzi, The Handbook of Fixed Income Securities, Sixth Edition, McGraw-Hill, 2001.  ISBN: 0-07-135805-6.


Software: Analytic Solver,

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