THE UNIVERSITY OF HONG KONG

FACULTY OF BUSINESS AND ECONOMICS

School of Economics and Finance
FINA0804/ FINA3323 Fixed Income Securities
GENERAL INFORMATION
Instructor: Dr. Huiyan QIU
Email: hqiu@hku.hk
Office: Room 917 K K Leung Building
Phone: 2859-1046
Consultation times: by appointments
Lecture: FINA0804A/ FINA3323A (Semester 1) Friday 14:30 17:20 in KKLG104
FINA0804B/ FINA3323B (Semester 2) Tuesday 13:30 16:20 in MB103
Pre-requisites: FINA0301/ FINA2322 Derivatives or STAT2820/ STAT3905 Introduction to financial derivatives
and FINA2802/ FINA2320 Investments and Portfolio Analysis or STAT2309/ STAT3609 The Statistics of
Investment Risk
Tutor: Mr. Clive HO, hoclive@hku.hk
Mutually exclusive: NA
Course Website: MOODLE via HKU portal

COURSE DESCRIPTION
This course is designed to provide a comprehensive introduction to fixed income securities by covering the
following broad topical areas: (a) the institutions and operations involved in the fixed income securities markets;
(b) the valuation and hedging of fixed income securities; (c) the term structure of interest rate; (d) the use and
application of interest rate derivatives in the areas of risk management and financial engineering; and (e) the
interest rate models.

COURSE OBJECTIVES
1. To help students develop a solid understanding of fixed income securities and fixed income markets.
2. To provide students with concepts and methods those are heavily used in practice.

COURSE LEARNING OUTCOMES

Course Learning Outcomes
CLO1.

CLO2.
CLO3.
CLO4.
CLO5.

Describe and interpret the general features of fixed income securities

including fixed income derivatives and understand the operations of fixed
income markets.
Apply techniques to price fixed income securities and be able to describe the
determinants of security prices.
Illustrate the term structure of interest rates and basic interest rate models.
Explain the characteristics of mortgage loans and mortgage-backed
securities.
Use interest rate derivatives like futures and options to manage risk and have

Aligned Faculty Goals

GOAL 1, 3, 5

GOAL 1, 2, 4, 5
GOAL 1, 2
GOAL 1, 2
GOAL 1, 2, 3, 5
1

CLO6.

general knowledge of other interest rate derivatives.

Be able to communicate with others on various issues of fixed income
securities.

GOAL 2, 3, 4, 5

COURSE TEACHING AND LEARNING ACTIVITIES

Course Teaching and Learning Activities

Expected
study
hour

Study Load
(% of study)

T&L1. Lectures
T&L2. Assignments
T&L3. Tutorials
T&L4. Self-study

33 hours
33 hours
10 hours
44 hours

27.5%
27.5%
8.33%
36.67%

120 hours

100%

Total
Assessment Methods

Weights

Aligned Course Learning Outcomes

A1. In-Class and Tutorial Performance

A2. Assignments
A3. Mid-term Examination
A4. Final Examination

5%
20%
25%
50%

CLO 1, 2, 3, 4, 5, 6
CLO 1, 2, 3, 4, 5, 6
CLO 1, 2, 3
CLO 1, 2, 3, 4, 5, 6

Total

100%

STANDARDS FOR ASSESSMENT

Course Grade Descriptors
A+, A, A-

Exhibited high level of understanding of the course materials through excellent performance in
class discussion, assignments and term tests.

B+, B, B-

Exhibited reasonably high level of understanding of the course materials through good
performance in class discussion, assignments, and term tests.

C+, C, CD+, D
F

Exhibited fair level of understanding of the course materials.

Exhibited limited level of understanding of the course materials.
Exhibited low level of understanding of the course materials.

Assessment Rubrics for Each Assessment

A1 In-Class and Tutorial Performance
A+ A A-

B+ B B-

C+ C C-

D+ D

Extremely well
prepared for class
discussion, very
active in sharing
views and
attended almost all
lectures and
tutorials.

Partially prepared
for class
discussion, quite
active in sharing
views and
attended most of
the lectures and
tutorials

Not well prepared

for class
discussion, limited
active in sharing
views and
attended many of
the lectures and
tutorials.

Not well prepared

for class
discussion, no
sharing of views
and attended some
of the lectures and
tutorials

Poorly prepared
for class
discussion and no
sharing of views
and experience
and rarely
attended lectures
and tutorials.
2

A2 Assignments: for numerical questions/homework, please refer to the following table:

A+ A A-

B+ B B-

C+ C C-

D+ D

Submitted all
homework with
excellent
accuracy.

Submitted well
written homework
with good
accuracy.

Submitted
homework with
fair level accuracy.

Submitted
homework with
limited accuracy.

Poorly written
homework or no
submission.

A2 Assignments: for essay type problems, please refer to the following grading criteria:
Grade

Depth and breadth of Coverage, critical elements, structure, language and

conventions

A+,A, A-

All aspects were addressed and researched in great depth.

Demonstrated a clear understanding of and the ability to apply the theory, concepts and
issues relating to the topic.
Clearly identified the most critical aspects of the task and adopted a critical perspective.
Developed excellent argument and offered a logically consistent and well-articulated
analysis and insight into the subject.
Drew widely from the academic literature and elsewhere whilst maintaining relevance.
All aspects conformed to a high academic / professional standard.

B+, B, B-

Most aspects were addressed and researched in depth.

Demonstrated a good understanding and some application of the theory and issues relating
to the topic.
Identified critical aspects of the task and adopted a critical perspective.
Showed some evidence of analysis, supported by logical argument and insight into the
subject.
Drew on relevant academic and other material.
Most aspects conformed to a high academic / professional standard.

C+, C, C-

Most aspects were addressed and researched adequately.

Demonstrated a good understanding of the theory, concepts and issues relating to the topic
but limited application relating to the topic.
Some presented argument showed some insight but not always consistent and logical.
Drew upon an adequate range of academic and other material.
Most aspects conformed to an acceptable academic / professional standard.

D+, D

Basic aspects were addressed and researched adequately. Demonstrated mainly

description, showing basic understanding of the topic but no application.
Showed little evidence of analysis but no clear and logical argument relating to the
subject.
Drew primarily upon course materials.
Limited aspects conformed to academic / professional standards.

Basic aspects were superficial, inadequate or absent.

Demonstrated limited understanding of the topic and drew conclusions unrelated to the
topic.
The written work was not of an academic / professional standard.

A3 and A4 Midterm and Final Exam

Midterm and final exam may include three types of questions: multiple choice, calculation problems, and essay
questions. Multiple choice and calculation problems are graded according to the marks assigned to each
question. Essay questions are graded according to the following criteria:
A+ A A-

B+ B B-

C+ C C-

D+ D

Idea development
is insightful and
sophisticated;
Supporting
evidence is
convincing,
accurate and
detailed. Well
written with clear
focus.

Idea development
is clear and
thoughtful;
Supporting
evidence is
sufficient and
accurate.
Well written.

Idea development
is simplistic and
lacking in
relevance;
Supporting
evidence
insufficient but
accurate.
Somewhat well
written.

Idea development
is superficial and
ineffective;
Supporting
evidence is
insufficient and
inaccurate.
Writing is unclear.

Idea development
is absent;
Supporting
evidence is vague
or missing.
Poorly written.

COURSE CONTENT AND TENTATIVE TEACHING SCHEDULE

The following topics will be covered:

Introduction to Fixed Income Securities

Bond Valuation and Yield Measures

Bond Price Volatility

Bond Yield and Interest Rate Structure

Bonds with Other Features

Forward and Futures on Bonds

Options and Credit Derivatives

Bond Portfolio Management including Hedging

Interest Rate Models

Mortgages and Mortgage-Backed Securities

Roughly, one three-hour long session will be used to cover one topic. More detailed teaching schedule will be
provided in each semester when the course is offered.

REQUIRED/RECOMMENDED READINGS & ONLINE MATERIALS

1. Highly recommended textbook: Fabozzi, Frank J., Bond Markets, Analysis, and Strategies, Global
Edition, 8th Edition, 2012, (Pearson Education, Inc)
2. Reference book: Tuckman, Bruce and Angel Serrat, Fixed Income Securities: Tools for Todays Markets,
University Edition, 3rd Edition, 2012, (Wiley Finance)
3. Lecture notes prepared by the instructor, which will be available on course Moodle
4. Video clips on Youtube
5. Recommended reading articles

MEANS/PROCESSES FOR STUDENT FEEDBACK ON COURSE

Conducting the Student Evaluation of Teaching and Learning (SETL) around the end of the semester

Using Discussion Forum in the course Moodle to seek for students feedback throughout the semester

COURSE POLICY
Class Conduct
Students are required to attend all classes on time. If you miss a class, it is entirely your responsibility for what you
have missed. In case you have to leave the class early, please inform the instructor beforehand and leave quietly.
No use of mobile phone or chatting is allowed when the class is in session. Remember to turn off or mute the phone
before each session. The instructor has the discretion to give penalty in case of class misconduct.
Respect your instructors and your fellow students. Be considerate to others.
Academic Dishonesty
The University Regulations on academic dishonesty will be strictly enforced! Please check the University
Statement on plagiarism on the web: http://www.hku.hk/plagiarism/
Academic dishonesty is any act that misrepresents a persons own academic work or that compromises the
academic work of another. It includes (but not limited to) cheating on assignments or examinations; plagiarizing,
i.e., representing someone elses ideas as if they are ones own; sabotaging anothers work.
If you are caught in an act of academic dishonesty or misconduct, you will receive an F grade for the subject. The
relevant Board of Examiners may impose other penalty in relation to the seriousness of the offense.

ADDITIONAL COURSE INFORMATION

Announcements, assignments, and lecture slides will be posted on the course MOODLE website. Hard
copy of lecture notes will not be provided.
No late assignments will be accepted.
Additional course information like TAs information, class schedule and such will be available later.

Supplementary Information for FINA0804A/FINA3323A, 2016-2017

Instructor: Dr. Huiyan QIU

Office:
Room 917 KKL (2859-1046)
E-mail:
hqiu@hku.hk
Office Hours: By appointment

TA: Mr. Clive Man Chung HO

Office: Room 1026KKL (2857-8514)
Email: hoclive@hku.hk
Office Hours: TBA

Meeting Schedule: Friday 14:30-17:20, KKLG104

Hard copies of lecture notes and other course material will not be provided except under special
circumstances. It is students responsibility to download them from the course Moodle.
Additional information on assignment:
There will be five homework assignments which are designed to help students review some of the
basic concepts and to practice applying the concepts. Each assignment has to be turned in by its
due date. No later homework will be accepted. For grading policy on homework assignment, please
refer to the assignments section on the course Moodle page.
Additional information on exams:
The midterm exam is scheduled on Wednesday evening, October 26. No make-up exam will be
given. Any students not taking the midterm exam will automatically have the weight shifted to final
exam. Final exam is cumulative. Students are required to have a financial calculator for taking the
exams.
Access to course Moodle:
Students registered to the course have access to the course Moodle through hkuportal.
For those who havent registered, please first make sure you log out your hkuportal account and
then go to https://hkuportal.hku.hk/moodle/guest and log in by using

Username: _fina0804_3323_a_2016_guest

password: Sef3323A@

If you have any question on course registration, please contact Faculty office at
fbe.ugenquiry@hku.hk.

COURSE SCHEDULE (tentative and subject to change)

Week

Topic

Reading*

Overview of the Course

Week 1: Sep 2

Chapter 1
Introduction to Fixed Income Securities

Week 2: Sep 9

Bond Valuation and Yield Measures

Chapter 2, 3

Week 3: Sep 16

NO CLASS, Public Holiday

Week 4: Sep 23

Bond Price Volatility

Chapter 4

Week 5: Sep 30

Bond Yield and Interest Rate Structure

Chapter 5

Week 6: Oct 7

Bond with Other Features

Chapter 17, 19

Week 7: Oct 14

Forward and Futures on Bond

Chapter 26

Week 8: October 17 22 Reading Week

7 9 pm, Oct 26: midterm exam
Options and Other Fixed Income Derivatives

Chapter 27, 28,

29

Week 10: Nov 4

Bond Portfolio Management

Chapter 22

Week 11: Nov 11

Interest Rate Models

Chapter 16

Week 12: Nov 18

Interest Rate Models (contd)

Week 13: Nov 25

Mortgages and Mortgage-Backed Securities

Week 9: Oct 28

Chapter 10, 11,

12

*: The chapters indicated are from Fabozzis book. Please note that the reading list here is for
reference only. Some of the topics are across several chapters of Fabozzis book as well as
Tuckmans book. More detailed information about corresponding readings will be in the lecture note.