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Target Audience
Junior and Middle level Officers in the following functional areas: Risk Management,
Treasury and Portfolio Management.
Objective: To develop the knowledge base and computing skill in Fixed Income. For
the best use of the course, participants are requested to carry a simple or scientific
calculator, if they do not prefer to carry laptop.
Contents
Economic concepts and indicators for traders and risk managers: Industrial
index of production, inflation, stock index, monetary policy rates, RBI’s annual
policy / credit policy, money market rates, 10 year benchmark rate, OIS rate,
MIBOR and LIBOR.
Computing Tools in Excel for Fixed Income Management: Application of
quantitative tools in Excel (e.g. standard deviation, normal distribution, goal
seek, solver, price, yield, limits of 99% VaR etc)
Basic Concepts in Fixed Income: Compounding vs. Discounting in the Context
of Time Value of Money – discreet and continuous
Valuation Methodologies: Valuation of treasury bills and long term dated
securities (i) Application of YTM, (ii) Application Spot Rates, (iii) Interpretation of
Premiums and Discounts
Valuation of option embedded bonds: Valuation of securities with call option,
put option and convertible debentures
Credit risk of corporate bonds: Measuring credit risk premium, credit rating of
corporate bonds
Alternative Return Measures: (i) Holding Period Return, (iii) Inter-Instrument
Performance Assessment in Scenario Analysis for Stress Testing
Term Structure: (i) Anatomy of Term Structure, (ii) Determining Spot and
Forward Rates, (iii) Different Interest Rate Models
Sensitivity Analysis: (i) Modified Duration, (ii) Convexity Analysis, (iii) Portfolio
Immunization
Value-at-Risk (VaR): (i) Critique to Duration and Need for VaR, (ii) Alternative
Methods of VaR calculation
Validating VaR Model: (i) Back Testing (ii) Stress-Testing
Extreme Tail Losses: Calculation of probable tail losses beyond the lower limit
of 99% confidence interval under continuous normal distribution.
Fixed Income Derivatives: IRS, FRA, Swaption, Interest Rate Floor, Interest
Rate Collar, Interest Rate Collar