Interest Rate Security Valuation

Course aim

The aim of this course is to undertake a rigorous study of fixed income securities, the bonds markets and related products. At the completion of the course, students will know how to manage interest rate risk, how to value securities with cash flows that are sensitive to movements in interest rates, and how to determine the optimal exercise policy for a variety of embedded options in fixed income securities. Students will be able to understand the return and risk of fixed income products, so as to better make investment decisions and manage risk.

Course content

Interest rate theory in discounting and the time value of money
Fixed-income products and market practices
Yield, duration and convexity
Bond portfolio management techniques (immunisation, duration matching)
The term structure of interest rates
Short-term interest rate modelling
Mortgage-backed securities; bonds with embedded options
Pricing interest rate derivatives (caps, floors, collars, swaps)

Textbook(s)

Veronesi, P 2010, Fixed income securities: valuation, risk and risk management, Wiley, New Jersey

Prerequisite(s)

Common to all relevant programs
Subject Area & Catalogue Number	Course Name
BUSS 5233	Corporate Finance
BANK 5014	Financial Theory and Financial Markets

Specific program
Program	Subject Area & Catalogue Number	Course Name
DMMA	BUSS 5249	Managerial Finance
DMMA	BANK 5014	Financial Theory and Financial Markets

Corequisite(s)

Nil

Teaching method

Component	Duration
INTERNAL, CITY WEST
Seminar	3 hours x 13 weeks
EXTERNAL, CITY WEST, ONLINE
External	3 hours equiv x 13 weeks

Note: These components may or may not be scheduled in every study period. Please refer to the timetable for further details.

Assessment

Assignment, Examination, Group Project and Presentation

Fees

EFTSL*: 0.125
Commonwealth Supported program (Band 3)
To determine the fee for this course as part of a Commonwealth Supported program, go to:
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Fee-paying program for domestic and international students
International students and students undertaking this course as part of a postgraduate fee paying program must refer to the relevant program home page to determine the cost for undertaking this course.

Non-award enrolment
Non-award tuition fees are set by the university. To determine the cost of this course, go to:
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Not all courses are available on all of the above bases, and students must check to ensure that they are permitted to enrol in a particular course.

* Equivalent Full Time Study Load. Please note: all EFTSL values are published and calculated at ten decimal places. Values are displayed to three decimal places for ease of interpretation.