Causal Capital

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Fixed Income End-to-End
COURSE TYPE : [ INTERMEDIATE ]
COURSE DURATION3 Days
 

The bond market and fixed income instruments in general is one of the most lucrative investment conduits in all of the capital markets however so many investors do not involve themselves in this domain because of a lack of understanding of the terms, trading approaches and valuation principles.  This course addresses these areas and many more, it will give you all the tools you need to fully understand sound fixed income investment strategies.

 

Who Should Attend
Risk AnalystsWill gain a solid insight into how credit risk is traded off their balance sheet while at the same time how to measure credit risks within investment portfolios. 
Investment AdvisorsThe course will walk across all the key fixed income instruments, lifting their knowledge substantially so that they can advise their clients on the risks and expected returns from such investments. 
Portolio ManagersThose who are establishing investment portfolios can understand how to immunise the yield within their fixed income investments, how to addjust returns inline with market and credit risk of the investment. 
TreasuryUnderstand the Yield, Risk, Liquidity relationship of a fixed income investment portfolio.  Learn how to hedge exposure through Swaps, Options and Forwards. 

 

AFTER THE COURSE YOU SHOULD BE ABLE TO

1)     Understand the various fixed income instruments from vanilla bonds to exotic mortgage backed securities

2)     Gain insight into the various risks and purposes of instruments in the fixed income domain  

3)     Learn how to immunise a portfolio so that it's yield is less volatile 

4)     Gain knowledge on how to hedge interest rate and currency risk 

5)     Understand how to measure market risk such as duration and Value at Risk

6)     Build up more yield curve analysis in steps so that it is easy to understand 

7)     Complete outline of the securitisation process and how investors can benefit

8)     How to compare bonds considering default risk

9)     What brought about the credit crisis, the fixed income angle

 

COURSE GIVE AWAYS

Materials and spreadsheet examples will be given to all participants in electronic format so that they may take the examples away with them and evolve them further once the course has been completed.   In addition a statistical tool will be presented to participants that allows for advanced yield curve analysis, this tool can also be taken away as a fully operational software package by all attendees.

 

 


MAIN TOPICS COVERED


  

SESSION 1 [ Fixed Income Overview ]

Focuses on the market and instruments of trade but will introduce some of the basic valuation and pricing requirements that are needed by a fixed income investor.  Extending on from the fundamentals, we will also drive deeper into the model, valuation, duration and building a portfolio of fixed income investments that are immunized.

 

Introduction to Fixed Income and Markets 

  • How fixed income interacts with the market
  • The terminology for fixed income trading
  • TVM and Basic Bond Pricing
  • Day Counts, Clean and Dirty Prices
  • Call and Put rights on bonds

 

Review of Repo Instruments 

  • What are Repo Instruments
  • The economic effects of interest and Reports
  • How to price repo haircuts
  • The various methods for documentation

 

Model and Valuation 

  • Duration in detail and measuring risk
  • Pricing of Zero Coupons, Guarantees & Forwards
  • How to price repo haircuts
  • Term Structure Hypothesis, liquidity premiums

 

Immunisation and Default Risk 

  • Extending duration to immunise portfolios
  • Introduction into interest rate modelling
  • Default Adjusted Term Structures
  • How to apply rating agency and recovery rates

 

 

SESSION 2 [ Extending The Foundations ]  

The second session extends on the foundational concepts of session 1. It takes a more detailed view of the more complex fixed income instruments; their economic purposes, advantages and risks to the investor.

 

Interest Rate Modelling 

  • Single Factor, Multi-Factor Models
  • How to smooth yield curves
  • What the economic effects of yield curves
  • Understand the real drivers for the credit crisis
  • Redemption, yield curve spot rates & strip values
  • Boot strapping techniques

 

Swaps in detail 

  • Basis Swaps for interest and currency rates
  • How to value swaps
  • The economic benefit of swaps
  • The issues and safety of swaps

 

Exotic Swaps in detail 

  • Swap Options - Swaptions
  • A Back Set Swap
  • Off Market Swaps and put rights
  • Extendable Interest Rate Swaps
  • Constant Maturity Swaps
  • Difference Swaps
  • A Setp Up Swap

 

SESSION 3 [ New Instruments and Risk ]

In the last session the course looks at some of the new instruments that are being used by organisations, how to measure risk in fixed income investments and how to hedge exposures within term structures.

 

Instruments for Securitisation

  • Understand Mortgage Backed Securities
  • Learn about the Credit Default Swap market
  • Information on iTrax and CDX
  • Learn about Collateralised Debt Obligations 
  • How does the SPV work in the CDO
  • How to execute a CDS
  • How and why use a Total Return Swap
  • Pricing approaches for the CDS instrument

 

Interest Rate and FX Forwards and Options

  • Understand the Interest Rate Option
  • Learn how to protect investments and loans
  • What is interest rate risk how is it measured
  • STIRS and their use with loans and investments
  • Methods for pricing and valuation of forwards and options

 

Risk Management

  • Understand the Greeks in relationships to hedges
  • How to create a Value at Risk perspective from a fixed income portfolio
  • How to construct a framework to measure exposure
  • Understand the effects of basis risk
  • Look at portfolio liquidity risk
  • Boot strapping techniques