FNEN 6850 3.00

Level Graduate
Department FINANCIAL ENGINEERING - ROOM SSB N204A, (416) 736-5690 fax (416) 736-5687

The course builds upon the use of symbolic and numerical tools. Maple is used as a computer algebra system and then as a generator of codes in C++ and/or FORTRAN. This course provides an overview of the major components of fixed income markets, including a review of the major instruments, the issuers and the investors. The valuation of interest-rate sensitive cash flows is the underlying theme. Major topics covered include: theories of the term structure, institutional aspects of the fixed income markets, and analytical techniques for managing interest rate risk. The course will concentrate on modern valuation methods as well as traditional techniques for risk management in the fixed income market. The effect of the assumed interest rate dynamics and the prevailing interest rate condition for the riskiness and value of various features of these contracts will also be analyzed. The power of convexity and duration upon risk management and valuation will be developed. Students will use the substantive approaches developed in the course to address concrete problems. The coursework will include a project dealing with Canadian data.

Registration with permission of the Director, Financial Engineering Program
Prerequisite: SB/FNEN 6810.030