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Home 2015-2016 Undergraduate College Catalog Course Offerings Finance (Graduate Program) Courses MFIN 5730: Fixed Income Analysis (3 cr.)

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MFIN 5730: Fixed Income Analysis (3 cr.)

In recent years, there has been an explosion of

activity in the fixed income markets as

corporations and governments continue to issue

record amounts of debt. The size of the global

fixed income market has reached nearly $100

trillion, far exceeding the $55 trillion

capitalization of the global equity market. In

addition, the market for fixed income derivatives

has exploded over the past thirty years in

response to a series of crises that have

increased uncertainty over the behavior of

interest rates. The fixed income markets consist

of an extremely wide array of products, ranging

from simple coupon-bearing bonds to structured

products such as asset-backed securities. These

products provide investors with the advantage of

flexibility due to the large number of choices

that are available. One of the major

disadvantages of these products is that they

expose investors to the risk of fluctuations in

interest rates and other variables. Due to the

complex behavior of interest rates, valuation and

management of fixed income products can be

extremely challenging. In addition, many fixed

income products contain embedded optionality,

which further complicates the pricing and

management of these securities. In recent years,

spectacular losses have occurred at several

financial institutions due to the misuse of fixed

income products and their derivatives. The

complexity of fixed-income products and

fixed-income derivatives requires market

participants to acquire a deep understanding of

how their cash flows are structured, how their

values are affected by interest rates and an

understanding of the properties of interest

rates. Market participants also need to

understand how interest rate risk is measured,

and what types of strategies may be used to hedge

interest rate risk. Portfolio managers need

insight into the different types of strategies

that may be employed with fixed-income portfolios.

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