FINC409/609 - Fixed Income Securities

Course Description

This course provides an introduction to fixed income markets and the analytical tools used by market participants. Fixed income markets have evolved significantly in recent years, particularly following the global financial crisis. Regulatory changes, unconventional monetary policy and extended periods of very low or near-zero nominal interest rates, increased government borrowing, shifts in the empirical behavior of U.S. Treasury securities, and the introduction of new fixed income instruments have all influenced how these markets function and how fixed income securities are priced and risk-managed.

Fixed income is a broad topic that cannot be covered comprehensively in a single semester. Accordingly, the course is selective and focuses on the core concepts and methods that underpin fixed income valuation and risk management. With a strong foundation in the underlying theory and market conventions, students will be well-positioned to learn additional institutional details and specialized products in professional settings.

The course is quantitative and emphasizes practical implementation. Students will work extensively with formulas, numerical methods, and real-world valuation and hedging techniques widely used in industry, including by banks and asset managers.

Learning Objectives

After completing this course, students will be able to:

• Describe the structure of bond markets, the main fixed income instruments, and the conventions used to quote, trade, and price fixed income securities.
• Explain the U.S. Treasury market, including major Treasury instruments and the mechanisms through which Treasuries are issued and traded.
• Apply time-value-of-money principles to price fixed income cash flows and interpret discount factors and their role in valuation.
• Use replicating portfolios and the law of one price to value fixed income securities and identify arbitrage relationships.
• Analyze the term structure of interest rates and use it to price bonds and other fixed income instruments.
• Explain the bond price-yield relationship and quantify interest rate sensitivity using standard measures.
• Compute and apply duration and convexity to measure interest rate risk and to hedge single-bond positions and bond portfolios.
• Implement and evaluate common fixed income trading strategies.
• Understand the mechanics and uses of forward and futures contracts in fixed income markets.
• Price and interpret key interest rate derivatives, especially interest rate swaps, and apply them to hedge interest rate risk.

Class Times

Office Hours

Exam Schedule

1. Midterm 1

• Date: March 12, 2026
• Time: 9.35am-10.55am (Section 010); 11.10am-12.30pm (Section 011)
• Location: Gore Hall Hall 219

2. Midterm 2

• Date: April 14, 2026
• Time: 9.35am-10.55am (Section 010); 11.10am-12.30pm (Section 011)
• Location: Gore Hall Hall 219

3. Final Exam

• Section 010:
  • Date: May 19, 2026
  • Time: 8.00am-10.00am
  • Location: Gore Hall 219
• Section 011:
  • Date: May 16, 2026
  • Time: 11.30am-1.30pm
  • Location: Gore Hall 219

Course Syllabus