This course is intended for third-year undergraduates and builds upon FM212 Principles of Finance. The main topics covered are financial risk analysis and financial risk management (first part of the course) and derivative pricing (second part). As such, this course is complementary to FM300 Corporate Finance, Investments and Financial Markets, with minimal overlap.
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This course provides a thorough grounding in recent developments in fixed income securities pricing, hedging and portfolio management. By the end of the course, the students will be familiar with a variety of topics, including (i) an analysis of the main products traded in the credit markets, such as Government and corporate bonds, bond options, swaps, caps, floors, swaptions, callable, puttable and convertible bonds, and an analysis of the main credit derivatives such as total-return swaps, spread options and credit default swaps; (ii) the specific tools used in the industry practice to evaluate and hedge these products, which range from no-arbitrage trees and the calibration of yield curve derivatives to the main tools used to monitor and manage credit risk; (iii) the process of securitization, with particular reference to collateralized default obligations and mortgage-based securities.
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The course focuses on several types of corporate reorganisations: mergers and acquisitions, leveraged buyouts, spin-offs and divestitures, as well as reorganisations in financial distress situations through private workouts and bankruptcy. Particular emphasis will be put on linking conceptual tools and institutional environments to real business decisions.
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This syllabus lists and describes the topics covered in this course. In a nutshell, the course aims to cover the basics in derivatives theory, and to apply them to a multitude of financial securities and structured products. The pricing of said engineered products is covered in theory first. We review selected case studies in order to gain a better understanding of their practical usage. We also implement some of the models numerically.
- Teacher:
This syllabus lists and describes the topics covered in this course. In a nutshell, the course aims to cover the basics in derivatives theory, and to apply them to a multitude of financial securities and structured products. The pricing of said engineered products is covered in theory first. We review selected case studies in order to gain a better understanding of their practical usage. We also implement some of the models numerically.
- Teacher:
The first part of the course gives an overview of risk management in the context of portfolios of fixed income securities and derivatives. The second part of the course deals with credit risk. Throughout, the course spends a significant amount of time on practical applications of the theories that are introduced. Some limitations of current approaches are also discussed.
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