After following this course, students have the following knowledge, skills and attitudes:
Basic knowledge of bond valuation and term structure calculation; theories of the term structure; duration and convexity based risk management; binomial models for valuing interest rate derivatives; basics of longevity risk and annuities; models for Solvency II supervisory regulation of pension and insurance firms; portfolio allocation with fixed income securities and liabilities.
Being able to implement the knowledge topics in computer program such as Excel. Analytical skills to understand relevant risks and the structure of interest rate models.
Accuracy in working with the material; a critical attitude towards fixed income investment and risk management issues.
Investment Analysis (323060)
The following topics will be covered:
• bond pricing for a given term structure of interest rates;
• hedging of interest rate risk using duration and convexity;
• interest rate derivatives;
• stochastic modelling of the term structure of interest rates, with applications to arbitrage-free pricing of derivatives;
• predictability of bond returns;
• monetary policy, inflation risk and real interest rates;
• solvency risk management;
• bond investing with liabilities.
lectures and tutorials
Type of instructions
written exam and three assignments. Your grade depends on the performance in the final exam. If you fail to score 50 points or more in the final exam you will fail and your grade consists for 100% of the final exam grade. If you score 50 points or more in the final exam, your grade consists for 30% of the three assignment grades (10% each) and for 70% of the final exam grade.
Type of exams
The same rule applies for the resit exam: If you score less than 50 points on the resit exam you will fail and your grade consists for 100% of the resit grade. If you score 50 points or more for the resit, your grade consists for 30% of the three assignment grades (10% each) and for 70% of the resit exam grade.
The scores of the assignments remain valid for the academic year; grades of assignments obtained in previous academic years are not valid.
- Veronesi, P. (2010), Fixed Income Securities: Valuation, Risk, and Risk Management., Wiley. ISBN 978-0-470-10910-6 (paper) or 978-0-470-58689-1 (e-book)
- lecture notes, additional articles, and assignments which will be available on Blackboard