Course Outline Template

Indian Institute of Management Calcutta

Programme : PGP

Name of the Course: Fixed Income Markets …

Core / Elective ……Elective………. Cap: 60

Credit: …3

Academic Year & Term: ……2021-22 (Term V)

Course Coordinator: Prof. Vivek Rajvanshi

Email: IIMC id: [email protected]

Instructor: …Prof. Vivek Rajvanshi….( Sessions – 20)

Affiliation: …IIMC…..

Email: IIMC id: [email protected]

Introduction to Course /Course Description

Fixed income markets have grown rapidly in the last two decades and captures about two-thirds
share of the capital market. Commercial and cooperative banks, primary dealers, insurance firms,
Pensions funds and Debt Management and Mutual funds are the main participants in these
markets. The objective of this course is to provide an overview and understanding of basic
concepts related to wide range of fixed income instruments and interest rate derivatives. Gradually
students would learn about various types of bonds and interest rate derivative securities, fixed
income portfolio construction, monitoring, valuation and risk management.

Course Objective and Key-takeaways from the course

After completing the course students will be conversant with:
• Types and characteristics of fixed income securities and derivatives
• Working of the International and Indian fixed income market
• Risk associated with fixed income securities
• Auction process of fixed income securities
• Concepts of spot and forward rates
• Valuation of simple bonds, bonds with embedded options and yield curves
• Formation and monitoring of fixed income portfolios
 • Trading strategies and risk mitigation techniques for fixed income securities
• Asset Liability Management
• Risk Management by using derivatives
• How to enter in a cost-effective swap
• Determining the price and credit risk and risk mitigation techniques

Programme Level Learning Goals (7)

Mapped Learning Goals

1. Possess state-of-the-art knowledge of theory and practice in all functional fields of management and the
ability to think critically, and apply them to diagnose and find solutions to organizational problems, even in
unfamiliar or uncertain situations

(a.) Attain theoretical and practical understanding of the functions and processes involved in managing an
organization
(b.) Develop critical thinking ability through analytical treatment of important contemporary problems and
issues
(c.) Acquire the ability to design approaches and use relevant models and tools to analyse situations and
solve practical business problems

Sessions mapped - 1,2,5,6,11,12,13, and 14

2. Develop and apply ethical values to analyse and solve organisational problems

(b.) Understand the issues of ethical importance specific to the domain of business

Sessions mapped - 3 and 4

3. Develop a global perspective that is built upon knowledge of economic, technological, regulatory and
political forces that are shaping a new international order in the 21st century

(b.) Acquire the ability to understand and comprehend issues and practices prevalent in the international
arena

Sessions mapped - 1,2,13 and 14

4. Develop their capacity to articulate their thinking and ideas through verbal and written communications, at a
professional (manager/consultant) level and to deliver the same

(a.) Acquire the ability to organize the thought process

(b.) Demonstrate understanding of main points
(c.) Acquire the ability to articulate the findings in a coherent and structured format to build a managerial
case analysis
(d.) Acquire the ability to customize messages/ solutions for diverse managerial situations

Sessions mapped - 3,4,7,8,11,12,15,16,17 and 18

5. Be able to appreciate the dynamics of Information Technology acquisition and absorption by present day
business organizations and develop ability to use modern IT enabled decision support tools for improved
understanding of business
 (a.) Acquire the ability to learn various IT-enabled analytical tools , techniques and methods for solving
problems

Sessions mapped - 5,6,7,8,9 and 10

International Components in your course (if any)

The following international case studies will be used in the course.
Case 1: Salomon and the Treasury Securities Auction HBS 5-295-046
Case 2: Deutsche Bank: Finding Relative-Value Trades HBS 9-205-059
Case 3: The Yield Curve and Growth Forecasts UV 5689 (Darden Business Publishing)
Case 4: Prudential Financial and Asset_ Liability Management, HBS 9-216-076
Case 5: Interest Rate Derivatives HBS 9-294-095
Case 6: Introduction to Credit Default Swaps, Ivey 910N27
Case 7: Betting on Failure: Profiting from Defaults on Subprime Mortgages, Kellogg School of
Management Case (KEL 879)

Pre-requisites
Nothing specific

Required Text Book(s)

1. Bond Markets Analysis and Strategies, 8th Ed. by Frank. J. Fabozzi, Published by
Pearson Education Inc.
Recommended Text Book(s)
2. Fixed Income Markets and Their Derivatives, Third Editon, By Suresh Sundaresan,
Academic Press Advanced Finance Series.
3. Bruce Tuckman, 2002, Fixed Income Securities: Tools for Today's Markets (2nd
Edition), John Wiley & Sons, Inc.

Course Pack Distribution to students

Course material will also be issued from the Programme office

Technology enabled learning component for your course

MS Excel

Session Plan

S No. Topic Intended learning outcome References

1-2 Introduction to Fixed Income To understand the return
Securities Market and risk characteristics of
1. Basic Features of Debt bond market.
Securities
2. Risk Associated with
Investing in Bonds
3-4 Overview of Bond Sectors and To understand the Case: Salomon and
Instruments practices in Indian bond the Treasury
1. Sectors of the Bond Market auction market. Securities Auction
2. Primary and Secondary HBS 5-295-046
 Market for G-Secs
3. Auctions, When Issued
Markets
4. Market Conventions and
Compounding Rules
5-6 Valuation of Fixed Income Securities To discuss the concepts
1. Valuation of Bonds of valuation of simple
2. Valuation of Bonds with bonds and bonds with
Embedded Options embedded option.
3. Liquidity and Credit Risk
Premium
7-8 Term Structure of Interest Rate To discuss the theoretical Case: Deutsche
1. Yield Measures and empirics of yield Bank: Finding
2. Spot Rates curve and fitting of a Relative-Value
3. Forward Rates yield curve. Trades HBS 9-205-
4. Zero Coupon Yield Curve 059
(ZCYC) Case: The Yield
5. Bootstrapping to Derive Spot Curve and Growth
Curve Forecasts UV 5689
(Darden Business
Publishing)
9-10 Measuring the Price Risk To discuss the measure
1. Duration of interest rate risk and
2. Convexity strategies to mitigate
3. Treasury Trading Strategies interest rate.
11-12 Interest Rate Derivatives and Their To understand the Case: Interest Rate
Valuation interest rate derivatives Derivatives HBS 9-
1. Interest Rate Futures and managing cash 294-095
Contracts, Hedging with flows.
Bond Futures
2. Interest Rate Swaps
3. Repo Transaction
13-14 Bond Portfolio Management – I To understand the basic
1. Bond Market Indices framework to form and
2. Interest Rate Indices monitor a bond portfolio.
3. Measuring Portfolio Risks
4. Monitoring and Adjusting
15-16 Bond Portfolio Management - II To discuss, how funds Case: Prudential
1. Portfolio Immunization and manage their assets and Financial and
Cash Flow Matching liabilities. Asset_ Liability
2. Controlling Interest Rate Risk Management, HBS
with Derivatives 9-216-076
17-18 Credit Risk Management To discuss the models for Case: Introduction
1. Credit Ratings credit risk management to Credit Default
2. Credit Risk Models and process of credit Swaps, Ivey 910N27
3. Credit Default Swaps rating. Case : Betting on
4. Credit Risk Management Failure: Profiting
from Defaults on
 Subprime
Mortgages, Kellogg
School of
Management Case
(KEL 879)

19-20 Review/Group Presentation/Guest To evaluate the overall

Speaker course and understanding
of students about the
subject.

Evaluation Components

✓ Components ✓ Weightage

Group Project 15%

Assignment (Case Submission) 15%

Class Participation 10%

End Term Exam 60%

Goal 1 Goal 2 Goal 3 Goal 4 Goal 5 Goal 6 Goal 7

Acquiring Technological
Critical Thinking Acquiring Global Ability to Competencies Problem Leadership
Ethical
Perspective Articulate Solving Qualities
Values
Fixed Income Fixed Income Fixed Income Fixed Income Fixed Income
Markets Markets Markets Markets Markets