Bond Market

Financial Mathematics.

Classes will use expository method, acompanied by a wide range of practical cases.

Goals:

The main objective of this course is to introduce students to the main characteristics of bonds and to discuss their potential as an interest rate risk management tool.

Skills:

At the end of the course, students must be able:

                1. To valuate and formulate a trading decision for a bond.

                 2. To compute the rate of return of an investment in the bond market.

                 3. To adopt an immunization strategy.

                 4. To estimate and interpret a yield curve

1. The bond market: Concepts and characteristics.

2. Features of a bond contract.

3. Spot rates, forward rates, and discount factors.

4. Fair value and trading rules: Treasury versus corporate bonds; Fixed versus floating rate bonds.

5. Rates of return: Yield to maturity and realized rate of return.

6. Rating and credit risk.

7. Volatility, duration and convexity.

8. Immunization.

9. Estimation of the yield curve.

NAO

Aman, A., Naim, A. M. & Isa, M. Y. (2019). What Determines Bond Market Development? New Theoretical Insights. Journal of Management, 2(1), 99-106.

Bhansali, V. (2011), Bond Portfolio Investing and Risk Management, McGraw Hill.

Fabozzi, F. J. (2015), Bond Markets, Analysis, and Strategies, 9.ª edição, Pearson.

Petitt, B. S., Pinto, J. E., e Pirie, W. L. (2015), Fixed Income Analysis, 3.ª edição, CFA Institute.

Quelhas, A. P. (2022). Mercado de obrigações: Características, Avaliação e Medidas de Risco. Coimbra: Editora d’Ideias.