Bond Markets

The main purpose of this course is to enable students to understand the mechanisms of the bondmarket, value
a bond contract, compute rates of return, use immunization strategies, and use curve fitting techniques.
1. Value and formulate a trading decision for a bond.
2. Compute the rate of return of an investment in the bond market.
3. Implement immunization strategies.
4. Estimate and interpret a yield curve.

1. The bondmarket: 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 tomaturity and realized rate of return.
6. Rating and credit risk.
7. Volatility, duration and convexity.
8. Immunization.
9. Estimation of the yield curve.

NAO

Dias, J. C. (2012), Lecture Notes.
– Fabozzi, F. J. (2006), Bond Markets, Analysis and Strategies, 6th edition, Prentice-Hall.
– Martellini, L., Priaulet, P. e Priaulet, S. (2003), Fixed-Income Securities: Valuation, Risk Management and
Portfolio Strategies, JohnWiley & Sons.
– Tuckman, B. (2002), Fixed Income Securities: Tools for Today`s Markets, 2nd edition, JohnWiley & Sons.