21-378 Mathematics of Fixed Income Markets


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Schedule and Assignments

For each week there will be a link to a page with a reading assignment and a homework assignment. This schedule is tentative. It will get more accurate as the semester progresses. No week's topics should be taken as final until the homework is linked.

Week #1:
Aug 27 - 31
Assignments M: Introduction to Fixed Income Securities
W: Discount Factors, Law of One Price, Arbitrage and Replication
F: Interest Rate Conventions, Spot Rates, Forward Rates

Week #2:
Sep 3 - 7
Assignments M: Labor Day: No class.
W: Forward Rates
F: Forward Rates and Spot Rates, Applications

Week #3:
Sep 10 - 14
Assignments M: Yield to Maturity
W: Yield to Maturity for Coupon Bonds, Annuities, and Perpetuities
F: Dr. Handron out of town. No Class.

Week #4:
Sep 17 - 21
Assignments M: Accrued Interest and YTM betwen Coupons
W: DV01 and Hedging off of DV01
F: Duration and Convexity

Week #5:
Sep 24 - 28
Assignments M: Duration and Convexity, Portfolio Durations
W: Portfolio Senstivities, Duration/Price matching Zero-Portfolios, Yield Curve Strategies
F: Duration/Price Matching Zero Portfolios, Key Rate Durations

Week #6:
Oct 1 - 5
Assignments M: Key Rate Durations
W: Key Rate Durations / Principal Components Analysis
F: Principal Components Analysis

Week #7:
Oct 8 - 12
Assignments - and Exam Review M: Overview of Fixed Income Securities with Non-Deterministic Cash Flows
W: The One Period Binomial Model
F: Pricing in the N Period Binomial Model
Administreative Note: Monday, October 8 is the course drop deadline. Students dropping after this date will receive a grade of W.

Week #8:
Oct 15 - 19 M: Pricing in the N Period Binomial Model / Common Short Rate Models
W: Common Short Rate Models and Pricing
F: Mid-Semester Break. No class.

Week #9:
Oct 22 - 26
Assignments M: Introduction to Credit Derivatives
W: Common Short Rate Models and Pricing
F: Installation of Farnam Jahanian as CMU President. No Class.

Week #10:
Oct 29 - Nov 2
Assignments M: Backwards Induction
W: Backwards Induction / American Options
F: American Options

Week #11:
Nov 5 - 9
Assignments M: Forwards and Futures
W: Futures
F: Futures/Callable and Putable Bonds
Administreative Note: Tuesday, November 6, is the course withdrawl deadline. Students may not withdraw after this date.

Week #12:
Nov 12 - 16
Assignments M: Callable and Putable Bonds
W: Simulation
F: Introduction to MBS

Week #13:
Nov 19 - 23 M: MBS - Prepayments and Securitization
W: Thanksgiving Break. No class.
F: Thanksgiving Break. No class.

Week #14:
Nov 26 - 30
Assignments M: MBS - Securitization and Common Prepayment Models
W: Common Deterministic Prepayment Models
F: Interest Rate Sensitivity of MBS Products

Week #15:
Dec 3 - 7
Assignments M: The S-curve Prepayment Model
W: Prepayment Models in the Binomial Model
F: Review for the Final

Final Exam
Exam Review The Final Exam has been scheduled for Monday, December 10 from 1:00-4:00pm in WEH 5409. Please take this into account when making your travel plans.

Week #1: Aug 27 - 31 Assignments	M: Introduction to Fixed Income Securities W: Discount Factors, Law of One Price, Arbitrage and Replication F: Interest Rate Conventions, Spot Rates, Forward Rates
Week #2: Sep 3 - 7 Assignments	M: Labor Day: No class. W: Forward Rates F: Forward Rates and Spot Rates, Applications
Week #3: Sep 10 - 14 Assignments	M: Yield to Maturity W: Yield to Maturity for Coupon Bonds, Annuities, and Perpetuities F: Dr. Handron out of town. No Class.
Week #4: Sep 17 - 21 Assignments	M: Accrued Interest and YTM betwen Coupons W: DV01 and Hedging off of DV01 F: Duration and Convexity
Week #5: Sep 24 - 28 Assignments	M: Duration and Convexity, Portfolio Durations W: Portfolio Senstivities, Duration/Price matching Zero-Portfolios, Yield Curve Strategies F: Duration/Price Matching Zero Portfolios, Key Rate Durations
Week #6: Oct 1 - 5 Assignments	M: Key Rate Durations W: Key Rate Durations / Principal Components Analysis F: Principal Components Analysis
Week #7: Oct 8 - 12 Assignments - and Exam Review	M: Overview of Fixed Income Securities with Non-Deterministic Cash Flows W: The One Period Binomial Model F: Pricing in the N Period Binomial Model Administreative Note: Monday, October 8 is the course drop deadline. Students dropping after this date will receive a grade of W.
Week #8: Oct 15 - 19	M: Pricing in the N Period Binomial Model / Common Short Rate Models W: Common Short Rate Models and Pricing F: Mid-Semester Break. No class.
Week #9: Oct 22 - 26 Assignments	M: Introduction to Credit Derivatives W: Common Short Rate Models and Pricing F: Installation of Farnam Jahanian as CMU President. No Class.
Week #10: Oct 29 - Nov 2 Assignments	M: Backwards Induction W: Backwards Induction / American Options F: American Options
Week #11: Nov 5 - 9 Assignments	M: Forwards and Futures W: Futures F: Futures/Callable and Putable Bonds Administreative Note: Tuesday, November 6, is the course withdrawl deadline. Students may not withdraw after this date.
Week #12: Nov 12 - 16 Assignments	M: Callable and Putable Bonds W: Simulation F: Introduction to MBS
Week #13: Nov 19 - 23	M: MBS - Prepayments and Securitization W: Thanksgiving Break. No class. F: Thanksgiving Break. No class.
Week #14: Nov 26 - 30 Assignments	M: MBS - Securitization and Common Prepayment Models W: Common Deterministic Prepayment Models F: Interest Rate Sensitivity of MBS Products
Week #15: Dec 3 - 7 Assignments	M: The S-curve Prepayment Model W: Prepayment Models in the Binomial Model F: Review for the Final
Final Exam Exam Review	The Final Exam has been scheduled for Monday, December 10 from 1:00-4:00pm in WEH 5409. Please take this into account when making your travel plans.