Fixed Income Securities

Code:

2MiF12

Acronym:

FIS

Keywords
Classification	Keyword
OFICIAL	Management Studies

Instance: 2024/2025 - 2S

Active?	Yes
Responsible unit:	Management
Course/CS Responsible:	Master in Finance

Cycles of Study/Courses

Acronym	No. of Students	Study Plan	Curricular Years	Credits UCN	Credits ECTS	Contact hours	Total Time
MIF	47	Official Syllabus after 2020-2021	1	-	3	21	81

Teaching language

English

Objectives

The course aims to give the students an advanced understanding of fixed-income securities, including bond pricing, risk analysis, and investment strategies while equipping them with the tools to assess and manage interest rate, credit, and market risks. Additionally, the course aims to integrate sustainable finance principles into fixed-income investing, covering ESG factors, green bonds, and responsible investment strategies.

Learning outcomes and competences

This course in fixed-income securities equips participants with a comprehensive understanding of bond pricing, risk assessment, and investment strategies. Learners will develop the ability to evaluate fixed and variable rate bonds, measure returns, and analyze key yield determinants. They will gain expertise in assessing interest rate and credit risk, using duration, convexity, and immunization strategies to mitigate exposure. The course also covers bonds with embedded options, such as callable and convertible bonds, and explores the role of interest rate derivatives like futures, forward rate agreements, and options in managing risk. Additionally, participants will understand the growing field of sustainable finance in fixed income, including green bonds, ESG integration, and sustainable investment strategies. By the end of the program, learners will be equipped with the analytical and strategic skills necessary to navigate fixed-income markets effectively.

Working method

Presencial

Program

 

1. Bond Pricing

1.1. Fundamental concepts

1.2. Evaluation of fixed rate and variable rate bonds

1.3. Measuring the return

1.4. Determinants of the yield of a bond

2. Bond risk analysis

2.1. Interest rate risk: measures and immunization strategies

2.2. Credit risk

3. Bonds with options: characteristics and pricing

3.1. Callable bonds

3.2. Bonds with Warrants and Convertible Bonds

4. Interest rate derivatives

4.1. Futures and Forward Rate Agreements

4.2. Options

5. Sustainable Finance in Fixed Income Markets 

5.1. Introduction to Sustainable Finance in Fixed Income

5.2. Sustainable Bond Market: Instruments and Pricing

5.3. ESG Integration in Fixed Income Investment

Mandatory literature

Fabozzi Frank J.; Bond markets, analysis and strategies. ISBN: 978-0-273-76613-1 (2013, 8th Edition, Pearson)
Schoenmaker, D.; Schramade, W.; Principles of Sustainable Finance, Oxford University Press, 2019. ISBN: 978-0-19-882660-6
Hull, J.; Option, Futures and Other Derivatives, 10th Ed., Prentice Hall, 2021. ISBN: 978-0134472089

Complementary Bibliography

Fabozzi, Frank; Mann, Steven; The Handbook of Fixed Income Securities, 8th Edition, McGraw Hill, 2012. ISBN: 978-0-07-176847-4
Pinto, Jerald E.; Petitt, Barbara S.; Pirie, Wendy L. ; Fixed Income Analysis Workbook (CFA Institute Investment Series), 3rd Edition, John Wiley & Sons, 2015. ISBN: 978-1-118-99950-9

Teaching methods and learning activities

Flipped classroom: the principle underlying this methodology assumes that the student will prepare before hand the topics assigned to each class. As a consequence the student will have a greater grasp and critical opinion on those topics so we can free class time to solve cases and exercises with the teacher support. For the preparation of each class the students have available in Moodle videos and reading sugestions per class. 
Each class starts with a quiz that will allow the student to assess the effectiveness of the preparation before the class. Afterwards, specific topics will be addressed followed by the clarification of all the questions risen during that preparation. The second part of the class is dedicated to problem-solving and case analysis in groups. 

Evaluation Type

Distributed evaluation with final exam

Assessment Components

Designation	Weight (%)
Participação presencial	15,00
Trabalho prático ou de projeto	25,00
Exame	60,00
Total:	100,00

Amount of time allocated to each course unit

Designation	Time (hours)
Elaboração de projeto	15,00
Estudo autónomo	45,00
Frequência das aulas	21,00
Total:	81,00

Eligibility for exams

Continuous assessment:

- Group project: 25%

- Final exam: 60% (oficial date of Epoca Normal)

- Engagement: 15%

Exam:

- Final Exam: 70% (either Epoca Normal or de Recurso)

- Group project: 30% 


Notes to both regimes:
- Group project (compulsory): Guidelines provided in class
- Engagement: participation in the quizzes and peer assessment of group project 
- There is a minimum grade of 60 points (out of 200) for every of these components.

Calculation formula of final grade

The final grade will be computed with the following weights:

Continuous assessment:

- Group project: 25%

- Final exam: 60% (oficial date of Epoca Normal)

- Engagement: 15%

Exam:

- Final Exam: 70% (either Epoca Normal or de Recurso)

- Group project: 30% 

Minimum Grade for every assessment component: 60 points (out of 200 points).

Examinations or Special Assignments

Group assignment: the subjects will be discussed in class

Special assessment (TE, DA, ...)

Final Exam and group project.

Classification improvement

Final Exam and oral examination.