Type of Credit: Elective
Credit(s)
Number of Students
As financial markets evolve, the complexity and diversity of financial instruments continue to expand. This course delves into the advanced aspects of fixed-income financial instruments, emphasizing their pricing methodologies, product applications, and innovative trading strate gies. It provides a comprehensive examination of sophisticated trading applications in the rate world and their integration within structured debt instruments.
由於此課程的內容銜接碩士班的債券分析(357920001) 課程，所以選修此課程的學生必須先修習過碩士班的債券分析課程(357920001)。
這是一門和必修課課程 loading 相當的選修課，非常不建議希望課程 loading 輕的同學選修的此課程。
能力項目說明
The course emphasizes a balanced approach, integrating both theoretical analysis and practical application to provide a comprehensive understanding of how these strategies are implemented in real-world scenarios. The purpose of this course is to ensure that students not only learn the strategic framework but also how to apply these strategies effectively in market operations. Additionally, practical computer-based exercises are a core component of the curriculum, allowing students to apply theoretical knowledge to real-world pricing and risk management scenarios. This course is tailored for students with a solid foundation in fixed-income securities, aiming to enhance their understanding through both theoretical concepts and practical ap plications in current financial markets.
| 教學週次Course Week | 彈性補充教學週次Flexible Supplemental Instruction Week | 彈性補充教學類別Flexible Supplemental Instruction Type |
|---|---|---|
(W1, W2) Topic 1: SOFR and Repos
1. To explore how SOFR reflects general liquidity and borrowing costs, particularly in the U.S. Treasury repo market.
2. To discuss how the Federal Reserve utilizes repo and reverse repo operations as tools for implementing its monetary policy.
3. Case Study
– Case (HBS W16695): Has LIBOR Lost Its Stature in Derivatives Markets?
– Case (HBS UV8232): Interbolsa’s Repo Trading: How to Stop an Insolvency Ticking Time Bomb (A)
– Case (HBS UV8234): Interbolsa’s Repo Trading: How to Stop an Insolvency Ticking Time Bomb (B).
(W3) Topic 2: Exotic Swaps
1. Focus on structures and product applications of non-generic swaps.
2. Swaps covered: constant maturity swaps (CMS), constant maturity treasury swaps (CMT), arrears swaps, differential (quanto) swaps, option-embedded swaps, and accrual swaps.
(W4, W5) Topic 3: Structured Products and Embedded Derivatives
1.To explore structured products and decompose structured bonds and derivatives into component transactions.
2. To analyze the rationale behind the strategies.
3. Case Study
– Case (HBS 9-217-050): Exotic Interest Rate Swaps: Snowballs in Portugal
(W6, W7) Topic 4: Carry Trades and Relative Value Trades
1. To discuss profit generation from the carry trades.
2. To explore the exploitation of discrepancies between closely related financial instruments.
3. Detailed exploration of profit generation under various market conditions.
(W8, W9) Topic 5: Swap Spread Trades
1. To examine various strategies involving swap spreads.
2. To explore dynamic relationships between Treasury bonds and swap markets.
3. To provide insights into the challenges of predicting and managing swap spread trades.
4. Case Study
– Case (HBS A00153): Swap Curve Steepener
– Case (HBS 9-211-051): Fixed Income Arbitrage in a Financial Crisis (C): Ted Spread and Swap Spread in November 2008
(W10, W11) Topic 6: Volatility Trades and Volatility Spread Trades
1. Trading Volatility with Options: using options to speculate or hedge based on expected changes in volatility.
2. Volatility Trading Strategies: strategies involving the purchase or sale of options to profit from the volatility discrepancies.
3. Risk Management: analysis of market conditions, monitoring of Greek metrics, and adjusting positions accordingly.
4. Case Study
– Case (HBS 9-211-052): Fixed Income Arbitrage in a Financial Crisis (D): Ted Spread and Swap Spread in November 2008
(W12, W13) Topic 7: Conditional Curve Trades
1. Overview of Conditional Trades: discussing how these trades combine rate strategies with options to manage specific market risks.
2. Conditional Curve Trades: using options to benefit from specific yield curve movements.
3. Conditional Spread Trades: utilizing options to capitalize on movements in swap spreads under particular rate scenarios.
(W14, W15) Topic 8: Dollar Roll
1. Treasury Futures Basis and Rolls: examining the net basis and the embedded delivery options within Treasury futures.
2. Trading Strategies: discussing strategies for trading Treasury futures, including considerations for managing positions and risks.
3. Practical Aspects: practical applications and complexities involved in the Treasury futures market.
(W16) Final-Term Evaluation
這是一門和必修課課程 loading相當的選修課，非常不建議希望課程loading輕的同學選修的此課程。
There are three components to the final grade of the course:
– Homework (25%): Problem sets will be distributed nearly every week and are due in the following week's class. Late assignments will not be accepted.
– Class participation (30%): Students are required to read assigned papers or cases before coming to class. Each group will be asked to present one paper or case every week or every two weeks.
– Final-Term Project (45%): There will be a group-based final-term project involv ing the design of structured financial products.
The main textbook for this course is:
– (TS) Tuckman, B., and Serrat, A. (2022). Fixed Income Securities: Tools for Today's Markets. John Wiley & Sons.
– Journal papers and HBS cases will be assigned as required readings for each topic of the course.