ACF Academy : : Markets : : Bond Maths

Category: Markets

The principal objectives of this intensive one-day seminar are:

	For delegates to become completely familiar with the concepts of bond maths.
	For delegates to be completely comfortable in applying these concepts in practice.
	To explain the theory underlying the pricing and valuation of fixed income and related products.
	To consolidate delegates’ understanding by providing first-hand experience of each area through interactive workshops, case studies, intensive simulations, and powerful computer analytics – using the HP17BII calculator, and ACF’s Global Trader system.

In our experience, many of those working in the financial markets are ill-at-ease with the mathematics underlying the products they are handling, and unsure how to apply even basic concepts like discounting, compounding, and present-value methods. Even if people are working with these products regularly, they may be uncomfortable about the way in which prices are derived, how sensitive these prices are to market forces, and how they should properly deal with variations to standard products. After attending this first-class seminar, delegates will have mastered the concepts, theory, and practices of bond mathematics, be confident in pricing and valuing a diverse range of fixed income and related financial products, and understand exactly what makes these products tick.


Time Value of Money

	Using a financial calculator and RPN
	Time value of money
	Present and future values
	Interest and discount factors
	Simple vs. compound interest
	Discounting and compounding
	Annuities
	Discounted cash flows
	Net present value
	Internal rate of return
	Partial interest periods
	Discrete vs. continuous compounding
	Nominal vs. effective interest yields
	TVM workshop

Understanding the Yield Curve

	Definition of the yield curve
	The normal yield curve
	Liquidity and expectations hypotheses
	Up and downward sloping yield curves
	Yield curve strategies and plays
	Riding and trading the yield curve

Market Mathematics: Money Market Instruments

	Discount vs. coupon securities
	Pricing discount instruments (e.g. bills, BAs, CP)
	Discount quotations
	Add-on yield quotations
	360- and 365-day bases
	Pricing interest-bearing instruments
	Money-market and bond-equivalent yields
	Frequency of compounding
	Compound effective yield
	Holding-period return
	Money-market workshop


Market Mathematics: Fixed Income Securities

	Pricing coupon securities
	Price and yield
	Gross and net redemption yields
	Day-count conventions
	Accrued income
	Clean and dirty prices
	Current yield vs. yield-to-maturity
	Re-investment of coupons
	Holding-period return
	Price sensitivity concepts
	Duration, volatility, and convexity
	Calculating duration and convexity
	Modified duration
	Using duration to measure bond price sensitivity
	Applying convexity for large yield shifts
	Using duration to manage investment returns within a given horizon
	Duration and convexity of a bond portfolio
	Characteristics of bullet and barbell portfolios
	Using duration to design portfolio hedges
	Fixed income workshop

Market Mathematics: Corporate Bonds

	Corporate bonds
	Bond rating and rating agencies
	Corporate bond spreads
	High-yield bonds
	Sinking funds and other provisions
	Bonds with embedded options
	Floating rate notes (FRNs)
	Corporate bonds workshop

NB All practical sessions are highlighted like this:
	means a Workshop or Simulation
	means a Case study