Fixed Income Analysis

Day One

09.00 - 09.15 Welcome and Introduction

09.15 - 12.00 Fixed Income Markets and Instruments

• Types of Fixed Income Instruments
• A Sightseeing Tour of World Fixed Income Markets
• How Bonds and other Fixed Income Instruments are Traded
• Issuer and Investor Perspectives

Cash Flow Analysis

• Cash Flows for Typical Fixed Income Structures
• Time Value of Money
• Future and Present Value
• Simple and Compound Return
• Annuities
• Examples and Exercises

12.00 - 13.00 Lunch

13.00 - 16.30 Price and Yield Analysis

• The Price/Yield Relationship
• Clean and Dirty Price
• Accrual Conventions
• Types of Yield
  • YTM
  • Realized yield
  • Horizon yield
  • Yield to call
• Yield Calculation
• Yield Conventions
• Yield Decomposition
  • Current yield
  • Interest upon interest
  • “Pull-to-maturity”
• Examples and Exercises

Day Two

09.00 - 09.15 Brief recap

09.15 - 12.00 Risk Analysis

• Price Volatility and Interest Rate Volatility
• Sources of Interest Rate Volatility
• Key Ratios for Interest Rate Sensitivity
  • Duration
  • Modified duration
  • Dollar duration
  • BPV
  • Convexity and relative convexity
• Portfolio Key Ratios
• Calculation of Expected Return Using “Babcocks Formula”
• Examples and Exercises

12.00 - 13.00 Lunch

13.00 - 16.30 Yield Curve Analysis

• The Coupon Yield Curve and the Spot Curve
• Interpretations of the Yield Curve
• Pricing Bonds Using the Yield Curve
• Calculating Forward Rates

Total Return Analysis (Horizon Analysis)

• Purpose of Total Return Analysis
• “Total Return” Defined
• Assessing Reinvestment Risk
• Assessing Principal Risk
• Calculating Expected Return
• Sensitivity Analysis
• Bond Switching Strategies
• Exercises

Evaluation and Termination of the Seminar