Fixed Income: Bonds, Securitized Products, and Derivatives

(3 Credits)

The first half of the course provides a hands-on exploration of fixed-income markets, equipping students with the quantitative and strategic skills needed for roles in trading, risk management, and quantitative modeling. Students will develop pricing models for bonds, Residential Mortgages, and Mortgage-Backed Securities (MBS), analyzing market reactions, risk positioning, and hedging strategies. Key topics include interest rates, prepayments, credit spreads (OAS), and model risk. The course also covers structured credit products such as CLOs, CMBS, ABS, and CDOs, along with credit derivatives like CDX and CMBX, emphasizing modeling risks and lessons from the 2008 Financial Crisis. The second half of the course focuses on real-world applications in fixed-income and rate-derivatives markets, bridging the gap between theory and practice. Students will examine bonds, swaps, flow options, and structured products, gaining insight into how economic trade ideas translate into trading and risk management strategies. A problem-oriented approach reinforces intuition about product structuring, market dynamics, and the practical constraints faced by sell-side practitioners in an evolving financial landscape.