Programme on Fixed Income in Excel

Target Audience

Junior and Middle level Officers in the following functional areas: Risk Management,

Treasury and Portfolio Management.

Overview of the Course

This course discusses the concepts and quantitative aspects of bond pricing,

sensitivity and risk measure and management along with term structure and

economic indicators for traders and risk managers. Subsequently this course also

discusses the dangers of misinterpretation and subsequent unintentional wrong

application of above concepts and then, the correctional measures. Though the focus

is on government securities, option embedded bonds and interested rate derivatives

may also be included depending on the interest of the participants. This course will

also work as prelude to market risk part in GARP examination.

Objective: To develop the knowledge base and computing skill in Fixed Income. For

the best use of the course, participants are requested to carry a simple or scientific

calculator, if they do not prefer to carry laptop.

Contents

( Economic concepts and indicators for traders and risk managers: Industrial

index of production, inflation, stock index, monetary policy rates, RBI’s annual

policy / credit policy, money market rates, 10 year benchmark rate, OIS rate,

MIBOR and LIBOR.

( Computing Tools in Excel for Fixed Income Management: Application of

quantitative tools in Excel (e.g. standard deviation, normal distribution, goal

seek, solver, price, yield, limits of 99% VaR etc)

( Basic Concepts in Fixed Income: Compounding vs. Discounting in the Context

of Time Value of Money – discreet and continuous

( Valuation Methodologies: Valuation of treasury bills and long term dated

securities (i) Application of YTM, (ii) Application Spot Rates, (iii) Interpretation of

Premiums and Discounts

( Valuation of option embedded bonds: Valuation of securities with call option,

put option and convertible debentures

( Credit risk of corporate bonds: Measuring credit risk premium, credit rating of

corporate bonds

( Alternative Return Measures: (i) Holding Period Return, (iii) Inter-Instrument

Performance Assessment in Scenario Analysis for Stress Testing

( Term Structure: (i) Anatomy of Term Structure, (ii) Determining Spot and

Forward Rates, (iii) Different Interest Rate Models

( Sensitivity Analysis: (i) Modified Duration, (ii) Convexity Analysis, (iii) Portfolio

Immunization

( Value-at-Risk (VaR): (i) Critique to Duration and Need for VaR, (ii) Alternative

Methods of VaR calculation

( Validating VaR Model: (i) Back Testing (ii) Stress-Testing

+ Extreme Tail Losses: Calculation of probable tail losses beyond the lower limit

of 99% confidence interval under continuous normal distribution.

+ Fixed Income Derivatives: IRS, FRA, Swaption, Interest Rate Floor, Interest

Rate Collar, Interest Rate Collar

Venue and Fees: For details mail Dr.RituparnaDas@Gmail.com