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25728 Bond Portfolio Management

Warning: The information on this page is indicative. The subject outline for a particular semester, location and mode of offering is the authoritative source of all information about the subject for that offering. Required texts, recommended texts and references in particular are likely to change. Students will be provided with a subject outline once they enrol in the subject.

UTS: Business: Finance
Credit points: 6 cp

Subject level:

Postgraduate

Result type: Grade and marks

Requisite(s): 25721 Investment Management OR 25741 Capital Markets
These requisites may not apply to students in certain courses.
There are course requisites for this subject. See access conditions.

Handbook description

This is a specialised subject focusing on the conceptual and theoretical aspects of interest rates and risk management in bond markets. The subject includes discussions of the term structure of interest rates, bond pricing and bond portfolio strategies. The subject includes a large applied component involving the construction of yield curves and the analysis of bond market data, as well the construction and management of bond portfolios.

Subject objectives/outcomes

Upon successful completion of this subject students should be able to:

  1. explain the characteristics of the term structure of interest rates
  2. evaluate the characteristics of fixed income portfolios
  3. apply the tools to evaluate interest rate sensitivity of bonds and bond portfolios
  4. use bond portfolio strategies for risk management
  5. analyse mortgage-backed securities.

Contribution to course aims and graduate attributes

This is a specialised subject focusing on many aspects of the valuation and risk assessment of fixed income securities and portfolios. The subject contributes to the course by ensuring that students are provided with a detailed analysis of the techniques used by analysts and fund managers in the construction of yield curves, analysis and valuation of fixed income securities and the construction and management of bond portfolios.

Teaching and learning strategies

The subject is presented using a combination of lectures and workshops. These classes will be supplemented with both printed and electronic learning materials and resources. The UTS web-based communication tool (UTS Online) will be used. EXCEL spreadsheets, including user-defined macros, are extensively used in the application of theory presented in lectures to market data and practical problems.

Content

1. Bond pricing and yield measures,
2. The term structure of interest rates, the yield curve, spot rate curve and forward curve
3. Return analysis and historical performance
4. Price volatility of option-free bonds
5. Price volatility measures: duration, convexity
6. Duration, convexity and the yield curve
7. Bond portfolio management strategies
8. Analysis of mortgage-backed securities

Assessment

Assessment Item 1: Assignments (Group)

Objective(s):

1-5
Weighting: 30

Assessment Item 2: Final Exam (Individual)

Objective(s): 1-5
Weighting: 70

Minimum requirements

Students must achieve at least 50% of the subject’s total marks.

References

  • Fabozzi, F. J., Fixed Income Analysis, 2nd edition,Wiley CFA Investment Series, 2007.
  • Fabozzi, F. J., Bond Markets, Analysis and Strategies, 7th edition, Prentice-Hall, 2009.
  • Fabozzi, F. J., Bond Markets, Analysis and Strategies, 8th edition, Prentice-Hall, 2012.
  • Martellini, L., P. Priaulet, and S. Priaulet, Valuation, Risk Management and Portfolio Strategies, Wiley 2003.
  • Sundaresan, S., Fixed Income Markets and Their Derivatives, 3rd edition,Academic Press, 2009.
  • Garbade, K. D., Fixed Income Analytics, MIT Press, 1996.
  • Hunt, B., and C. Terry, Financial Institutions and Markets, 6th edition, Thomson, 2011.
  • Viney, C., Financial Institutions, Instruments & Markets, 6th edition, McGraw Hill, 2009.
  • Tuckman, B. and Serrat, A., Fixed Income Securities: Tools for Today's Markets, 3rd edition, Wiley 2011.

Websites

Other resources


The lecture notes will be available on UTSOnline.

Students will also be provided with problem sets to be discussed in class. These will be available from UTSOnline.