Fixed Income Fundamentals and Math for Corporate Finance [Financial Mathematics]

Fixed Income Fundamentals and Math for Corporate Finance [Financial Mathematics]

This two part module is an introduction to fixed income fundamentals and the principal products and players involved in the fixed income markets and shows the points covered using real market data and examples of the most frequently used Bloomberg screens for bonds.

This two part module is an introduction to fixed income fundamentals and the principal products and players involved in the fixed income markets and shows the points covered using real market data and examples of the most frequently used Bloomberg screens for bonds.

‘My name is Bond…. Corporate Bond’

 

Course description part 1 – Fixed Income Fundamentals

Get on good terms with the fundamental concepts

You will be introduced to the fundamental concepts and have the opportunity to get on good terms with bond pricing, duration and yield curves,  all of which are extensively explored.

This course includes a variety of applied exercises and case studies as well as sophisticated search and navigation tools that enable you to progress at your own pace with pop quizzes to test your level of progress.  The material also includes two PDF reference guides, an accounting fact sheet and a financial statements glossary that can be used as you work through the course and which can also be downloaded for future reference.

Module 1 – Fixed income products and markets

This first module examines the core features of what a bond entails comprising the issuer, coupon and maturity date.  We take you through the key issuers and discuss ratings for bonds.  The yield curve is the key driver of changes in bond prices.

We analyse shapes of typical yield curves in tandem with how the yield curve moves through the economic scale.  To illustrate the various discussion points this module uses Bloomberg’s DES, YAS, and IYC screens.

This two part module is an introduction to fixed income fundamentals and the principal products and players involved in the fixed income markets and shows the points covered using real market data and examples of the most frequently used Bloomberg screens for bonds.

We also cover the key features of fixed income securities and bonds and you will also develop an understanding of the yield curve and what it represents as well as how to track yield curve changes throughout the economic cycle.

Module 2 – Pricing fixed income securities and duration

We open the second module with a demonstration of how bonds are priced using discounted cash flow and examine the relationship between the bond price and yield.

Clean prices, dirty prices

We also explore clean prices, dirty prices and accrued interest and you will develop an understanding of how bond prices move as their yields move which is a core concept in the fixed income market.  We explain both Macaulay and modified duration and this module also offers an intuitive explanation of these concepts prior to analysing detailed calculations.

You will also learn how to:

  • Use DCF to price bonds.
  • Understand the relationship between bond prices and yields.
  • Use duration to understand how bond prices move in the market.

 

Module curriculum

  • Fixed income products and markets

Downloadable files

Session objectives

DCF valuation definitions

Bonds

Bond certificates

Reading a bond certificate

Semi-annual bond quiz

US Treasury 10 year

US Treasury yield graph

Ford DES demonstration

For DES demonstration 2

The bond is right exercise

Issuers of bonds

Who invests in bonds?

Yield curves

US Treasury yield curve from Bloomberg

Credit spreads

Cash flow forecast period

Yield rating quiz

The economic cycle

Yield curve changes quiz

Yield curve shapes demonstration

Yield curve mix and match exercise

Conclusion

This two part module is an introduction to fixed income fundamentals and the principal products and players involved in the fixed income markets and shows the points covered using real market data and examples of the most frequently used Bloomberg screens for bonds.

  • Pricing fixed income securities and duration

Downloadable Files

Session objectives

Accrued interest

Bond pricing quiz

Time value of money

Compound interest

Discounting

Calculating cash flow

Pricing a bond

Annual bond demonstration

Manufacturing your pricing exercise

Pricing a bond continued

Bonds, prices and yields

Bond pricing quiz

Duration definition

Zero coupon bonds

Bond sensitivity

Macaulay duration

Coupon bonds

Duration calculation

Drivers of duration

Duration quiz

Modified duration and Macaulay duration

Duration exercise

Conclusion

This two part module is an introduction to fixed income fundamentals and the principal products and players involved in the fixed income markets and shows the points covered using real market data and examples of the most frequently used Bloomberg screens for bonds.

  • Qualified Assessment

 

Qualified Assessment

Module evaluation

 

 This two part module is an introduction to fixed income fundamentals and the principal products and players involved in the fixed income markets and shows the points covered using real market data and examples of the most frequently used Bloomberg screens for bonds.

 

Course description part 2 – Math for Corporate Finance [Financial Mathematics]

This four part module shows how various financial mathematical formulas can be used to perform a detailed analysis on a set of data and/or variables.

Module 1 – Discounted cash flows

“Time value of money”

In this first module, we examine in detail the concept of “time value of money” and focus on how present values and future values are calculated using compounding and discounting techniques.

We also focus on how the present values of annuities, perpetuities and growing perpetuities are calculated.  Learning the various concepts is supported by practical and applied exercises and case studies.  Upon completion of this module, you will have developed a thorough understanding of how discounted cash flow techniques are used to evaluate future cash flows.

You will also gain an in-depth understanding of:

  • The concept of “time value of money”.
  • Specific terms including present value, future value, NPV, DCF, annuities and perpetuities.
  • DCF techniques used to calculate present values.
  • How to calculate the present value of cash flow streams such as annuities and perpetuities.

This two part module is an introduction to fixed income fundamentals and the principal products and players involved in the fixed income markets and shows the points covered using real market data and examples of the most frequently used Bloomberg screens for bonds.

Module 2 – Bond pricing and yields

This financial mathematics module examines bond pricing and yields and starts off by explaining how to calculate the price of a bond using discounted cash flows.

Trading at par, at a premium or at a discount

We explore how various yields (for instance, the current yield and the yield to maturity) are calculated and also explain the relationship between bond prices and yields and how to identify whether a bond is trading at par, at a premium or at a discount.

Learning the various concepts is supported by practical and applied exercises and case studies.  Upon completion of this module, you will have developed a sound understanding of how bonds are priced and how yields are calculated.

You will also learn how to:

  • Use DCF to establish the price of an annual or semi-annual bond.
  • Calculate the different yields used to assess bond returns.
  • Define the relationship between bond prices and yields.
  • Ascertain whether a bond is trading at par, premium or discount.

 

This two part module is an introduction to fixed income fundamentals and the principal products and players involved in the fixed income markets and shows the points covered using real market data and examples of the most frequently used Bloomberg screens for bonds.

Module 3 – Key statistical skills

This module examines the key statistical measures used and starts off by explaining how to calculate measures of central tendency including the arithmetic mean and expected values.  You will also learn how to calculated different types of statistical dispersion including range, variance and standard deviation.  Learning the various concepts is supported by practical and applied exercises and case studies and upon completion of this module you will gain a thorough understanding of how to calculate key statistical measures.

This two part module is an introduction to fixed income fundamentals and the principal products and players involved in the fixed income markets and shows the points covered using real market data and examples of the most frequently used Bloomberg screens for bonds.

You will also learn how to:

 

  • Calculate different measures of central tendency including arithmetic mean, weighted mean, WACC and expected values.
  • Calculate simple moving and weighted moving averages.
  • Calculate different types of statistical dispersions including range, variance and standard deviation.

Module 4 – Covariance, correlation and regressions

This module examines the mathematical relationship between two variables and starts off by explaining how covariance and correlation are defined and calculated.  We discuss how regression analysis is used to estimate the value of one variable based on another.

We investigate the regression equation and explain how to interpret the coefficient of determination and how to access the regression tools in Excel.  Learning the various concepts is supported by practical and applied exercises and case studies and upon completion of this module you will have grasped how to calculate and interpret covariance, correlation and the results of regression analysis.

You will also learn how to:

  • Use correlation and covariance in describing the relationship between two variables.
  • Calculate covariance and correlation using Excel.
  • Use regression analysis in describing the relationship between two variables.
  • Perform regression analysis using Excel and interpret the results.

This two part module is an introduction to fixed income fundamentals and the principal products and players involved in the fixed income markets and shows the points covered using real market data and examples of the most frequently used Bloomberg screens for bonds.

Course curriculum

  • Discounted cash flows

Downloadable content

Session objectives

The basic idea

The discount rate

Which is more valuable to you?

The time value of money

A simple example

Time value quiz

Compounding and discounting

NPV introduction

NPV demonstration

NPV exercise

Annuities introduction

Understanding annuities

The annuity factor

Annuity quiz

Annuity tables

Annuity demonstration

Annuity exercise

Perpetuity

Perpetuity example

Constant perpetuity

Growing perpetuity

Perpetuity demonstration

Prize draw exercise

Conclusion

This two part module is an introduction to fixed income fundamentals and the principal products and players involved in the fixed income markets and shows the points covered using real market data and examples of the most frequently used Bloomberg screens for bonds.

  • Bond pricing and yields

Downloadable files

Session objectives

Bonds

Valuing a bond

Forecasting cash flows

Par value

Coupon rate and yield to maturity

Quiz

Setting up the cash flow

Annual bond demonstration

Annual bond exercise

Semi-annual bond cash flows

Semi-annual bond yield to maturity

Semi-annual diagram of cash flow

Quiz

Semi-annual bond demonstration

Semi-annual bond exercise

Yield to maturity

Break down of YTM

Bond prices and yield

Quiz

YTM and current yield

Relationship between yields

Bond pricing and yields exercise

Conclusion

This two part module is an introduction to fixed income fundamentals and the principal products and players involved in the fixed income markets and shows the points covered using real market data and examples of the most frequently used Bloomberg screens for bonds.

  • Key statistical skills

Downloadable files

Session objectives

Measures of central tendency

Arithmetic mean

Weighted mean

WACC

Quiz

WACC equation

Expected values

Expected values demonstration

Expected values exercise

Moving averages

Simple moving average

Simple moving example

Quiz

Weighted moving average

Weighted moving example

Weighted moving average demonstration

Weighted moving average exercise

Measures of dispersion

Range

Variance

Variance example

Quiz

Population versus sample variance

Standard deviation

Variance versus standard deviation

Mean and standard deviation demonstration

Mean and standard deviation exercise

Conclusion

 

  • Covariance, correlation and regression

Downloadable files

Session objectives

Relationship between variables

Covariance and correlation

Covariance

Calculating the covariance

Drivers of covariance

Quiz

Correlation

Covariance and correlation demonstration

Covariance and correlation exercise

Regression analysis

Simple linear regression

The regression equation

Quiz

Sum of squares

R squared and the correlation coefficient

Regression demonstration

Target exercise

Conclusion

 

  • Qualified Assessment

Qualified Assessment

Module evaluation

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