Fixed Income Investment

Objective
The Fixed Income Investment training course provides a practical overview of the fixed income markets, with focus on the management of bond portfolios.

Key benefits
By attending this program, you will:

• Increase your understanding of the different types of risk faced by bond portfolio managers
• Learn about measures of risk such as duration and convexity as well as more advanced measures
• Review fixed-income derivatives, futures, options and swaps and understand their usefulness in bond portfolio management for hedging or speculating
• Analyze currency risk in international portfolios of bonds

Day 1
Risk and Return for Bonds without Embedded Options

• Yield measures
• Risk measures: Part I
  -  Duration: Definition, usefulness, properties and limitations
   
• Risk Measures: Part II
  -  Convexity: Definition, usefulness, properties and limitations
   
• Usefulness of duration in bond portfolio management: Immunization
• Usefulness of convexity in bond portfolio management: Butterfly swaps

Risk and Return for Bonds with Embedded Options

• Adjusted yield measures
• Adjusted risk measures
  -  Adjusted duration
  -  Adjusted convexity
   
• Bond portfolio management for bonds with embedded options
   

Day 2
New Measures of Risk

• Factor based measures of risk
  -  The shift
  -  The tilt
  -  The flex
   
• Key rate durations

Use of Derivative Instruments in Bond Portfolio Management: Part I - Interest Rate Swaps

• Interest rate swaps as portfolio of bonds
• Risk of interest rate swaps: Interest rate risk and credit risk
• Swap rationale
• Advanced swaps: Forward swaps and swaptions
• Usefulness of swaps in bond portfolio management

Day 3
Use of Derivative Instruments in Bond Portfolio Management: Part II - Futures

Pricing Long Term Bond Futures

• Pricing of futures: General principles
• Pricing of bond futures
  -  Conversion factors
  -  Cheapest bond to deliver
  -  Delivery options

Use of Bond Futures in Bond Portfolio Management

• Difficulties of hedging with bond futures
• Hedging with bond futures
  -  Duration hedging
  -  Factor hedging
  -  Price regression hedging
  -  Regression / duration hedging
  -  Generalized duration hedging

Strategies with Bond Futures

Day 4
Use of Derivative Instruments in Bond Portfolio Management: Part III - Options

• Pricing interest rate options
  -  Typology of interest rate options
  -  Simple payoff diagrams
  -  Pricing interest rate options: The Black, Derman and Toy Model

Use of Interest Rate Options in Bond Portfolio Management

• Pricing examples
  -  Bonds with embedded options
  -  Sinking funds
   
• Reshaping bond portfolio returns with options
• Hedging asymmetric risk with options
• Duration hedging with convexity adjustment using futures and options
   

Day 5
Currency Risk in a Bond Portfolio

• International diversification
• Currency risk in bond portfolios
• Currency hedging

Case study 

The typical participant in the Fixed Income Investment training course will be an investment professional, analyst or plan sponsor. This includes bond analysts, pension fund advisors, risk managers, private client portfolio managers and consultants to the fund management industry. Those responsible for the management of fixed-income portfolios within banks, pension funds and insurance companies are advised to attend.

Amsterdam Institute of Finance is registered with CFA Institute as an Approved Provider of continuing education programs. This program is eligible for 24 CE credit hours as granted by CFA Institute. If you are a CFA Institute member, CE credit for your attendance at this event will be automatically recorded in your CE Diary.

“It helps to relate different markets and instruments. Very good for risk managers.”
Liquidity Manager, State Treasury Department
Ministry of Finance
Estonia

“It extends your knowledge in a way that can directly be applied to your daily activities.”
Pricing Specialist,
ING Investment Management
Netherlands

"I would recommend this program because it is a very practical, well explained overview of the fixed income markets. The subjects discussed are very useful."
Senior Manager, Interbank
Saudi Hollandi Bank
Saudi Arabia

“The program gives a good overview of the topic. Furthermore, relationships between instruments are very well explained.”
Portfolio Manager, Asset Management,
Financial Markets Division
De Nederlandsche Bank