BUSINESS SCHOOL

Unit of Study Outline

Unit Code FINC3019
Unit Title Fixed Income Securities
Semester 2, 2016
Pre-requisite Units: (FINC2012 or FINC2002) or (FINC2013 or FINC2003) or (FINC2014 or FINC2004)
Co-requisite Units:
Prohibited Units:
Assumed Knowledge and/or Skills: Basic Probability and Statistical Theory, Calculus, Basic Working
Knowledge of Excel
Unit Coordinator: Dr Richard Philip
Address: Room 415, The Business School Building(H69), Darlington NSW 2008
Email: richard.philip@sydney.edu.au Phone: 91140578
Consultation Hours: Friday 9-10 during teaching weeks
Class Day(s): Lecture: Wednesday 12:00-14:00 Tutorials: Refer to timetable
Required Text / Resources:
Fabozzi F.J. (2012) Bond Markets, Analysis and Strategies (8th Edition), Pearson Education.

This unit of study outline MUST be read in conjunction with

The Business School Unit of Study Common Policy and implementation information that applies to every unit of study offered by the
Business School (http://sydney.edu.au/business/currentstudents/policy). All assessment rules, such as standards used, penalties etc, are
covered.
The Business School Student Administration Manual - for information about all processes such as illness, appeals etc (
http://sydney.edu.au/business/currentstudents/student_information/student_administration_manual) When deciding applications and
appeals relating to these matters it will be assumed that every student has taken the time to familiarise themselves with these key policies
and procedures.
The Business School seeks feedback from students and staff in order to continually improve all units offered. For information on previously
collected feedback and innovations made in response to this feedback, please see
http://sydney.edu.au/business/learning/planning_and_quality/feedback/student

1. Unit of Study Information

This unit is designed to provide a thorough grounding in fixed income securities, bond portfolio analysis and the
use of closely related financial instruments in risk management. The unit begins with the basic analytical
framework necessary to understand the pricing of bonds and their investment characteristics (introducing
fundamental concepts such as duration, yield and term structure). This provides the building blocks for analysis of
more complicated corporate and derivative securities. Sectors of the debt market, including treasury securities,
corporate bonds, mortgage-backed securities, and convertible bonds are analysed. The use of derivatives and a
selection of special topics in fixed income are also discussed.

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2. Program Learning Outcomes and Unit Learning Outcomes

The Program Learning Outcomes for this Program are located at
http://sydney.edu.au/business/about/accreditations/AoL
Unit Learning Outcomes
Unit Learning Outcomes
Program Learning Outcomes
On the successful completion of the Unit you should be able to:
Articulate the recent developments and innovation in the fixed income area. 1. Business Knowledge
4. Communication
Identify and understand the function of fixed income markets and their role 1. Business Knowledge
in the economy.
2. Critical Thinking
Explain the dynamics of interest rates and their term structure and relate
1. Business Knowledge
them to the pricing of fixed income securities.
2. Critical Thinking
3. Business Analysis and
Problem-Solving
4. Communication
Analyse the principles of bond portfolio's and explain their management.
1. Business Knowledge
2. Critical Thinking
3. Business Analysis and
Problem-Solving
Apply theory to the management of the risk inherent in fixed income
1. Business Knowledge
securities, derivatives and portfolios.
2. Critical Thinking
3. Business Analysis and
Problem-Solving
3. Assessment
Assessment
Name
Mid-semester
Exam
Group
Assignment
Final Exam

Individual/ Assessment
Group
Conditions

Program
Learning
Outcomes
Assessed

Length

Weight

Due
Time

Due Date

Closing Date

Individual

Compulsory

2, 3

1 hour

25%

2:00pm

15-Sep-2016

15-Sep-2016

Group

Compulsory

2, 4, 5

12 pages 25%

4:00pm

17-Oct-2016

24-Oct-2016

Individual

Compulsory

2, 3

2.5
Hours

Final Exam
Period

Final Exam
Period

Academic
Honesty

50%

Week 4

For the meaning and operation of this table, see policy information in the box on the front page or click here

Assessment details
Mid-semester Exam

Task Description
The objective of the mid-semester exam is to motivate you to regularly revise the course material and to
complete the tutorial questions. The exam will provide you with feedback on your performance over the first 4
weeks of the course. The test will be 1 hour in duration and will be held in Week 8 in class. It will examine all
material covered in Weeks 1 to 4
Assessment Criteria
1. Attention to purpose
2. Use of literature/ Knowledge of theory
3. Analysis

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4.
5.
6.
7.

Problem solving
Conceptualisation
Critical reasoning / critical thinking
Time management/self management

Feedback - What, when and how feedback will be provided for this assessment
Worked solutions presented in Lectures

Group Assignment

Task Description
Students will be required to form groups of 3-5 and conduct a study of fixed income markets with the goal of
forming a bond portfolio from a range of individual fixed income securities. The particular details of the project
will be posted on blackboard in the first few weeks of the semester. The assigment will be submitted via
turnitin.
Assessment Criteria
1. Conforming with instructions (e.g. word length, font, other instructions)
2. Presentation, communication & style (written)
3. Clarity of expression (incl. accuracy, spelling, grammar, punctuation)
4. Attention to purpose
5. Use of literature/ Knowledge of theory
6. Methodology used is the most appropriate to the aims and objectives of the task
7. Data/information gathering/processing
8. Context in which subject is used
9. Analysis
10. Critical reasoning / critical thinking

Feedback - What, when and how feedback will be provided for this assessment
Before October 26th assignments with comments will be returned. Disussion of what was required for top
marks will be presented in lectures.

Final Exam

Task Description
This will be a closed-book examination of two hours duration held during the Examination Period. The
questions will cover the entire 13 weeks of the course. Further administrative details on the final exam will be
provided in Week 13
Assessment Criteria
1. Presentation, communication & style (written)
2. Attention to purpose
3. Use of literature/ Knowledge of theory
4. Methodology used is the most appropriate to the aims and objectives of the task
5. Analysis
6. Problem solving
7. Conceptualisation
8. Critical reasoning / critical thinking
9. Time management/self management

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Feedback - What, when and how feedback will be provided for this assessment
Final marks released subject to the University policy and timetable arrangement. The final exam will be
available for review during the exam review period.

4. Other Resources for Students

All lectures and seminars are recorded and will be available within Blackboard for student use. Please note the
Business School does not own the system and cannot guarantee that the system will operate or that every
class will be recorded. Students should ensure they attend and participate in all classes.
The following books are on library reserve and may help you in your study of Fixed Income Securities:

* Sundaresan, S. (2009) Fixed Income Markets and Their Derivatives, 3rd edition, Academic Press
* Martellini, L., P. Priaulet and S. Priaulet (2003) Fixed Income Securities: Valuation, Risk Management, and
Portfolio Strategies, John Wiley [also available online via the library catalogue]
* Hull, J. (2009) Options, Futures and Other Derivatives, 7th Edition, Pearson Prentice Hall
Academic articles, supplementary materials and readings will be provided on blackboard
http://bonds.about.com/?once=true http://www.bondresources.com/
http://www.bondsonline.com/
http://www.investinginbonds.com/
http://www.bloomberg.com/news/bonds/

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5. Unit Schedule
Week
1
25 Jul 2016
2
1 Aug 2016
3
8 Aug 2016
4
15 Aug 2016
5
22 Aug 2016
6
29 Aug 2016
7
5 Sep 2016
8
12 Sep 2016
9
19 Sep 2016

List of Topics

Assessments Due

Introduction - The Fixed Income Market

Pricing Basic Bonds: The Relationship Between Prices and Yields
Bond Price Volatility: Duration and Convexity
The Term Structure of Interest Rates: Modelling the Yield Curve
Bond Portfolio Management
Bloomberg Labs 1
Bloomberg Labs 2
Mid Semester Test
during class

Mid Semester Exam

Bond Credit Analysis and Securitization Part I
Common week 26 Sep to 2 Oct

10
3 Oct 2016
11
10 Oct 2016
12
17 Oct 2016
13
24 Oct 2016

Securitization Part II
Interest Rate Derivatives
Bonds with embedded options/Guest Lecture

Assignment is due

Credit Default Swaps

Review Lecture

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