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2012/2013  KAN-CM_SU8O  Bond Markets

English Title
Bond Markets

Course information

Language English
Exam ECTS 7.5 ECTS
Type Elective
Level Full Degree Master
Duration Summer
Course period Summer
NOTE: The course schedule is at the moment ONLY available at www.cbs.dk/summer
Time Table Please see course schedule at e-Campus
Study board
Study Board for MSc in Economics and Business Administration
Course coordinator
  • Faculty - Erik Theissen, University of Mannheim
    Patricia Plackett - Department of Operations Management
Main Category of the Course
  • Finance
Last updated on 23-04-2012
Learning objectives
After this course students should
  • know the institutional features of primary and secondary markets for bonds
  • be able to value standard coupon and zero bonds
  • be able to describe the various approaches to explain the term structure of interest rates
  • be familiar with the concepts for measuring and managing interest rate risk and credit risk
  • understand the basic features of valuation principles for non-standard bonds (such as callable or convertible bonds)
  • be able to describe different approaches to manage a bond portfolio
  • be able to describe how securitization works, describe the problems involved and how they relate to the 2007-2008 financial crisis
It is recommended that students are familiar with basic finance issues (such as the NPV rule, annuities, the term structure of interest rates, debt and equity financing, the theory of portfolio selection and the CAPM) at the level of standard finance textbooks such as Brealey/Myers/Allen (Principles of Corporate Finance, 10th. edition, McGraw-Hill 2011), Ross/Westerfiled/Jaffee/Jordan (Modern Financial Management, 8th edition, McGraw-Hill 2008), Berk/DeMarzo (Corporate Finance, Addison-Wesley 2008)
Bond Markets
4-hour written exam:
Type of test Written Exam
Marking scale 7-step scale
Second examiner No second examiner
Exam period Summer Term
Aids Please, see the detailed regulations below
Duration 4 Hours
Each student is allowed to bring one sheet of A4 or letter format paper (double-sided). Students may also use a pocket calculator.
Course content
Many courses on investments have their focus on equity markets and cover bond markets only briefly, if at all. By sheer volume. however, bond markets are much larger than equity markets, and the 2007-2008 financial crisis had its origin in the (structured) bond market.
This course is devoted entirely to bond markets, bond portfolio management, and the measurement and management of the risks involved. It introduces the institutional features of primary and secondary bond markets, discusses the valuation of both standard and non-standard bonds, and introduces and explains the term structure of interest rates. It further addresses issues in risk measurement and management (both interest and credit risk) and discusses issues in bond portfolio management. The last chapter discusses asset-backed securities and relates this discussion to the 2007-2008 financial crisis.
Teaching methods
The course will consist of lectures (about 70%) and exercise sessions in which we will discuss questions related to the contents of the course (30%)
Expected literature
Required course readings and literature:
Please note: This list is preliminary and will be updated. In particular I will add chapters from the new textbook by Veronesi (Fixed Income Securities, Wiley 2010). The total number of pages for this preliminary list is about 525.
Bodie, Z., A. Kane and A. Marcus (2009): Investments, 8th edition, McGraw Hill, chapters 14-16.
Crouhy, M., D. Galai und R. Mark (2001b): Risk Management. McGraw Hill, chapters 7 and 8.
Elton, E., M. Gruber, St. Brown and W. Goetzmann (2007): Modern Portfolio Theory and Investment Analysis, 7th edition. Wiley, chapter 22.
Fabozzi, F. (2010): Bond Markets, Analysis and Strategies, 7th edition, Pearson, chapter 1-5 , p. 513-516 in chapter 23, chapter 25.
Jobst, A. (2007): A Primer on Structured Finance. IMF Working Paper.
Ross, S., R. Westerfield, J. Jaffe and B. Jordan (2008): Modern Financial Management, 8th edition, McGraw Hill, chapter 20, p. 585-589 and chapter 24.
Sundaresan, S. (2009): Fixed Income Markets and Their Derivatives, 3rd edition, Academic Press, chapters 1, 2.1 and 2.2, 4, 6.1-6.3, 7.5, 8, 12
Last updated on 23-04-2012