IC203-Debt Markets and Instruments

Module Provider: ICMA Centre
Number of credits: 20 [10 ECTS credits]
Terms in which taught: Spring term module
Pre-requisites: IC102 Introductory Finance/Trading Simulation I
Non-modular pre-requisites:
Modules excluded:
Current from: 2019/0

Module Convenor: Gail Rolland

Email: xj904458@reading.ac.uk

Type of module:

Summary module description:

In this module students will study the international debt markets, equipping them with the tools to analyse and compare products and determine trading and hedging strategies.


There are two overall objectives of this unit. First, to develop an understanding of the products and practices of international money and bond market cash instruments and bond futures.   Second, to provide insight into how such instruments are commonly used in the implementation of trading, hedging and portfolio strategies. The emphasis is on quantitative techniques and practical examples rather than detailed knowledge of the institutional features of debt markets.

Assessable learning outcomes:

Students should be able to identify key features of international debt products and markets and know how to price and hedge (control the risk of) traditional fixed income bonds. Students should be able to apply these techniques in the formulation of trading and hedging strategies commonly used in today’s market.

Additional outcomes:

Although the emphasis is on pricing and hedging, students will gain some knowledge of the structure and characteristics of modern debt markets. In addition, students will gain some understanding of the economics of interest rates and how bond markets behave in different economic circumstances.

Trading sessions in a simulated dealing environment will enhance the students’ knowledge by working with FX prices, to see influences on value, trading and managing risk.

Outline content:

Introduction to long and short-term debt market Instruments and core TVM maths

  • FX and Money markets

  • Bond pricing and yields: yield conventions and their impact

  • Treasury securities and the yield curve: fitting and interpreting the curves

  • Spot and forward yields

  • Duration and Convexity

  • Bond Futures: trading and hedging strategies

  • Corporate bonds: determining risk and corporate bond pricing, role of credit ratings; issuance procedure

  • Introduction to structured securities: bonds with embedded options and contingent cash flows

Brief description of teaching and learning methods:
Teaching will be by traditional lecture presentations. Students will be examined on material contained in the recommended textbooks and will not be able to rely solely on the lecture notes and handouts. Seminars will focus on problem solving and students will be expected to answer questions set for the seminars. The seminars will also be used to provide additional teaching, where necessary.

Contact hours:
  Autumn Spring Summer
Lectures 20
Seminars 9
Practicals classes and workshops 10
Guided independent study:      
    Wider reading (independent) 10
    Wider reading (directed) 61
    Exam revision/preparation 40
    Advance preparation for classes 10
    Preparation for seminars 10
    Revision and preparation 20
    Reflection 10
Total hours by term 0 200 0
Total hours for module 200

Summative Assessment Methods:
Method Percentage
Written exam 60
Practical skills assessment 10
Class test administered by School 30

Summative assessment- Examinations:
One 2-hour unseen written paper

Summative assessment- Coursework and in-class tests:

One 90 minute unseen 30 question MCQ

Performance in the trading simulation will be used to award the 10% for practical skills.

Formative assessment methods:

Penalties for late submission:
The Module Convener will apply the following penalties for work submitted late:

  • where the piece of work is submitted after the original deadline (or any formally agreed extension to the deadline): 10% of the total marks available for that piece of work will be deducted from the mark for each working day[1] (or part thereof) following the deadline up to a total of five working days;
  • where the piece of work is submitted more than five working days after the original deadline (or any formally agreed extension to the deadline): a mark of zero will be recorded.

  • The University policy statement on penalties for late submission can be found at: http://www.reading.ac.uk/web/FILES/qualitysupport/penaltiesforlatesubmission.pdf
    You are strongly advised to ensure that coursework is submitted by the relevant deadline. You should note that it is advisable to submit work in an unfinished state rather than to fail to submit any work.

    Assessment requirements for a pass:
    A minimum mark of 40%

    Reassessment arrangements:
    Re-examination for Part 2 modules takes place in August/September of the same year

    Additional Costs (specified where applicable):
    1) Required text books: An Introduction to Bond Markets (fourth edition) by
    Moorad Choudhry, published by Wiley
    ISBN: 978-0-470-68726-6, RRP: £36.00.
    2) Specialist equipment or materials:
    3) Specialist clothing, footwear or headgear:
    4) Printing and binding:
    5) Computers and devices with a particular specification:
    6) Travel, accommodation and subsistence:

    Last updated: 8 April 2019


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