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:
Module version for: 2017/8

Module Convenor: Gail Rolland

Email: xj904458@reading.ac.uk

Summary module description:

There are two overall objectives of this unit. First, to develop an understanding of the pricing of money and bond market instruments and, also, of interest rate derivative securities. 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 know how to price and hedge (control the risk of) traditional fixed income bonds and interest rate sensitive derivatives. 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. The lectures will make extensive reference to both past and current market situations. Trading sessions on a simulated dealing environment will enhance the students’ knowledge on pricing, managing the risk and trading fixed income securities.

Outline content:
Introduction to long and short-term debt market Instruments and core TVM maths
Bond Pricing and yields, yield conventions and their impact
Yield Curves and treasury securities: fitting and interpreting the curves
Spot and forward yields
Duration and Convexity
Short-term interest rate Futures
Bond Futures and trading
Credit products: determining risk, role of credit ratings and pricing corporate bonds
Bond 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
Tutorials 9
Guided independent study 171
Total hours by term 200.00
Total hours for module 200.00

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

Other information on summative assessment:
Performance in the trading simulation will be used to award the 10% for practical skills.

Formative assessment methods:
Six seminar assignments

Penalties for late submission:
The Module Convenor will apply the following penalties for work submitted late, in accordance with the University policy.

  • where the piece of work is submitted up to one calendar week after the original deadline (or any formally agreed extension to the deadline): 10% of the total marks available for the piece of work will be deducted from the mark for each working day (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.

    Length of examination:
    One 2-hour unseen written paper

    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: 31 March 2017

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