Fixed income instruments provide lower risk returns through interest payments and repayment of principal. They come with various risks like interest rate risk, credit risk, inflation risk. Common fixed income products include treasury bills, government bonds, commercial paper, mortgage backed securities, and various derivatives like interest rate swaps, swaptions, and caps/floors that allow hedging of risks. Understanding the features, risks and types of various fixed income instruments is important.

1. Understanding Fixed Income Instruments

4. Types Of Bonds Understanding Fixed Income Instruments

6. Accrual Securities Buyer Seller Jan 09 Jan 10 Jun 10 Jan 11 Jun 11 Jun 09 $ 5 $ 5 $ 5 $ 5 $ 5 Accrued Interest Par Value of $100 - Semi Annual Interest Of 5% Dirty Price – Trading Cum-Coupon Clean Price – Trading Ex-Coupon Understanding Fixed Income Instruments

20. Fixed Income Derivatives Understanding Fixed Income Instruments

24. Interest Swaps – I llustrated Understanding Fixed Income Instruments Time 6-Month Fixed Rate Floating Rate Swap 0 2.80% – 100.0 – 100.0 0 0.5 3.40% 2.3 1.4 0.9 1 4.40% 2.3 1.7 0.6 1.5 4.20% 2.3 2.2 0.1 2 5.00% 2.3 2.1 0.2 2.5 5.60% 2.3 2.5 – 0.2 3 5.20% 2.3 2.8 – 0.5 3.5 4.40% 2.3 2.6 – 0.3 4 3.80% 102.3 102.2 0.1 Cash Flows During the Life of a Hypothetical USD 100MM 4.6% Four-Year Swap