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FIXED INCOME SECURITIES
Objective:
1. This course is intended to analyze the fixed income securities market and its importance
/implications for investments.
2. It covers the market characteristics and its linkage with money market, etc. Fixed
income instruments, the risks associated with various types of FI securities/markets and their
measurement and management with particular reference to interest rate risk management with
swaps, options and future, portfolio management techniques, term structuring modeling,
corporate bonds & credit risk analysis.
CONTENTS:-
UNIT-I
1. Introduction (3 Hours)
(a) Different financial markets with particular reference to Fixed Income Securities
Market - Institutional Arrangements, Market Participants and Instruments - The linkage
between Fixed Income Market and other Markets
Learning Outcome: After reading this Unit you will understand the structure and mechanism
of Indian Money Market and Government Securities Market- the players, instruments, methods
and conditions of Issue and inter-linkages.
2. Government securities market (3 Hours)
(a) Different type of Government Securities and their features - Regular Coupon
Bonds, Floating Rate Bonds, Capital Indexed Bonds, Option Embedded Bonds, Partly
Paid Bonds, STRIPS (1.5 Hours)
(b) Auction & Bidding, Uniform vs. multiple price auction, Yield and price based
auctions auction, budding behavior, and winners curse analysis. When- Issued markets -
Open Market Operations (1.5 Hours)
UNIT-II
3. Term Structure of Interest Rates (8.5 Hours)
(a) The Interest Rate Concept and Components - Factors affecting interest rates -
Bench Mark Rates - Bench Mark Yield Curve and other Curves (2 Hours)
(b) Theories of Term structure and the economy (1.5 Hours)
(c) Yield Curve Analysis: Par Value, Zero, Spot Curve, Bootstrapping, Spot &
forward rates (2.5 Hours)

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(d) The Yield Concepts - Current / Running Yield, Holding Period Yield, Yield to
Maturity, Yield to Call, Real Yield, Effective Annually Yield, Bond Equivalent Yield,
etc. (1.5 Hours)
(e) Market Conventions relating to Yield (1 Hour)
Learning Outcome: After reading this unit you will understand the concept, theory and
application of Yield Curve, different concepts of yield and construction/bootstrapping of yield
curve. You will also understand the concept, calculation and relationship of Spot and Forward
rates.
4. Bond valuation (7.5 Hours)
Learning Outcome: After reading this unit you will understand the concept and calculation of
Time Value of Money, its application in bond valuation, Factors affecting the time value of
Money, concept and application of NPV, IRR, YTM etc in valuing different Fixed Income
Security Instruments
(a) Time value of money - PV, FV, NPV, IRR, etc. (2 Hours)
(b) Bond Pricing Theorems (2 Hours)
(c) Bond Valuation under flat term structure (1.5 Hours)
(d) Valuation of other Bonds, Floating Rate securities, index bonds, illiquid bonds
(2 Hours)
QUIZ: It covers from Unit no 1 & 2 of the syllabus.
UNIT-III
5. Risks in Fixed Income Securities (5 Hours)
Learning Outcome: After reading this unit you will understand various risks in Fixed Income
Securities, their measurement and management through various Bond Management Strategies,
Bond Indexing and Interest rate Derivatives
(a) Risk Identification - Credit Risk, Purchasing Power Risk, Market Risk - Interest
Rate Risk - Reinvestment and Price Risk (1 Hours)
(b) Measurement and management of Interest Rate Risk in fixed income securities -
Duration, Convexity and Immunization and Value at Risk (4 Hours)
(c) Passive, semi-active & Active portfolio management strategies (1.5 Hours)
6. Fixed income Derivative markets (5 Hours)
(a) FRAs (1 Hour)

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(b) Interest rate Swaps, swap pricing and swap curve (2.5 Hours)
(c) Interest rate futures and (1.5 Hours)
(d) Options Caps & Floors (1 Hour)
CLASS TEST: It covers from Unit no 1 to 3 of the syllabus.
UNIT-IV
7. Bond indexing (2 Hours)
(a) Methodology for constructing a bond index, index return
8. Corporate Debt Market (2 Hours)
Learning Outcome: After reading this unit you will understand the structure of corporate
debt market various corporate debt instruments, their features and valuation. And cause and
effect of Sub Prime Crisis
(a) Instruments - Features and Valuation, Valuation of Convertibles
9. Market for Assets Backed Securities (2 Hours)
(a) Prime and Subprime Mortgage-Backed Securities
CASE STUDY PRESENTATION / QUIZ: It covers from Unit no 1 to 4 of the syllabus.
UNIT-V
10. Bond Portfolio Management (3 Hours)
Learning Outcome: After reading this unit you will understand how to build the Fixed
Income Securities Portfolio, setting its objectives and measuring its performance
(a) Portfolio construction, setting portfolio objectives, interpreting portfolio
parameter
11. Global brand Markets (1.5 Hours)
Learning Outcome: After reading this unit you will understand the International/ Global
Bond markets and their mechanism. Different type of instrument and their features and their
trading.
(a) Foreign currency bonds, dual currency bonds
(b) Eurozone debt crisis
12. Summary of Learning Experience
END-TERM EXAMINATIONS: It covers from Unit no 1 to 5 of the syllabus.
Total (42.5 Hours)

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Textbook
1. Securities Markets and Products, IIBF, Taxmann.
References Books
1. Bond Market Analysis and Strategies by Frank J Fabozzi, published by Pearson, 8th
Edition
2. Fixed Income Securities by Dun & Bradstreet Pub. by TMH
3. The Handbook of Fixed Income Securities 7th
ed by Frank J Fabozzi Pub. by TMH
4. Fixed Income Merkets and other Derivatives 2nd
ed by Suresh Sundaresan Pub. by
Cengage Learning
5. Fixed Income Market and their Derivatives by Dr. kapil Bhargav Pub. by Axis
Publications
6. Fixed Income Securities: Valuation, Risk & Risk Management by Pietro Veronesi Pub.
by Wiley India.