California Polytechnic State University


BUS 439: Fixed Income Securities


Prof. Cyrus Ramezani


Lecture Time

Section-03: TTH 02:10-04:00 PM-Room:03-302



Office Hours:

TTH 12:30-1:30, M 12-4 PM, and by appointment

Office:

03-406

Phone:

756-1168

Email:

cramezan@calpoly.edu

WEB

http://cyrus.cob.calpoly.edu/

Communicating with the Professor: The easiest way to reach me and getting a reply to your questions is email. The next best way to reach me is to come to office hours. Please make use of my office hours.

First Assignment (due today): Send me an email. (subject line: BUS 439) providing the following information: Name, major, class level, general interests, and anything else that may interest you. I will create an email alias for the class and send articles and other important information via email. You will be responsible for materials sent to you by email (So please don't neglect email).

COURSE DESCRIPTION:

The course provides a working knowledge of the fixed-income markets. In the distant past (i.e., less than 20 years ago), fixed-income instruments consisted of bonds, which promised a pre-specified series of payments over time. Since then, the fixed income market has developed a bewildering array of instruments, including high yield bonds, asset-backed securities, credit derivatives, and so on. Thanks to amazing growth in debt around the globe, the fixed income markets now represent the largest financial markets, roughly three times larger than the global equity markets.

A good knowledge of the fixed income securities is essential to investment and asset management business, as well as the corporate and government sectors. This course offers a comprehensive introduction to fixed income analysis. This course will cover the pricing and risk management of fixed income securities and will provide an introduction to fixed-income derivatives. It will also discuss interest rate risk management and fixed-income investment strategies. The course involves a mix of lectures and exercises. We will make extensive use of the Bloomberg system, which is the premier analytical system for managing bond portfolios. The workload for this course will be heavy, reflecting the quantitative nature of this market. The primary focus of the course, however, is on practical applications.

Bus-439 serves as the foundation for the finance concentration, and as such is critical to the subsequent required finance courses (Bus-431, Bus-438, Bus-445) and all finance electives.

Prerequisites: A statistics course (at the level of Statistics 252) and an introductory finance course (at the level of Bus. 342). Spreadsheet proficiency is a must. Please see me after class if you don't meet the requirements.

COURSE MATERIALS:

GRADING:

Homework: There will be 2 homework sets (40% of grade). The due dates will be announced when the homework is handed out or placed on the course home-page (http://cyrus.cob.calpoly.edu). To make life easy on the grader, homework presentation should conform to a set of rules. The homework are substantial. Don't wait till the day before they are due! The homework would require less effort provided that you attend class, keep up with the readings and try your hands at the problems (using your calculator or computer software). You are encouraged to discuss problems with classmates but there will be a high penalty to all parties involved for copying homework (you would be surprised how easy it is to catch folks who duplicate. Surely, they reveal themselves on the exams!). Late Homework Will Not Be Accepted!

Exams: Two midterm and a final exam will be given. The first midterm will be at the end of the first week of class covering time value of money handout and materials in chapters 1 through 3 (10% of grade). The second midterm will be around the middle of the term covering the materials on fixed income securities (20% of grade). Final (20% of grade) will cover all course materials (you should have no problem on exams if you go for perfection on the homework and read). The format of exams will be problems, definitions, and multiple choice questions. All grading will be on the curve (i.e., your performance will be measured relative to others in the class).

No make-up exams will be given without prior consent of instructor and documentation to show why exam cannot be taken at the scheduled time. Exams are closed book.

Class Participation and Attendance: 10% of your grade will be determined by attendance and class participation. I will take roll and expect to know your names and have informal discussions with all of you during the term (I am told I have a good sense of humor. Remains to be seen!). Don't hesitate to point out anything that is annoying you about the class.

Overall Course Grade will be determined as follows:

Total-Score= .1 x Attendance + .1 x Midterm1 + .2 x Midterm2 + .4 x Homework + .2 x Final

Since attendance, midterm, homework, and final will have a 100 points each, the total score will be between 0-100 points. For example, suppose a student receives 90 for attendance, 70 for each midterm, 80 for homework, and 90 for final. Then his/her total score will be:

Total-Score = .1 x 90 + .3 x 70 + .4 x 80 + .2 x 90 = 80

A distribution will be constructed from everyone's total score. The course grade will begin at F (total score below 50) and go up.

It is recommended that reading assignments (particularly from the text book) be done prior to lectures. Calendar of topics and assignments will be posted on the course home-page (http://cyrus.cob.calpoly.edu) and will be mailed to you weekly.

Classroom Civility: I expect students to avoid arriving late or leaving class early; cell phones going off in class; bicycles in the classroom; packing up disruptively before the class is dismissed; eating in class; sleeping in class; reading newspapers or surfing the internet while I lecture; chatting with neighbors, or other forms of disruptive behavior.

Tentative Schedule of Lectures: Will be handed out in class.