CFA Level 1 (2020) FIXED INCOME

Analyze fixed income securities from issuer types to indentures, bond cash flows, fixed versus floating coupons, currency, and money market vs capital market maturities.

Explore bond indentures as legal contracts that define issuer and investor rights, trustee duties, collateral, and credit enhancements, and distinguish secured versus unsecured bonds and covenants.

Define the structure of modern cash flows in fixed income. Examine bullet, fully amortized, and partial amortization with balloon payment, sinking funds, and contingency provisions.

Learn fixed income valuation by calculating bond prices from the present value of coupon payments and redemption at maturity using the market discount rate, with practical calculator steps.

Learn how bond prices respond to changing discount rates, highlighting inverse price behavior, coupon and maturity effects, and convexity. The lecture also covers pricing with spot rates and zero rates.

Explains how to value fixed income securities by distinguishing full price (dirty) and flat price (clean), including accrued interest, settlement, coupon timing, and day-count conventions (actual/actual and 30/360).

Learn matrix pricing to value illiquid bonds via interpolation from similar securities, with yields calculated using IRR and Excel, and explore compounding effects and money market pricing.

Investigate spot and forward rates, including deriving forward rates from spot rates and pricing bonds at par. Examine yield curves, spreads, and the role of benchmarks in fixed income valuation.

Explore fixed income risk and return, from coupon and reinvestment income to price dynamics, duration, and convexity, and learn how interest-rate changes affect bond prices and yields.

Compute portfolio duration using a cash flow weighted average or the average of individual durations, and use money duration, effective duration, and convexity to refine price change estimates.

Learn the fundamentals of credit risk, including default probability, loss given default, and expected loss. Examine seniority, cross-default, and notching, plus rating agencies and credit analysis frameworks.

Explore the creation and structure of asset backed securities through securitization, SPVs, and the key roles involved, and examine prepayment, contraction, and extension risks across mortgage backed securities.

Explore asset backed securities, focusing on CMBS and non-recourse loans with balloon risk and lockout period. Understand how senior, mezzanine, and equity tranches and CDO structures drive cash flows.

explains how the global fixed income market is structured and funded, covering issuance, primary and secondary markets, underwriting, and key instruments from commercial paper to structured products.