Fixed Income Valuation and Analysis, CFA L2
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Fixed Income Valuation and Analysis, CFA L2

An easy guide to interest rate dynamics, bond valuation and credit analysis
3.8 (6 ratings)
Instead of using a simple lifetime average, Udemy calculates a course's star rating by considering a number of different factors such as the number of ratings, the age of ratings, and the likelihood of fraudulent ratings.
53 students enrolled
Created by Tanuja Yadav
Last updated 4/2016
English
Current price: $10 Original price: $20 Discount: 50% off
5 hours left at this price!
30-Day Money-Back Guarantee
Includes:
  • 3 hours on-demand video
  • 4 Supplemental Resources
  • Full lifetime access
  • Access on mobile and TV
  • Certificate of Completion
What Will I Learn?
  • Understand Fixed income topic as contained in the official CFA Level 2 curriculum
  • Prepare better for 10-20 % of the CFA Level 2 course
  • Get a good understanding of this complex topic
View Curriculum
Requirements
  • Access to a computer with internet connection
  • A calculator, ideally a financial calculator
  • Possession of CFA curriculum course ware will be ideal
Description

This course covers the curriculum of Fixed Income as contained in the CFA Level 1 curriculum. It is split into two Study sessions containing 4 readings.

As this is a very complex and technical topic, at the same time being one of the most important topics for CFA, I have simplified it for ease of understanding of the students.

The course contains approximately 4 hours of video lectures, split in short lectures to make it convenient for students, supporting reading material and topic based tests to ensure that taught topics are well understood by the students.

The first study session on "Valuation Concepts" covers essential knowledge and skills needed for the valuation of fixed income investments. It begins with a discussion of the term structure of interest rates and interest rate dynamics. The following reading addresses arbitrage-free valuation of fixed-income securities. The study session concludes with an introduction to the valuation and analysis of bonds with embedded options.

The second Study Session "Topics in Fixed Income Analysis" consists of a discussion of credit analysis and how credit standards affect liquidity.

Students taking CFA Level 2 exam must take this course for understanding this complex topic. I would also recommend those students enrolled in CFA Level 3 to take this course who struggled with the basic concepts of fixed income in Level 1 and 2 so that their foundation improves for Fixed Income portfolio management in Level 3.

This course is also recommended for anyone in the investment field wanting to transition into the fixed income domain.

Who is the target audience?
  • This is meant for all the candidates appearing for CFA L2 exam but do not have the time required to put in for the preparation and therefore would like to take a course to cut their preparation time to one third.
  • Anyone who is starting their career in the field of finance or getting into managing their own investments but requires an understanding of fixed income instruments
Compare to Other Finance Courses
Curriculum For This Course
12 Lectures
02:53:47
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Introduction
1 Lecture 03:42

This is an introduction lecture, it introduces the new students to their faculty and also the structure of the course.

This section covers essential knowledge and skills needed for the valuation of fixed income investments. It begins with a discussion of the term structure of interest rates and interest rate dynamics.

Preview 03:42
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The Term Structure and Interest Rate Dynamics
3 Lectures 53:35

After listening to this lecture, you should be able to:

  • describe relationships among spot rates, forward rates, yield to maturity, expected and realized returns on bonds, and the shape of the yield curve;
  • describe the forward pricing and forward rate models and calculate forward and spot prices and rates using those models;
  • describe how zero-coupon rates (spot rates) may be obtained from the par curve by bootstrapping;
  • describe the assumptions concerning the evolution of spot rates in relation to forward rates implicit in active bond portfolio management;
Preview 19:58

After listening to this lecture, you should be able to:

  • describe the strategy of riding the yield curve;
  • explain the swap rate curve and why and how market participants use it in valuation;
  • calculate and interpret the swap spread for a given maturity;
  • describe the Z-spread; i describe the TED and Libor–OIS spreads;
Part 2 of Reading 43_The Term Structure and Interest Rate Dynamics
13:58

After listening to this lecture, you should be able to:

  • explain traditional theories of the term structure of interest rates and describe the implications of each theory for forward rates and the shape of the yield curve;
  • describe modern term structure models and how they are used;
  • explain how a bond’s exposure to each of the factors driving the yield curve can be measured and how these exposures can be used to manage yield curve risks;
  • explain the maturity structure of yield volatilities and their effect on price volatility.
Part 3 of Reading 43_The Term Structure and Interest Rate Dynamics
19:39
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The Arbitrage-Free Valuation Framework
2 Lectures 37:11

At the end of this lecture, you should be able to:

  • explain what is meant by arbitrage-free valuation of a fixed-income instrument;
  • calculate the arbitrage-free value of an option-free, fixed-rate coupon bond;
  • describe a binomial interest rate tree framework;
  • describe the backward induction valuation methodology and calculate the value of a fixed-income instrument given its cash flow at each node;
Part 1 of Reading 44_The Arbitrage-Free Valuation Framework
19:59

After listening to this lecture, the student should be able to:

  • describe the process of calibrating a binomial interest rate tree to match a specific term structure;
  • compare pricing using the zero-coupon yield curve with pricing using an arbitrage-free binomial lattice;
  • describe path-wise valuation in a binomial interest rate framework and calculate the value of a fixed-income instrument given its cash flows along each path;
  • describe a Monte Carlo forward-rate simulation and its application.
Part 2 of Reading 44_The Arbitrage-Free Valuation Framework
17:12
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Valuation and Analysis: Bonds with Embedded Options
3 Lectures 49:36

After completing this lecture, the student should be able to:

  • describe fixed-income securities with embedded options;
  • explain the relationships between the values of a callable or putable bond, the underlying option-free (straight) bond, and the embedded option;
  • describe how the arbitrage-free framework can be used to value a bond with embedded options;
  • explain how interest rate volatility affects the value of a callable or putable bond;
  • explain how changes in the level and shape of the yield curve affect the value of a callable or putable bond;
  • calculate the value of a callable or putable bond from an interest rate tree;
Part 1 of Reading 45_ valuation and Analysis: Bonds with Embedded Options
17:26

After completing this lecture, the student should be able to:

  • explain the calculation and use of option-adjusted spreads;
  • explain how interest rate volatility affects option-adjusted spreads;
  • calculate and interpret effective duration of a callable or putable bond;
  • compare effective durations of callable, putable, and straight bonds;
  • describe the use of one-sided durations and key rate durations to evaluate the interest rate sensitivity of bonds with embedded options;
  • compare effective convexities of callable, putable, and straight bonds;
Part 2 of Reading 45_ valuation and Analysis: Bonds with Embedded Options
15:28

After completing this lecture, the student should be able to:

  • describe defining features of a convertible bond;
  • calculate and interpret the components of a convertible bond’s value;
  • describe how a convertible bond is valued in an arbitrage-free framework;
  • compare the risk–return characteristics of a convertible bond with the risk-return characteristics of a straight bond and of the underlying common stock.
Part 3 of Reading 45_ valuation and Analysis: Bonds with Embedded Options
16:42
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Credit Analysis Models
3 Lectures 29:43

After listening to this lecture, the student should be able to:

  • explain probability of default, loss given default, expected loss, and present value of the expected loss and describe the relative importance of each across the credit spectrum;
  • explain credit scoring and credit ratings, including why they are called ordinal rankings;
  • explain strengths and weaknesses of credit ratings; d explain structural models of corporate credit risk, including why equity can be viewed as a call option on the company’s assets;
  • explain reduced form models of corporate credit risk, including why debt can be valued as the sum of expected discounted cash flows after adjusting for risk;
  • explain assumptions, strengths, and weaknesses of both structural and reduced form models of corporate credit risk;
Part 1 of Reading 46_Credit Analysis Models
19:59

After completing this lecture, the student should be able to:

  • explain the determinants of the term structure of credit spreads;
  • calculate and interpret the present value of the expected loss on a bond over a given time horizon;
  • compare the credit analysis required for asset-backed securities to analysis of corporate debt.
Part 2 of Reading 46_Credit Analysis Models
09:04

Bonus Lecture: Coupon codes and Access to free courses
00:40
About the Instructor
Tanuja Yadav
4.0 Average rating
438 Reviews
12,712 Students
17 Courses
Chartered Financial Analyst

A CFA charter holder, I have extensive experience in the field of F&A outsourcing and have worked on various projects within the F&A Arena. I have 11 years of experience in F&A delivery, handling end to end finance and accounting processes, F&A practice and process improvement. I am also a visiting faculty with International College of Financial Planning, New Delhi where I have taken classes for CFA L 2 and 3. I have my own channel on Youtube on Finance and Investments.

Specialties: Finance, Fixed Income, Treasury, Accounts Payable, Accounts Receivables, Reconciliation, Fixed Asset and Project accounting, Solution development, F&A Training, SOX testing, Fraud risk assessment and Process streamlining.