Return to
Curriculum
Webpage
Description: 
This course will convey the basic concepts
and analytical methodology for interest rate modeling and the
valuation of interest based products. 


Topics: 



the Tforward measure;

zerocoupon bonds, yield,
instantaneous short interest rate, instantaneous forward
interest rate;

the term structure of the interest
rates;

extensions of BlackScholesMerton
model;

the forward price and the futures
price;

contingent claims risk neutral
valuation;




the valuation equation, the market
price of risk;

affine term structure models, Vasicek
model, CoxIngersollRoss model;

the calibration to data, HooLee
model, HullWhite model;




clean price, dirty price, accrued interest

the forward price and the futures price of a coupon bearing
bond;

options on coupon bearing bonds;

“bootstrapping” (constructing the term structure of interest
rate) using coupon bearing bonds;




the HeathJarrowMorton framework;

instantaneous short interest rate
dynamics, zerocoupon bond price dynamics;

the noarbitrage condition of the HJM
framework, HJM drift condition;

the volatility term structure of the
instantaneous forward interest rates, the volatility of
zerocoupon bonds;




spot LIBOR, forward LIBOR;

forward LIBOR models, discrete tenor
case, BraceGatarekMusiela model;

valuation of interest rate swaps, swap
rate;

valuation of interest rate options,
caps , floors, swamptions;

“bootstrapping” using swap rates;

Eurodollar contracts, implied futures
LIBOR, convexity adjustment;




structural creditrisk models

the case of nodefault prior to
maturity, the case of default prior to maturity.




Teaching: 
42 hours during third semester 


