Об этом курсе

This course gives you an easy introduction to interest rates and related contracts. These include the LIBOR, bonds, forward rate agreements, swaps, interest rate futures, caps, floors, and swaptions. We will learn how to apply the basic tools duration and convexity for managing the interest rate risk of a bond portfolio. We will gain practice in estimating the term structure from market data. We will learn the basic facts from stochastic calculus that will enable you to engineer a large variety of stochastic interest rate models. In this context, we will also review the arbitrage pricing theorem that provides the foundation for pricing financial derivatives. We will also cover the industry standard Black and Bachelier formulas for pricing caps, floors, and swaptions.
At the end of this course you will know how to calibrate an interest rate model to market data and how to price interest rate derivatives.

Section

...

1 video (Total 5 min), 5 readings

Evaluation10m

Certificate10m

Course discussions10m

Where to get help10m

Do you like our course?10m

Section

We learn various notions of interest rates and some related contracts. Interest is the rent paid on a loan. A bond is the securitized form of a loan. There exist coupon paying bonds and zero-coupon bonds. The latter are also called discount bonds. Interest rates and bond prices depend on their maturity. The term structure is the function that maps the maturity to the corresponding interest rate or bond price. An important reference rate for many interest rate contracts is the LIBOR (London Interbank Offered Rate). Loans can be borrowed over future time intervals at rates that are agreed upon today. These rates are called forward or futures rates, depending on the type of the agreement. In an interest rate swap, counterparties exchange a stream of fixed-rate payments for a stream of floating-rate payments typically indexed to LIBOR. Duration and convexity are the basic tools for managing the interest rate risk inherent in a bond portfolio. We also review some of the most common market conventions that come along with interest rate market data. ...

5 videos (Total 55 min), 2 readings, 6 quizzes

Forward and Futures Rates14m

Coupon Bonds and Interest Rate Swaps12m

Duration and Convexity9m

Market Conventions5m

Compounded Interest Rates10m

Continuously Compounded Forward Rate (Forward Yield)10m

Interest Rates and Discount Bonds20m

Forward and Futures Rates10m

Coupon Bonds and Interest Rate Swaps0m

Duration and Convexity50m

Market Conventions30m

Interest Rates and Related Contracts10m

Section

We learn how to estimate the term structure from market data. There are two types of methods. Exact methods produce term structures that exactly match the market data. This comes at the cost of somewhat irregular shapes. Smooth methods penalize irregular shapes and trade off exactness of fit versus regularity of the term structure. We will also see what principal component analysis tells us about the basic shapes of the term structure....

4 videos (Total 56 min), 5 quizzes

Bootstrapping Example30m

Exact Methods30m

Smoothing Methods40m

Principal Component Analysis30m

Estimating the Term Structure0m

Section

Models for the evolution of the term structure of interest rates build on stochastic calculus. We start with a crash course in stochastic calculus, which introduces Brownian motion, stochastic integration, and stochastic processes without going into mathematical details. This provides the necessary tools to engineer a large variety of stochastic interest rate models. We then study some of the most prevalent so-called short rate models and Heath-Jarrow-Morton models. We also review the arbitrage pricing theorem from finance that provides the foundation for pricing financial derivatives. As an application we price options on bonds....

4 videos (Total 76 min), 1 reading, 5 quizzes

Short Rate Models20m

Heath-Jarrow-Morton Framework10m

Forward Measures23m

Definition of Brownian Motion without Filtration10m

Stochastic Calculus30m

Short Rate Models10m

Heath-Jarrow-Morton Framework40m

Forward Measures40m

Stochastic Models0m

Section

We apply what we learnt to price interest rate derivatives. Specifically, we focus on the standard derivatives: interest rate futures, caps and floors, and swaptions. We derive the industry standard Black and Bachelier formulas for cap, floor, and swaption prices. In a case study we learn how to calibrate a stochastic interest rate model to market data....

4 videos (Total 46 min), 5 quizzes

Caps and Floors14m

Swaptions10m

Calibration Example11m

Interest Rate Futures and Convexity Adjustment30m

Caps and Floors40m

Swaptions30m

Calibration Example0m

Interest Rate Derivatives40m

Section

...

1 reading, 1 quiz

Course evaluation & ranking10m

Final quiz0m

4.6

got a tangible career benefit from this course

By KS•May 21st 2018

Difficult but interesting course. Only it took me more time than announced to complete it and perhaps additional materials (articles, link to thesis etc...) would be beneficial

By MB•Jan 31st 2017

Great course! Level of difficulty is about first or second year Ph.D. in economics/finance. I learned a lot.\n\n-Michael

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