Bond valuation and interest rate risk
The Bonds sub-topic focuses on bonds as a common financial product. Distinctions are made between fixed-rate bonds (bonds with a fixed coupon rate), floating-rate bonds (bonds with a variable interest rate), and zero-coupon bonds (special bonds with a single coupon payment at the end of the term).
The Documents & Materials section contains a mathematical description of a valuation and risk calculator for various bond classes.
Specifically, the following elements are covered:
-Yield curve and discounting
-Present value
-Clean price and dirty price
-Macaulay duration
-Modified duration
-DV01 (Dollar Value of 01)
-Convexity
-Parametric VaR – with manual yield curve input
-Empirical portfolio VaR – using historical interest rate data
-Empirical variance-covariance matrix
-Volatilities
-Correlations
-Sensitivities
-Portfolio VaR
-Scenario analysis
-Yield to Maturity (YTM)