- resources in finance

Brit Training South Africa

Workshop on

Debt Instruments and Markets

presented by
Professor Ian Giddy
New York University

What the Course is About

This is a keystone workshop for debt market professionals. It offers an intensive review of the global market for bonds and money market instruments, with a focus on fixed-income asset pricing and risk analysis, including interest-rate risks and credit-related risks. It includes material and techniques essential for dealers and brokers, for individuals involved in debt underwriting and distribution, and for managers of fixed-income portfolios.

Method and Schedule
The lectures will offer structure, the discussions will amplify, and the case studies will apply tools and concepts to real-world applications. Participants will work in teams to solve problems in debt financing and investments.

Participants will be provided with a package of materials useful to the analysis of debt instruments, including pertinent articles, rating agency reports and sample documentation from actual deals done in the US, Europe and elsewhere.

Who Should Attend?
The seminar is of relevance to both potential originators and investors in debt: money market professionals, commercial lenders and investment bankers, securities analysts; investment officers and fund managers; asset managers and other individuals whose professional future may be enhanced by an understanding of debt instruments and techniques.

At the end of this course participants will be able to:
  • Explain the basics of fixed income instruments
  • Identify the different classes of bond investors and their main goals and constraints
  • Compare the risk classes of different fixed-income investments and floating-rate notes
  • Understand duration, immunization, and related measures of interest rate risk
  • Understand bond ratings and related measures of credit risk
  • Grasp the fundamentals of debt instruments, such as government bonds, international corporate bonds, high-yield bonds and asset-backed securities
  • Explain the principles of option features in bonds

Course Outline

Debt Instruments and Markets

Day Topics 
Day 1
Debt Instruments: The Global Market

Money Market Instruments
Treasury bills
Fed funds
Commercial paper
The international interbank market
Assignment: Find and interpret rates in the international money market

Government Bonds
Comparison of government bond markets
Rating government bonds
Bond interest rates: discount rates, coupon and yields
The yield curve
Bond pricing methods
Strips and synthetic treasuries
Exercise:  Identifying mispriced government bonds using the spot curve

Measuring Rate Risk in a Bond Portfolio
Measuring bond price risk: Maturity, average life, and duration
Duration and convexity of bonds
Duration of portfolios
Managing and matching fixed liabilities in pension funds and insurance companies
Hands-on exercise: Immunizing a portfolio
Measuring the gap: Value at Risk
Closing the gap: portfolio restructuring

Managing Risk in a Bond Portfolio: Tools and Techniques
Closing the gap: derivatives
Futures, forwards and swaps
Delta, gamma and the use of options
Dynamic hedging
Exercise: Managing the interest-rate risk of a mortgage portfolio funded with a straight bond.

Day 2
Corporate Bonds, Domestic and International
The global corporate bond market
Credit risk and ratings
High-yield debt
Corporate bond spreads, pricing and issuance
Hedging credit risk with credit default swaps
Exercise: Review deals in the international bond market

Asset-Backed Securities
Structure of ABS
Process of securitization
Credit enhancement and ratings
Collateralized Debt Obligations
Case study: Creating an ABS from a bank’s loan portfolio

Bonds with Options
Call features and pricing
Callable corporate bonds: special features
Mortgage-backed securities
Comparison of yields
Determinants of option value
Option-adjusted spreads
Exercise: comparison of callable with straight bonds from an investor's


Course Materials

Day 1
Slides: The International Money Market
Slides: The Government Bond Market
Slides: Measuring Rate Risk in Bond Portfolios
Slides: Fixed-Income Portfolio Management

Assignment: Compare and swap rates in the international money market
Case Study: A Bond for CMHC
Exercise: The GE Capital Bond
Case Study: Golds Gym
Exercise: Home to Canadians

Day 2
Slides: Corporate Bonds
Slides: Asset-Backed Securities
Slides: Bonds with Options

Case Study: Imperial Capital MTN
Case Study: Tuis RMBS
Case Study: Endesa
Case Study: A Call to Guernsey

Workshop Instructor
Ian Giddy is on the faculty of finance at New York University, USA. He has taught finance at NYU, Columbia, Wharton, Chicago and elsewhere for the past thirty years. He was Director of International Fixed Income Research at Drexel Burnham Lambert from 1986 to 1989. The author of more than fifty articles on international finance, Dr Giddy has served at the International Monetary Fund and the U.S. Treasury and has been a consultant with numerous financial institutions and corporations in Europe, North America, the Middle East and Asia. He has lectured in more than forty countries, and has been involved in the asset-backed securities market for over 15 years. He is the author or co-author of The International Money Market, The Handbook of International Finance, Cases in International Finance, Global Financial Markets Asset Securitization in Asia, and The Hudson River Watertrail Guide. | | | | contact
Copyright © 2008 Ian H Giddy. All rights reserved.