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.
À propos de ce cours
4.6
84 notes
Compétences que vous acquerrez
CalibrationStochastic CalculusYield CurveInterest Rate Derivative
Programme du cours : ce que vous apprendrez dans ce cours
Semaine
1Introduction
1 vidéos (Total 5 min), 5 lectures
1 vidéos
Introduction5 min
5 lectures
Evaluation10 min
Certificate10 min
Course discussions10 min
Where to get help10 min
Do you like our course?10 min
Semaine
2Interest Rates and Related Contracts
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 vidéos (Total 55 min), 2 lectures, 6 quiz
5 vidéos
Forward and Futures Rates14 min
Coupon Bonds and Interest Rate Swaps12 min
Duration and Convexity9 min
Market Conventions5 min
2 lectures
Compounded Interest Rates10 min
Continuously Compounded Forward Rate (Forward Yield)10 min
6 exercices pour s'entraîner
Interest Rates and Discount Bonds20 min
Forward and Futures Rates10 min
Coupon Bonds and Interest Rate Swapss
Duration and Convexity50 min
Market Conventions30 min
Interest Rates and Related Contracts10 min
Semaine
3Estimating the Term Structure
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 vidéos (Total 56 min), 5 quiz
4 vidéos
Bootstrapping Example10 min
Exact Methods19 min
Smoothing Methods13 min
Principal Component Analysis11 min
5 exercices pour s'entraîner
Bootstrapping Example30 min
Exact Methods30 min
Smoothing Methods40 min
Principal Component Analysis30 min
Estimating the Term Structures
Semaine
4Stochastic Models
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 vidéos (Total 76 min), 1 lecture, 5 quiz
4 vidéos
Stochastic Calculus21 min
Short Rate Models20 min
Heath-Jarrow-Morton Framework10 min
Forward Measures23 min
1 lectures
Definition of Brownian Motion without Filtration10 min
5 exercices pour s'entraîner
Stochastic Calculus30 min
Short Rate Models10 min
Heath-Jarrow-Morton Framework40 min
Forward Measures40 min
Stochastic Modelss
4.6
23 avis50%
a commencé une nouvelle carrière après avoir terminé ces cours
50%
a bénéficié d'un avantage concret dans sa carrière grâce à ce cours
Meilleurs avis
par 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
par SB•Aug 23rd 2017
Very helpful course to revisit my daily work covering curves, derivative pricing.
Enseignants
Damir Filipović
EPFLThe Swissquote Chair in Quantitative Finance and Swiss Finance Institute Professor
À propos de École polytechnique fédérale de Lausanne
Foire Aux Questions
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