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Garud Iyengar,
Ali Hirsa,
and
Martin Haugh
This course will focus on capturing the evolution of interest rates and providing deep insight into credit derivatives. In the first module we discuss the term structure lattice models and cash account, and then analyze fixed income derivatives, such as Options, Futures, Caplets and Floorlets, Swaps and Swaptions. In the second module, we will examine model calibration in the context of fixed income securities and extend it to other asset classes and instruments. Learners will operate model calibration using Excel and apply it to price a payer swaption in a Black-Derman-Toy (BDT) model. The third module introduces credit derivatives and subsequently focuses on modeling and pricing the Credit Default Swaps. In the fourth module, learners would be introduced to the concept of securitization, specifically asset backed securities(ABS). The discussion progresses to Mortgage Backed Securities(MBS) and the associated mortgage mathematics. The final module delves into introducing and pricing Collateralized Mortgage Obligations(CMOs).
Register for this course and see more details by visiting:
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Syllabus
Course Overview
Term Structure Models I
Welcome to week 2! This week, we will re-visit the fixed income instruments. So far we have been very comfortable with the notion of a fixed interest rate. In reality, however, interest rate is always evolving over time. Previously, we have seen that the evolution of stock prices can be modeled via multi-period binomial models or the Black Scholes model, but how do we capture the evolution of interest rate? Let us unfold the modeling of interest rate in this week. We will also see that all security derivatives have their equivalents in fixed income domains, such as options, forwards, futures and swaps. If you get stuck on the quizzes, you should post on the Discussions to ask for help. (And if you finish early, I hope you'll go there to help your fellow classmates as well.)
Read more
Syllabus
Course Overview
Term Structure Models I
Welcome to week 2! This week, we will re-visit the fixed income instruments. So far we have been very comfortable with the notion of a fixed interest rate. In reality, however, interest rate is always evolving over time. Previously, we have seen that the evolution of stock prices can be modeled via multi-period binomial models or the Black Scholes model, but how do we capture the evolution of interest rate? Let us unfold the modeling of interest rate in this week. We will also see that all security derivatives have their equivalents in fixed income domains, such as options, forwards, futures and swaps. If you get stuck on the quizzes, you should post on the Discussions to ask for help. (And if you finish early, I hope you'll go there to help your fellow classmates as well.)
Read more
Term Structure Models II (and Introduction to Credit Derivatives)
Welcome to week 3! This week, we will start with an important practice in real-life financial engineering - model calibration. The mathematical models are no good if they do not capture the regularities in the financial markets. In order to ensure that our models are useful, we need to search for model parameters that describe the current market conditions. You might find it very helpful to review the optimization methods in the pre-requisite materials of Introduction of Financial Engineering and Risk Management.
Introduction to Credit Derivatives
Welcome to week 4! This week we will introduce credit derivatives, a very powerful family of derivative products that are partially responsible for the Financial Crisis in 2008. As always, if you get stuck on the quizzes, you should post on the Discussions to ask for help. (And if you finish early, I hope you'll go there to help your fellow classmates as well.)
Introduction to Mortgage Mathematics and Mortgage-Backed Securities
Welcome to week 5! This week, we will focus on a brand new set of financial products - mortgage-backed securities. Mortgage-backed securities are constructed from mortgages, which are common cash flows occurring in the housing market. Through a detailed case study of mortgage-backed securities, we will touch upon the important concept of securitization, i.e. how to package common cash flows into securitized products. We will explore a specific kind of financial product - Collateralized Mortgage Obligations (CMO). As always, if you get stuck on the quizzes, you should post on the Discussions to ask for help. (And if you finish early, I hope you'll go there to help your fellow classmates as well.)
Assignment - CMO
Welcome to week 6! This week, we will explore a specific kind of financial product - Collateralized Mortgage Obligations (CMO). We will also get some experience in pricing those securities. Finally, we will apply the knowledge we learned through the course by working on a quiz and a practical assignment. If you get stuck on the problems, you should post on the Discussions to ask for help. If you finish early, I hope you'll go there to help your fellow classmates as well.
Good to know
Good to know
Know what's good ,
what to watch for , and
possible dealbreakers
Focuses on capturing the evolution of interest rates, providing insights into credit derivatives, and modeling and pricing financial instruments
Taught by Martin Haugh, Garud Iyengar, and Ali Hirsa, who are recognized experts in the field
Covers a wide range of topics in fixed income and credit derivatives, including term structure models, cash accounts, fixed income derivatives, model calibration, credit default swaps, securitization, and mortgage-backed securities
Provides hands-on experience through model calibration exercises and a practical assignment on pricing collateralized mortgage obligations (CMOs)
Requires a strong foundation in mathematics, probability, and financial concepts
Involves working with complex financial models and data, which may be challenging for beginners
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Activities
Be better prepared
before
your course. Deepen your understanding
during
and
after
it. Supplement your coursework and achieve mastery of the topics covered
in Term-Structure and Credit Derivatives with these
activities:
Review Mean Value Theorem
Show steps
Review the Mean Value Theorem to ensure that you have a solid foundation for the course.
Browse courses on
Mean Value Theorem
Show steps
-
Read through your notes or textbook on the Mean Value Theorem.
-
Work through some practice problems to test your understanding.
Solve Differential Equations with Wolfram Alpha
Show steps
Become familiar with using Wolfram Alpha to solve differential equations, a tool you can use throughout the course.
Browse courses on
Differential Equations
Show steps
-
Go to the Wolfram Alpha website.
-
Type in a differential equation, such as 'y' + y = sin(x)'.
-
Click on the 'Solve' button.
Discuss Calculus Applications with Classmates
Show steps
Engage with classmates to explore real-world applications of calculus, broadening your understanding and making the concepts more relatable.
Browse courses on
Calculus
Show steps
-
Form a study group with classmates.
-
Choose a specific application of calculus, such as optimization or modeling.
-
Discuss how calculus is used in that application.
Four other activities
Expand to see all activities and additional details
Show all seven activities
Practice Integration Techniques
Show steps
Complete practice problems on integration techniques to reinforce your understanding and build your skills.
Browse courses on
Integration
Show steps
-
Find practice problems on integration techniques from your textbook or online.
-
Work through the problems carefully, step-by-step.
-
Check your answers against the solutions provided.
Attend a Calculus Workshop
Show steps
Enhance your understanding of calculus by attending a workshop led by an expert, gaining new insights and perspectives.
Browse courses on
Calculus
Show steps
-
Find a calculus workshop in your area or online.
-
Register for the workshop.
-
Attend the workshop and actively participate.
Create a Mind Map of Calculus Concepts
Show steps
Organize your understanding of calculus concepts by creating a mind map that connects different ideas and relationships.
Browse courses on
Calculus
Show steps
-
Start with a central concept, such as 'calculus'.
-
Brainstorm related concepts and ideas.
-
Draw branches connecting the related concepts to the central concept.
-
Add more branches and sub-branches as needed.
Build a Simple Calculator
Show steps
Apply your knowledge of calculus and programming to build a simple calculator, reinforcing your understanding and developing practical skills.
Browse courses on
Programming
Show steps
-
Choose a programming language and development environment.
-
Design the user interface for your calculator.
-
Implement the basic arithmetic operations (+, -, *, /).
-
Add more advanced features, such as trigonometric functions or graphing.
Review Mean Value Theorem
Show steps
Review the Mean Value Theorem to ensure that you have a solid foundation for the course.
Browse courses on
Mean Value Theorem
Show steps
Show steps
Show steps
- Read through your notes or textbook on the Mean Value Theorem.
- Work through some practice problems to test your understanding.
Solve Differential Equations with Wolfram Alpha
Show steps
Become familiar with using Wolfram Alpha to solve differential equations, a tool you can use throughout the course.
Browse courses on
Differential Equations
Show steps
Show steps
Show steps
- Go to the Wolfram Alpha website.
- Type in a differential equation, such as 'y' + y = sin(x)'.
- Click on the 'Solve' button.
Discuss Calculus Applications with Classmates
Show steps
Engage with classmates to explore real-world applications of calculus, broadening your understanding and making the concepts more relatable.
Browse courses on
Calculus
Show steps
Show steps
Show steps
- Form a study group with classmates.
- Choose a specific application of calculus, such as optimization or modeling.
- Discuss how calculus is used in that application.
Four other activities
Expand to see all activities and additional details
Show all seven activities
Practice Integration Techniques
Show steps
Complete practice problems on integration techniques to reinforce your understanding and build your skills.
Browse courses on
Integration
Show steps
Show steps
Show steps
- Find practice problems on integration techniques from your textbook or online.
- Work through the problems carefully, step-by-step.
- Check your answers against the solutions provided.
Attend a Calculus Workshop
Show steps
Enhance your understanding of calculus by attending a workshop led by an expert, gaining new insights and perspectives.
Browse courses on
Calculus
Show steps
Show steps
Show steps
- Find a calculus workshop in your area or online.
- Register for the workshop.
- Attend the workshop and actively participate.
Create a Mind Map of Calculus Concepts
Show steps
Organize your understanding of calculus concepts by creating a mind map that connects different ideas and relationships.
Browse courses on
Calculus
Show steps
Show steps
Show steps
- Start with a central concept, such as 'calculus'.
- Brainstorm related concepts and ideas.
- Draw branches connecting the related concepts to the central concept.
- Add more branches and sub-branches as needed.
Build a Simple Calculator
Show steps
Apply your knowledge of calculus and programming to build a simple calculator, reinforcing your understanding and developing practical skills.
Browse courses on
Programming
Show steps
Show steps
Show steps
- Choose a programming language and development environment.
- Design the user interface for your calculator.
- Implement the basic arithmetic operations (+, -, *, /).
- Add more advanced features, such as trigonometric functions or graphing.
Career center
Learners who complete Term-Structure and Credit Derivatives will develop knowledge and skills
that may be useful to these careers:
Quantitative Researcher
Quantitative Researcher
Quantitative Researchers develop and implement mathematical and statistical models to solve financial problems. Those specializing in fixed income can leverage this course to enhance their knowledge of the valuation and modeling of fixed income securities and credit derivatives, covered in **Term Structure Models I**, **Term Structure Models II (and Introduction to Credit Derivatives)**, and **Introduction to Credit Derivatives**.
Financial Engineer
Financial Engineer
Financial Engineers design and develop financial products and services. Those specializing in fixed income can leverage this course to enhance their knowledge of the valuation and modeling of fixed income securities and credit derivatives, covered in **Term Structure Models I**, **Term Structure Models II (and Introduction to Credit Derivatives)**, and **Introduction to Credit Derivatives**.
Hedge Fund Manager
Hedge Fund Manager
Hedge Fund Managers manage investment funds that use advanced investment strategies to generate high returns. Those specializing in fixed income can leverage this course to enhance their knowledge of the valuation and modeling of fixed income securities and credit derivatives, covered in **Term Structure Models I**, **Term Structure Models II (and Introduction to Credit Derivatives)**, and **Introduction to Credit Derivatives**.
Fixed Income Trader
Fixed Income Trader
Fixed Income Traders facilitate the buying and selling of fixed income securities such as bonds and securitized products like Collateralized Mortgage Obligations (CMOs). Fixed income traders that specialize in derivative products can leverage this course to gain a comprehensive overview of fixed income securities, and expand their understanding of credit derivatives as well as their pricing in **Term Structure Models II (and Introduction to Credit Derivatives)** and **Introduction to Credit Derivatives**.
Investment Banker
Investment Banker
Investment Bankers advise companies on mergers and acquisitions, and help them raise capital. Those specializing in fixed income can leverage this course to enhance their knowledge of fixed income securities, credit derivatives, and securitization, covered in **Term Structure Models I**, **Term Structure Models II (and Introduction to Credit Derivatives)**, **Introduction to Credit Derivatives**, and **Introduction to Mortgage Mathematics and Mortgage-Backed Securities**.
Portfolio Manager
Portfolio Manager
Portfolio Managers manage investment portfolios for individuals and organizations. Those specializing in fixed income portfolios can leverage this course to enhance their knowledge of the valuation and modeling of fixed income securities and credit derivatives, covered in **Term Structure Models I**, **Term Structure Models II (and Introduction to Credit Derivatives)**, and **Introduction to Credit Derivatives**.
Risk Manager
Risk Manager
Risk managers design and implement strategies to mitigate financial risk for organizations. Those specializing in quantitative methods can leverage this course to enhance their knowledge of the valuation and modeling of credit derivatives, which is covered in **Term Structure Models II (and Introduction to Credit Derivatives)** and **Introduction to Credit Derivatives**.
Data Scientist
Data Scientist
Data Scientists use data to solve business problems. Those specializing in financial data can leverage this course to enhance their knowledge of the valuation and modeling of fixed income securities and credit derivatives, covered in **Term Structure Models I**, **Term Structure Models II (and Introduction to Credit Derivatives)**, and **Introduction to Credit Derivatives**.
Financial Analyst
Financial Analyst
Financial Analysts provide investment advice and make investment decisions for individuals and organizations. Those specializing in fixed income analysis can leverage the material in **Term Structure Models I** to build out probability models that can be used to determine the fair value of financial instruments.
Private Equity Investor
Private Equity Investor
Private Equity Investors invest in private companies and help them grow. Those specializing in fixed income can leverage this course to enhance their knowledge of the valuation and modeling of fixed income securities, which is covered in **Term Structure Models I**.
Securitization Analyst
Securitization Analyst
Securitization Analysts evaluate the risks and returns of securitized products, such as mortgage-backed securities (MBS) and asset-backed securities (ABS). Those specializing in mortgage-backed securities can leverage this course to enhance their understanding of mortgage mathematics and MBS, covered in **Introduction to Mortgage Mathematics and Mortgage-Backed Securities**.
Actuary
Actuary
Actuaries use mathematical and statistical methods to assess risk and uncertainty. Those specializing in financial modeling can leverage this course to enhance their knowledge of the valuation and modeling of fixed income securities, which is covered in **Term Structure Models I**.
Venture Capitalist
Venture Capitalist
Venture Capitalists invest in early-stage companies with high growth potential. Those specializing in fixed income can leverage this course to enhance their knowledge of the valuation and modeling of fixed income securities, which is covered in **Term Structure Models I**.
Quantitative Analyst
Quantitative Analyst
Quantitative Analysts use mathematics and statistics to analyze financial data in order to make investment decisions. Those that specialize in modeling the discount curve can leverage this course's material in **Term Structure Models I** to build out probability models that can be used to determine the fair value of financial instruments. This course **may** assist in this pursuit.
Credit Analyst
Credit Analyst
Credit Analysts assess the creditworthiness of individuals and organizations to determine their ability to repay debts. Those specializing in structured products can leverage this course **may** assist with the assessment of credit risk and the pricing of credit derivative products, such as Credit Default Swaps (CDS), covered in **Term Structure Models II (and Introduction to Credit Derivatives)** and **Introduction to Credit Derivatives**.
For more career information including salaries, visit:
OpenCourser.com/course/zwwr7d/term
Reading list
We've selected eight books
that we think will supplement your
learning. Use these to
develop background knowledge, enrich your coursework, and gain a
deeper understanding of the topics covered in
Term-Structure and Credit Derivatives .
A comprehensive treatment of credit risk modeling, including various methodologies, theoretical foundations, and practical applications. provides a solid foundation for understanding the concepts and techniques used in the course, particularly in the module on credit derivatives.
A detailed and rigorous treatment of interest rate models, with a focus on practical applications. provides a deeper understanding of the theoretical underpinnings of the term structure models discussed in the course.
A classic textbook on options, futures, and derivatives, providing a comprehensive overview of the subject matter. serves as a good reference for understanding the fundamental concepts and techniques related to fixed income derivatives.
A detailed analysis of mortgage-backed securities, covering their structure, pricing, and risk management techniques. provides a practical understanding of mortgage-backed securities and their role in the financial markets.
A practical guide to fixed income analysis, covering various aspects of the fixed income market. provides insights into the real-world applications of fixed income derivatives and can serve as a supplement to the course modules on fixed income securities.
A comprehensive textbook on financial risk management, covering a wide range of topics including interest rate risk, credit risk, and operational risk. provides a solid foundation for understanding the risk management aspects of fixed income derivatives.
Save
A comprehensive guide to mortgage-backed securities, covering their history, structure, and valuation techniques. provides a solid foundation for understanding the basics of mortgage-backed securities and their role in the financial markets.
A practical guide to pricing and modeling credit derivatives, including various methodologies and case studies. provides insights into the real-world applications of credit derivatives and can serve as a reference for professionals in the field.
For more information about how these books relate to this course, visit:
OpenCourser.com/course/zwwr7d/term
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Effort
5-8 hours/week
Level
Intermediate
Via
Coursera
Institution
Columbia University
Instructors
Garud Iyengar
Ali Hirsa
Martin Haugh
Language
English
Transcripts
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This course belongs to a
collection
called
Financial Engineering and Risk Management. It's comprised of five courses:
- Term-Structure and Credit Derivatives (viewing)
- Introduction to Financial Engineering and Risk Management
- Optimization Methods in Asset Management
- Computational Methods in Pricing and Model Calibration
- Advanced Topics in Derivative Pricing
Good to know
Focuses on capturing the evolution of interest rates, providing insights into credit derivatives, and modeling and pricing financial instruments
Taught by Martin Haugh, Garud Iyengar, and Ali Hirsa, who are recognized experts in the field
Covers a wide range of topics in fixed income and credit derivatives, including term structure models, cash accounts, fixed income derivatives, model calibration, credit default swaps, securitization, and mortgage-backed securities
Provides hands-on experience through model calibration exercises and a practical assignment on pricing collateralized mortgage obligations (CMOs)
Requires a strong foundation in mathematics, probability, and financial concepts
Involves working with complex financial models and data, which may be challenging for beginners
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