Objectifs
The purpose of this course is to present methodologies and models to determine the "no-arbitrage price" of fixed income securities with and without "credit risk" as well as fixed income derivatives and credit derivatives. The course will be divided in two parts. The first (main) part deals with the problem of pricing default free fixed income securities and derivatives such as zero-coupon bonds, coupon bonds, forward and futures. The second part of the course will be developed, joint with Christopher Finger (MSCI, formerly RiskMetrics Group), over two lectures. The first lecture (by F. Pegoraro) presents an introduction to credit risk and to the pricing of defaultable zero-coupon bonds in discrete-time. The second lecture (by C. Finger) will cover models for assessing credit quality of individual corporate issuers, and will then present model of portfolio credit risk.
Contenus
The course will be based on seven lectures with the instructor and associated exercise sessions with the assistant (see time schedule, below). Your final grade, based on the grade of the midterm examination (D, say) and the final examination (F, say), will be determined according to the formula: Final Grade = max(F, (F+D)/2) . The final grade will be rounded to the nearest half point. If you need to retake the exam, your grade will be based only on the makeup exam. The midterm exam no longer count.
The lecture sessions will take place on Monday in Room 122 at Internef.
Hours : 8:30 - 12:00 / 13:15 - 15:00. The time schedule of the lectures is as follows:
Fixed Income: 24-09 , 08-10 , 22-10, 05-11, 19-11. Credit Risk: 03-12, 17-12 (by Christopher Finger).
The exercise sessions (with Roberto Marfè) will take place in Room 122 at Internef. Hours : 8:30 - 10:00. The time schedule is:
01-10, 15-10, 29-10, 12-11, 26-11, 10-12; the last exercise session will take place during the week of the last lecture (hours and room to be fixed).
Références
The course (and its slides) will be mainly based on the following books
and working papers:
Baz, J., and Chacko, G. (2004), Financial Derivatives, Cambridge
University Press.
Bingham, N. H., Kiesel, R. (2004), Risk-Neutral Valuation, Springer
Finance.
Cairns, A. J. G. (2004), Interest Rate Models : An Introduction,
Princeton University Press.
Filipovic, D. (2009), Term Structure Models - A Graduate Course,
Springer Finance.
Munk, C. (2011), Fixed Income Modelling, Oxford University Press.
Tuckman, B., Serrat, A. (2011), Fixed Income Securities. Tool's for Today's Markets, Wiley Finance Editions.
Veronesi, P. (2010), Fixed Income Securities: Valuation, Risk, and Risk Management, John Wiley and Sons, Inc.
Monfort, A., and Pegoraro, F. (2007), Multi-Lag Term Structure Models and Stochastic Risk Premia, available online at: http://www.crest.fr/pageperso/pegoraro/pegoraro.htm.
Bertholon, H., Monfort, A., and Pegoraro, F. (2008), Econometric Asset Pricing Modelling, Journal of Financial Econometrics, 6(4), 407-458. The working paper version is available online at: http://www.crest.fr/pageperso/pegoraro/pegoraro.htm.
Other useful references are :
Altman, E., ed. (2010), The Z-Metrics Methodology, available online at www.riskmetrics.com/publications/working\_papers/z-metrics .
Baxter, M., and Rennie, A. (2002), Financial Calculus : An Introduction
to Derivative Pricing, Cambridge University Press.
Bjork, T. (2004), Arbitrage Theory in Continuous Time, Oxford University
Press.
Campbell, J., Lo, A., and MacKinlay, A. C. (1997), The Econometrics of
Financial Markets, Princeton University Press.
Duffie, D. (2002), Dynamic Asset Pricing Theory, Princeton University
Press.
Duffie, D. (2002), Credit Risk Modelling with Affine Processes, available
online at: www.stanford.edu/~duffie/pisa.pdf .
Duffie, D., and Singleton, K. (2003), Credit Risk, Princeton University
Press.
Finger, C., ed. (2002), CreditGrades Technical Document, available online at www.riskmetrics.com/publications/techdoc.html .
Gourieroux, C., and Tiomo, A. (2007), Risque de Crédit: Une Approche Avancée, Economica.
Gupton, G., Finger, C. and Bhatia, M. (1997), CreditMetrics Technical Document, available online at www.riskmetrics.com/publications/techdoc.html
Lando, D. (2004), Credit Risk Modelling, Princeton University Press.
Privault, N. (2008), An Elementary Introduction to Stochastic Interest Rate
Modeling, World Scientific.
Singleton, K. (2006), Empirical Dynamic Asset Pricing - Model Specification and Econometric Assessment, Princeton University Press.
Shreve, S. (2008), Stochastic Calculus for Finance II: Continuous-Time Models, Springer Finance.
Wu, L. (2009), Interest Rate Modeling - Theory and Practice, Chapman and Hall.
Evaluation
1ère tentative
- Examen:
-
Ecrit 2h00 heures
- Documentation:
- Non autorisée
- Calculatrice:
- Autorisée avec restrictions
- Evaluation:
Normal : écrit, 2h00, doc non autorisée (100%) Non programmable calculator only
Rattrapage
- Examen:
-
Ecrit 2h00 heures
- Documentation:
- Non autorisée
- Calculatrice:
- Autorisée avec restrictions
- Evaluation:
Rattrapage : écrit, 2h00, doc non autorisée (100%) Non programmable calculator only
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