Fixed income

Fixed income refers to any type of investment under which the borrower or issuer is obliged to make payments of a fixed amount on a fixed schedule. For example, the borrower may have to pay interest at a fixed rate once a year and repay the principal amount on maturity. Fixed-income securities — more commonly known as bonds — can be contrasted with equity securities – often referred to as stocks and shares – that create no obligation to pay dividends or any other form of income. Bonds carry a level of legal protections for investors that equity securities do not — in the event of a bankruptcy, bond holders would be repaid after liquidation of assets, whereas shareholders with stock often receive nothing. For a company to grow its business, it often must raise money – for example, to finance an acquisition; buy equipment or land, or invest in new product development. The terms on which investors will finance the company will depend on the risk profile of the company. The company can

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Endogenous Completeness of Diffusion Driven Equilibrium Markets

Julien Hugonnier, Semyon Malamud

We study the existence of dynamic equilibria with endogenously complete markets in continuous-time, heterogenous agents economies driven by diffusion processes. Our main results show that under appropriate conditions on the transition density of the state variables, market completeness can be deduced from the primitives of the economy. In particular, we prove that a sufficient condition for market completeness is that the volatility of dividends be invertible and provide higher order conditions that apply when this condition fails as is the case in the presence of fixed income securities. In contrast to previous research, our formulation does not require that securities pay terminal dividends, and thus allows for both finite and infinite horizon economies.

Econometric Society2012

Term-Structure Models: A Graduate Course

Damir Filipovic

Changing interest rates constitute one of the major risk sources for banks, insurance companies, and other financial institutions. Modeling the term-structure movements of interest rates is a challenging task. This volume gives an introduction to the mathematics of term-structure models in continuous time. It includes practical aspects for fixed-income markets such as day-count conventions, duration of coupon-paying bonds and yield curve construction; arbitrage theory; short-rate models; the Heath-Jarrow-Morton methodology; consistent term-structure parametrizations; affine diffusion processes and option pricing with Fourier transform; LIBOR market models; and credit risk. The focus is on a mathematically straightforward but rigorous development of the theory. Students, researchers and practitioners will find this volume very useful. Each chapter ends with a set of exercises, that provides source for homework and exam questions. Readers are expected to be familiar with elementary Itô calculus, basic probability theory, and real and complex analysis.

Springer Finance2009

Bond (finance)

In finance, a bond is a type of security under which the issuer (debtor) owes the holder (creditor) a debt, and is obliged – depending on the terms – to provide cash flow to the creditor (e.g. repay

Security (finance)

A security is a tradable financial asset. The term commonly refers to any form of financial instrument, but its legal definition varies by jurisdiction. In some countries and languages people common

Mutual fund

A mutual fund is an investment fund that pools money from many investors to purchase securities. The term is typically used in the United States, Canada, and India, while similar structures across th

FIN-416: Interest rate and credit risk models

This course gives an introduction to the modeling of interest rates and credit risk. Such models are used for the valuation of interest rate securities with and without credit risk, the management and hedging of bond portfolios and the valuation and usage of interest rate and credit derivatives.

FIN-405: Investments

The course covers a wide range of topics in investment analysis

FIN-522: Venture capital

The course applies finance tools and concepts to the world of venture capital and financing of projects in high-growth industries. Students are introduced to all institutional aspects of the venture capital industry. Students analyze various aspects of VC finance using an investors' perspective.