Course outline: Understanding Bonds

In-house Training

Capital Markets & Derivatives Training specialise in developing and delivering bespoke in-house training courses and programmes. This sample course outlines the content and structure of a typical course.

Objective: This is an introductory level bond and fixed income programme, aimed at those with a limited background in these instruments.
Course aims:
  • Examine the different types of bond
  • Explore how they are issued and traded
  • Understand the market conventions for quoting price and yield
  • See how the bond price is derived
  • Understand the price sensitivity measures

Bond markets

This section is designed to explain the different types of bonds and all the jargon and terminology associated with the underlying market.

  • Bond types
    • basic bond definition
    • government and corporate bonds
    • fixed and floating coupons
  • Primary & secondary markets
    • issuing bonds

Bond Pricing

The following section looks at how a bond's price is calculated based upon latest techniques.

  • Pricing bonds on coupon and non-coupon dates
    • clean v dirty price
    • accrued interest
    • zero-coupon bond pricing
  • Measures of yield
    • yield to maturity
    • interpreting yields and the yield curve

Bond Sensitivity Measures

In this section we see how to calculate the price sensitivity of fixed income instruments for given changes in their yield and how to use these measures in practice.

  • Bond price sensitivities
    • price yield relationship
    • duration, modified duration, PV01 (BPV or risk)
    • convexity
  • Deriving equivalent positions and basic hedge ratio
    • adjusting the hedge ratio
    • key-rate duration

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