Bond Math

This interactive course introduces the participant to the fundamental tenets of bond valuation and risk measurement. Through a variety of interactive exercises, the course participant will calculate present and future value. This leads directly into pricing a bond. Different yield measures are examined and the participant will construct a basic yield curve. Using the price of a bond as the foundation, modified duration is calculated and its applications are explained. Convexity is introduced (but not calculated!). Different day count conventions are explored. The course concludes with examining and calculating spot and forward curves and discussing their applications.

Course Objectives

By the end of the course, participants will be able to:

• Describe and calculate present and future value
• Price a bond
• Discuss yield conventions
• Explain industry day count and interest conventions
• Calculate and apply duration and dollar value of a basis point (DV01)
• Explain and apply convexity
• Construct a yield curve
• Calculate and explain applications of spot and forward curves

Suggested Prerequisites:

• Fixed Income or equivalent knowledge

Program Level:Foundational

Advance Preparation: None

Computers and Financial Calculators: Calculators

Recommended CPE Credits: 7