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Unit of study_

FINC6014: Fixed Income Securities

Semester 2, 2021 [Normal day] - Remote

This unit covers the concepts required for investment in fixed income securities, managing bond portfolios and understanding debt markets. Topics covered include duration, convexity, interest rate risk, bond volatility and the term structure of interest rates. The more complex types of debt securities studied include mortgage backed securities, corporate bonds with embedded options such as convertible bonds and interest rate derivatives.

Unit details and rules

Unit code FINC6014
Academic unit Finance
Credit points 6
Prohibitions
? 
None
Prerequisites
? 
FINC5001
Corequisites
? 
None
Assumed knowledge
? 

None

Available to study abroad and exchange students

Yes

Teaching staff

Coordinator Joakim Westerholm, joakim.westerholm@sydney.edu.au
Type Description Weight Due Length
Final exam (Record+) Type B final exam Final exam Part 1
MCQ, numerical and short answer questions
25% Formal exam period 1.5 hours
Outcomes assessed: LO1 LO2 LO3 LO4 LO5 LO6
Final exam (Take-home extended release) Type E final exam Final Exam Part 2
Take-home open book exam
25% Formal exam period 48 hours
Outcomes assessed: LO1 LO2 LO3 LO4 LO5 LO6
In-semester test (Record+) Type B in-semester exam Mid-semester exam
MCQ, numerical and short answer questions
25% Week 08
Due date: 07 Oct 2021 at 13:00
80 minutes
Outcomes assessed: LO2 LO3 LO4
Assignment group assignment Assignment
Report, Peer review
25% Week 11 See Canvas Assignment for instructions
Outcomes assessed: LO1 LO2 LO3 LO4 LO5 LO6
group assignment = group assignment ?
Type B final exam = Type B final exam ?
Type B in-semester exam = Type B in-semester exam ?
Type E final exam = Type E final exam ?

Assessment summary

  • Mid-semester exam: The objective of this exam is to motivate you to regularly revise the unit material and to complete the tutorial questions. It will examine all material covered in weeks 1-4.
  • Group assignment: Students will be required to form a group of 3-6 students. The group is expected to complete an assignment where they present an investment strategy for a bond portfolio, using industry standard analysis techniques.
  • Final exam: This examination will cover the entire 12 weeks of the unit.

Detailed information for each assessment can be found on Canvas.

Assessment criteria

The University awards common result grades, set out in the Coursework Policy 2014 (Schedule 1).

As a general guide, a high distinction indicates work of an exceptional standard, a distinction a very high standard, a credit a good standard, and a pass an acceptable standard.

Result name

Mark range

Description

High distinction

85 - 100

Awarded when you demonstrate the learning outcomes for the unit at an exceptional standard, as defined by grade descriptors or exemplars outlined by your faculty or school. 

Distinction

75 - 84

Awarded when you demonstrate the learning outcomes for the unit at a very high standard, as defined by grade descriptors or exemplars outlined by your faculty or school.

Credit

65 - 74

Awarded when you demonstrate the learning outcomes for the unit at a good standard, as defined by grade descriptors or exemplars outlined by your faculty or school.

Pass

50 - 64

Awarded when you demonstrate the learning outcomes for the unit at an acceptable standard, as defined by grade descriptors or exemplars outlined by your faculty or school. 

Fail

0 - 49

When you don’t meet the learning outcomes of the unit to a satisfactory standard.

For more information see sydney.edu.au/students/guide-to-grades.

For more information see guide to grades.

Late submission

In accordance with University policy, these penalties apply when written work is submitted after 11:59pm on the due date:

  • Deduction of 5% of the maximum mark for each calendar day after the due date.
  • After ten calendar days late, a mark of zero will be awarded.

Academic integrity

The Current Student website  provides information on academic integrity and the resources available to all students. The University expects students and staff to act ethically and honestly and will treat all allegations of academic integrity breaches seriously.  

We use similarity detection software to detect potential instances of plagiarism or other forms of academic integrity breach. If such matches indicate evidence of plagiarism or other forms of academic integrity breaches, your teacher is required to report your work for further investigation.

You may only use artificial intelligence and writing assistance tools in assessment tasks if you are permitted to by your unit coordinator, and if you do use them, you must also acknowledge this in your work, either in a footnote or an acknowledgement section.

Studiosity is permitted for postgraduate units unless otherwise indicated by the unit coordinator. The use of this service must be acknowledged in your submission.

Simple extensions

If you encounter a problem submitting your work on time, you may be able to apply for an extension of five calendar days through a simple extension.  The application process will be different depending on the type of assessment and extensions cannot be granted for some assessment types like exams.

Special consideration

If exceptional circumstances mean you can’t complete an assessment, you need consideration for a longer period of time, or if you have essential commitments which impact your performance in an assessment, you may be eligible for special consideration or special arrangements.

Special consideration applications will not be affected by a simple extension application.

Using AI responsibly

Co-created with students, AI in Education includes lots of helpful examples of how students use generative AI tools to support their learning. It explains how generative AI works, the different tools available and how to use them responsibly and productively.

WK Topic Learning activity Learning outcomes
Week 01 Introduction: the fixed income market Lecture (3 hr) LO1 LO2
Week 02 Pricing basic bonds: the relationship between prices and yields Lecture (3 hr) LO3 LO4
Week 03 Bond price volatility: duration and convexity Lecture (3 hr) LO4
Week 04 The term structure of interest rates: modelling the yield curve Lecture (3 hr) LO3 LO4
Week 05 Bond portfolio management 1 Lecture (3 hr) LO5
Week 06 Bond portfolio management 2 Lecture (3 hr) LO5
Week 07 Assignment workshop: Bond Portfolio Strategy, Building a zero curve Lecture (3 hr) LO3 LO4
Week 08 In-semester Exam on the Week 1-4 material. Lecture (1.3 hr) LO2 LO3
Week 09 Securitisation 1 Lecture (3 hr) LO1 LO2 LO6
Week 10 Securitisation 2 Lecture (3 hr) LO1 LO2 LO6
Week 11 Interest rate derivatives Lecture (3 hr) LO5 LO6
Week 12 Bonds with embedded options Lecture (3 hr) LO6
Week 13 Review lecture Lecture (3 hr) LO1 LO2 LO3 LO4 LO5 LO6

Study commitment

Typically, there is a minimum expectation of 1.5-2 hours of student effort per week per credit point for units of study offered over a full semester. For a 6 credit point unit, this equates to roughly 120-150 hours of student effort in total.

Required readings

Fabozzi F.J. (2015) Bond Markets, Analysis and Strategies (9th Edition), Pearson Education. (Note: the hard copy of the 9th edition is about $300.)


Here is the link for students to purchase the eBook online: $60 downloadable Vital Source eBook http://www.pearson.com.au/9780133797145

Learning outcomes are what students know, understand and are able to do on completion of a unit of study. They are aligned with the University's graduate qualities and are assessed as part of the curriculum.

At the completion of this unit, you should be able to:

  • LO1. articulate the recent developments and innovation in the fixed income area
  • LO2. identify and understand the function of fixed income markets and their role in the economy
  • LO3. conceptualise the fixed income financial instruments and apply them to their purposes
  • LO4. explain the dynamics of interest rates and their term structure and relate them to the pricing of fixed income securities
  • LO5. understand the principles of bond portfolio management and construct and manage a bond portfolio
  • LO6. apply theory to the management of the risk inherent in fixed income securities, derivatives and portfolios.

Graduate qualities

The graduate qualities are the qualities and skills that all University of Sydney graduates must demonstrate on successful completion of an award course. As a future Sydney graduate, the set of qualities have been designed to equip you for the contemporary world.

GQ1 Depth of disciplinary expertise

Deep disciplinary expertise is the ability to integrate and rigorously apply knowledge, understanding and skills of a recognised discipline defined by scholarly activity, as well as familiarity with evolving practice of the discipline.

GQ2 Critical thinking and problem solving

Critical thinking and problem solving are the questioning of ideas, evidence and assumptions in order to propose and evaluate hypotheses or alternative arguments before formulating a conclusion or a solution to an identified problem.

GQ3 Oral and written communication

Effective communication, in both oral and written form, is the clear exchange of meaning in a manner that is appropriate to audience and context.

GQ4 Information and digital literacy

Information and digital literacy is the ability to locate, interpret, evaluate, manage, adapt, integrate, create and convey information using appropriate resources, tools and strategies.

GQ5 Inventiveness

Generating novel ideas and solutions.

GQ6 Cultural competence

Cultural Competence is the ability to actively, ethically, respectfully, and successfully engage across and between cultures. In the Australian context, this includes and celebrates Aboriginal and Torres Strait Islander cultures, knowledge systems, and a mature understanding of contemporary issues.

GQ7 Interdisciplinary effectiveness

Interdisciplinary effectiveness is the integration and synthesis of multiple viewpoints and practices, working effectively across disciplinary boundaries.

GQ8 Integrated professional, ethical, and personal identity

An integrated professional, ethical and personal identity is understanding the interaction between one’s personal and professional selves in an ethical context.

GQ9 Influence

Engaging others in a process, idea or vision.

Outcome map

Learning outcomes Graduate qualities
GQ1 GQ2 GQ3 GQ4 GQ5 GQ6 GQ7 GQ8 GQ9

This section outlines changes made to this unit following staff and student reviews.

In comparison to 2020 the assessment structure has been adjusted to be more flexible, remote, hy-flex and on campus mode. The Final has been split into an online type B and take-home type E exam. Two individual assignments have been consolidated into a group assignment.

Disclaimer

The University reserves the right to amend units of study or no longer offer certain units, including where there are low enrolment numbers.

To help you understand common terms that we use at the University, we offer an online glossary.