• Forwards and Swaps
  • Two Convergence trades using swaps:
  • Outline of the trade and student responsibilities.
    • Chapter 5 in Veronesi. Including the PiVe Case.
      • Accompanying Spreadsheet.
    • Forward notes and Carry spreadsheet.
    • Forward swaps spreadsheet.
    • On-the-run / off-the-run spread of spreads from Tuckman (Appx 18A):
      • Accompanying Spreadsheet.

• Futures and Options
  • Chapter 6 in Veronesi.
  • Chapter 6 in Hull.
  • Spreadsheet with Bloomberg Cheapest-to-Deliver screen and all computations. (Also includes a VBA macro to compute a note's conversion factor.)
  • CME page on computing notes' conversion factors.

• Residential Mortgage Backed Securities
  • Chapter 8 in Veronesi.
  • Fabozzi Chapter 10 Mortgage-Backed Sector of the Bond Market
  • SEC report on the Mortgage-Backed Security Industry.
  • Spreadsheet Mortgage, Passthrough and Basic CMO Examples.
  • Introductory Slides.
  • Bloomberg - Related Slides.
  • Prospectus of the CMO deal discussed in the slides.

• TIPS and Inflation Swaps.
  • Handy Treasury webpage with information on TIPS.
  • Spreadsheet with examples.
  • Link to US Department of Labor, CPI page.
  • Computation of Holding Period Return on a TIPS Investment Example.
  • ``The TIPS-Treasury Bond Puzzle,'' by Matthias Fleckenstin, Francis Longstaff, and Hanno Lustig, Journal of Finance, October 2014.

• Term Structure Models--Binomial Trees
  • Chapters 9 and 10 in Veronesi.
    • Spreadsheet to accompany Chapter 9.

• Term Structure Models--Binomial Trees
  • Chapter 11 in Veronesi:
  • Includes:
  • The Ho-Lee Model.
  • Black Derman, and Toy Model calibrated to caplet (i.e., forward) vols.
  • Black, Derman, and Toy Model.--Calibrated to Bond vols.
  • A recent interview with Emanuel Derman.
  • A more recent interview with Professor Derman: In a combined format.
  • Problems and a study guide.
  • Options, Caplets, Caps, Floorlets, Floors, & Collars in BDT Spreadsheet.
  • Slides with Bloomberg screens on Option Valuation.
  • Spreadsheet with BDT solutions and examples of a caps / floors problem.

• Free Boundary Problems: Applications of American Options
  • Chapter 12 in Veronesi
    • Corresponding Spreadsheet.

• Continuous-time Models of Interest Rates
  • Chapter 14 in Veronesi
  • Vasicek Spreadsheet.
    • Closed-form solution for Bond Prices.
    • Note that Bond Prices depend on three things:
      1. Convexity.
      2. Expectations (about future short-rates).
      3. Risk

• Monte-Carlo Model of MBS
  • Nesting a behavioral pre-payment model into the Monte Carlo analysis.

• Catastrophe Bonds -- how expected losses tie in to a bond's yield
  • Web portal for Cat Bonds and Insurance Linked Securities (ILS)
  • Articles from the financial press:
    • The Economist, Perilous Paper, October 3, 2013
    • Financial Times Why Buffett is steering clear of catastrophe bonds, by Gillian Tett, March 8, 2014.
    • Wall Street Journal The Insurance Industry has been Turned Upside Down by Catastrophe Bonds, by Leslie Scism and Anupreeta Das, August 8, 2016.
  • Spreedsheet showing relationship between hazard rate and bond yield.

  Corporate Bonds

• Kmart's 2002 Bankruptcy Case.
  • Relevant Bloomberg Screens and Notes.
    • Guides to the Discussion:
      • ``Breaking Bankruptcy Priority: How Rent-Seeking Upends the Creditors' Bargain,'' by Mark Roe and Frederick Tung, Virginia Law Review, October, 2013.
      • ``A Strategic Perspective on Bankruptcy,'' by Bill George, Jim Sharpe, and Andrew N. McLean. (In the Harvard Course Pack)
      • Financial Contracting: A Survey of Empirical Research and Future Directions, by Michael R. Roberts and Amir Sufi.
      • ``Practical Issues in Debtor-in-Posession Financing,'' by Jeffrey Weston Shields.
      • Accompanying Slides.

• Corporate Bond Default Risk: A 150-year Perspective,'' by Kay Giesecke, Francis A. Longstaff, Stephen Schaefer, and Ilya Strebulaev.
• Banking and Bank Regulation.
  • Background Slides.
    • The Basel Framework.
    • Originate to Distribute:
      • The role of Banks in Asset Securitization by Nicola Cetorelli and Stavros Peristani.
      • The Rise of the Originate-to-Distribute Model and the Role of Banks in Financial Intermediation by Vitaly M. Bord and João A.C. Santos.
      • The Role of Bank Credit Enhancements in Securitization by Benjamin H. Mandel, Donald Morgan, and Chenyang Wei.
      • Are Banks Still Special When There is a Secondary Market for Loans? by Amar Gande and Anthony Saunders.
    • Leveraged Loan Market

• Moody's Distressed Exchanges Surge in 2009.
• Moody's Report on Corporate Credit Risk in 2011.
• Commercial Paper and the Credit Cliff
• Bond Ratings and the Ratings Agencies
  • How and Why Credit Rating Agencies are not Like Other Gatekeepers, by Frank Portnoy.
  • Moody's: Don't blame us for ``investment grade''
  • Moody's on Japan.
  • Moody's Ratings Definitions.
  • Jerome B. Van Orman, Jr.'s lament on the Credit Cliff.
  • The Credit Rating Agencies by Lawrence J. White.
  • Marcin Kacperczyk and Philipp Schnabl on Commercial Paper in the financial crisis.
  • Slides.

• Credit Default Swaps
  • Reduced Form Models of Default and Credit Default Swaps
    • Hull 500--506.
    • Hull, Chapter 23.
    • Total Return Swap is now the Tool of Choice to Provide Leverage (from Sober Look).
    • Slides reviewing Structural, Reduced Form, and Empirical Methods, and their implementation.
    • Spreadsheet with valuation of Credit Default Swap.
    • Spreadsheet with the basic information for our In-Class Activity on Corporate Bond Replication using CDS and IRS.
    • An example of the CDS-Bond Basis during the financial crisis.
    • Spreadsheet with trade on the CDS-Bond basis (Northrup-Grumman bonds on April 9, 2014).
    • Credit Event Fixings. (ISDA settlement protocol for Credit Default Swaps).
    • ``Counterparty Risks and Contract Volumes in the Credit Default Swap Market,'' by Nicholas Vause, BIS Quarterly Review, December 2010.
    • ``Credit default swaps market outstandings shrink as dealers tear up offsetting agreements,'' Global Finance, December 2008.
    • ``An Analysis of CDS Transactions: Implications for Public Reporting,'' by Chen, Fleming, Jackson, Li, and Sarkar. Federal Reserve Bank of New York, September 2011.
    • ``The Determinants of the CDS-Bond Basis During the Financial Crisis of 2007--2009,'' by Jennie Bai and Pierre Collin-Dufresne, December 2011.

  Spreadsheet with the auction data and results for the Greek Sovereign CDS fixing auction of March 19, 2012.

  Slides.

.