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Fixed Income Securities
MB 77
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Introduction to the Course
Why a separate course only on Fixed Income
Securities?
What are fixed-income securities?
Participants/Players
Meaning of a Bond
Features of a Bond
Types of Bonds
Sources of Risk and Return in Debt Securities
Regulation of Fixed Income Securities
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Markets Prior to 1980s
± Dominated by plain vanilla bonds with simple cash
flow structures
± Valuation was simple and straightforward
Markets After 1980s
± Complex cash flow structures
± A variety of securities
± Derivative products to facilitate portfolio strategies to
control interest rate risk and to enhance return
± Wider range of investors
Two thirds of the market value of all the securities
outstanding in world classified as fixed income
Most participants in the corporate and financial sectors
participate in this market
Federal governments, state governments, and
municipalities have not choice but to issue fixed income
securities
Therefore, a need to have well informed participants so
that they understand
± the forces that drive the bond market
± The valuation of complex cash flow structures
± Portfolio management strategies
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Issuers/sellers
government, government agencies, state governments,
corporations, municipalities, and banks and other financial
institutions
± To receive a fair value for their securities
± Be able to issue securities that best fit their needs
Investors
Large institutions such as pension funds, insurance
companies, commercial banks, corporations, mutual funds,
and central banks
Smaller institutions
Individual investors
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