The objective of this seminar is to give the participants a good understanding of and "hands-on" experience with advanced, state-of-the-art toolkits for analyzing bonds and sophisticated bond investment strategies. We shall start with a brief review of "traditional" bond analytics and explain how the expected return of a bond portfolio can be modeled as a Taylor-series of second and higher orders. We shall then explain in depth how zero coupon curves can be derived from observable market prices and how such curves can be used to price different bond structures, including Floating Rate Notes. We also look at how inflation-linked bonds are priced, and how implied inflation expectations can be backed out of observable prices. Next, we will show how you can use Principal Components Analysis on historical yield curve data to identify statistically significant and independent return factors. We will also explain how you can use these factors and their associated "factor loadings" for trading and risk management purposes. We will then look at how callable bonds and bonds with pre-payment options (e.g. Mortgage Backed Securities) can be valued using term structure models, pre-payment models and Monte Carlo Simulation. We will also show how to calculate option-adjusted key-ratios such as Option-Adjusted Yield, Option-Adjusted Spread, Option-Adjusted Duration, Static Spreads etc. Next, we will discuss how "High Yield" bonds (i.e. low-rated corporate and emerging markets bonds) can be analyzed with explicit consideration of default probabilities, recovery rates, covenants, and collaterals. Finally, we will present and explain some advanced strategies for managing bond portfolios, based upon the above analytics.
