Fixed Income

Design, price, and hedge fixed-income instruments

A fixed-income instrument is a contract between a borrower and an issuer to exchange cash flows in a predetermined and periodic (fixed) time frame. Cash flows at each period in time may be variable. Traditional securities of fixed income include loans, notes, bills and bonds. Non-traditional securities include interest rate derivatives, inflation derivatives, and credit derivatives.

Modeling tools are often used for determining the price, yield, and cash flow for many types of fixed-income securities, including mortgage-backed securities, corporate bonds, treasury bonds, municipal bonds, certificates of deposit, and treasury bills.

Common techniques for modeling and analyzing fixed-income instruments and markets include:

  • Fitting yield curves to market data using parametric fitting models and bootstrapping
  • Calculating the price, rates, and sensitivities for interest rate swaps
  • Pricing and valuing other derivatives, including credit default swaps, bond futures, and convertible bond.

For more information about modeling fixed income, see Financial Instruments Toolbox.

Examples and How To

Software Reference

See also: credit risk, financial derivatives, zero curve, swap curve, Financial Toolbox, Financial Derivatives Toolbox