This course examines how strategies that systematically change exposure to different assets can achieve various investment objectives. Students will apply the latest tools in fixed-income analysis and classic models in economics and finance to a critical evaluation of the structure and operation of the securitized bond markets. The course covers the basic mechanics of structuring deals for mortgage-related securities, credit cards, leases, and other debt markets and the risk management techniques employed in the securitization process for these assets. The course will also consider the valuation of pooled assets and derivative bonds using both Monte Carlo and option pricing techniques, an analysis of the trading strategies that are employed in these markets, and a study of the market microstructure of asset-backed security markets. This is an applied project exploring an unresolved finance problem that is met in practice and involves the development or use of a quantitative financial technique.
Participation requires prior approval of the supervising faculty member.