46-956 Fixed Income

6 units, Carnegie Mellon University

This course introduces the most important securities traded in fixed income markets and the valuation models used to price them. Payoff characteristics and quotation conventions will be explained for treasury bills and bonds, STRIPS, callable bonds, mortgage-backed securities, and derivative securities like swaps, caps, floors, swaptions, and options on bonds. Basic concepts will be explained, such as the relation between yields and forward rates, duration, convexity, and factor models of yield curve dynamics. Key concepts for interest rate derivative valuation will be introduced using discrete time versions of the Ho-Lee and Black-Derman-Toy models. Text: Bruce Tuckman, Angel Serrat. "Fixed Income Securities," 3rd ed., (University Edition) ISBN# 0-470-90403-8 (paperback contains exercises) 0-470-89169-6 (hardcover does not contain exercises, but will be posted on course site). Non-MSCF students may not take this course without written permission from the instructor. To be eligible, you must be a BSCF student or a graduate student enrolled in an MSCF participating college/department (Stats & Data Science, Tepper, Computer Science Dept., or Math Sciences). PhD students with relevant research may be eligible with permission from the instructor.

Prerequisites: none listed

Offered: Fall 2026, Fall 2025

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