MGT 227 Fixed Income Securities and Markets
Instructor: Sukwon Thomas Kim Office: Anderson Hall 242 Phone: (951) 827 4995 Fax: (951) E-mail: sukwonk@ucr.edu Quarter: Spring 2014 Lecture time: MW 8:40pm – 10:00pm Classroom: ANDHL 118 Course Website: http://ilearn.ucr.edu/ Office Hours: MW 2:00pm – 4:00pm

SoBA Mission Statement
Our mission is to develop diverse leaders, propel research-based innovation and promote the sustainable growth of Inland Southern California within the global economy. We harness the powerful resources of UC and our location at the nexus of commerce to create a laboratory for education, research, and productive partnerships across economic enterprises. The strategic activities that propel our mission include: • Conducting basic and applied research in management that explores and informs the creation, development and management of growth; • Providing degree programs that prepare our students to be effective managers and responsible community leaders with a deep understanding of the dynamics of growth in both a regional and global context; • Partnering with business and community leaders through a shared commitment to exemplary growth; and • Delivering educational programs to executives and the public at large that respond to the needs of our local, state, national, and international communities. MBA Program - Learning Goals Professional Integrity / Ethical Reasoning Skills Students will be able to recognize ethical issues, demonstrate familiarity with alternative frameworks for ethical reasoning, and discern trade-offs and implications of employing different ethical frames of reference when making business decisions. Global Context Skills Students will be conversant with major economic, social, political, and technological trends and conditions influencing foreign investment and development of the global economy and demonstrate an understanding of the cultural, interpersonal and analytical competencies required for engaging in global business activities.

Written Communication Students will demonstrate proficiency in written communications by creating written document that are clearly written, with appropriate content and conclusions. Technology Skills Students will be able to integrate and apply the tools and techniques of business, drawing on a broad-based knowledge of the major functions (accounting, economics, finance, information systems, marketing, operations management, and strategy) to solve complex business problems and make sound business decisions.

Course description
This course covers fixed income securities. The course will cover concepts, valuation, and various applications of fixed income securities. The fixed income securities covered in this class includes Treasury Bills, Corporate Bonds, Convertible Bonds, Mortgages, and Derivatives. MGT 202 or equivalent

Prerequisite

Textbook: Fixed Income Analysis, 2nd Edition, by Frank J. Fabozzi, 2012, Prentice Hall. – Required Text (ISBN 047005221X) Cases: Follow the link to access the cases: https://cb.hbsp.harvard.edu:443/cbmp/access/26370956

Course Materials

Grading policy
Sample: A. Case Study B. Home Works C. Class Participation D. Exam __20__% __10__% __10__ % __60__ % (midterm 20%, Final 40%)

Grades will be posted throughout the term on iLearn. If you find any problem with your score, you must inform the instructor within one week from the time this score is posted. After one week, scores will not be reviewed.

In the case of score dispute, the entire exam or assignment will be reviewed, not just the question(s) in dispute. The score could go up, down, or remain the same.

Problem sets: The problem sets are individual works. There will be 3~4 problem sets and you will have about one week to do each of them. They can be good practices for your exams, too.

Case Studies: Students are required to form a group of maximum 4 students to do their case studies. Email me the groups you formed by the second week of the class. There will be several questions regarding each case. All the groups should answer those questions and submit their answers in writing. The written answers should have all the group members’ name on it. There will be one or two groups assigned to present their work. Your case study grade is based on the written answers, presentation and questions made to the presenters. All the groups will have at least one presentation opportunity. At the end of the course, you may choose to do an anonymous peer evaluation of your team members. The cases can be found at the following link: https://cb.hbsp.harvard.edu:443/cbmp/access/26370956

Integrity statement:
At the University of California, Riverside (UCR) honesty and integrity are fundamental values that guide and inform us as individuals and as a community. The academic culture requires that each student take responsibility for learning and for producing work that reflect their intellectual potential, curiosity, and capability. Students must represent themselves truthfully, claim only work that is their own, acknowledge their use of others’ words, research results, and ideas, using the methods accepted by the appropriate academic disciplines and engage honestly in all academic assignments. Misunderstanding of the appropriate academic conduct will not be accepted as an excuse for academic misconduct. If a student is in doubt about appropriate academic conduct in a particular situation, he or she should consult with the instructor in the course to avoid the serious charge of academic misconduct. To ensure the highest standard of academic integrity, all students should be familiar with the guidelines posted at: http://conduct.ucr.edu/SiteCollectionDocuments/DocumentsFromStudentConduct/AcademicIntegrity BrochureStudent.pdf

Tentative Course Schedule: (Week 1) Introduction to Fixed Income Securities Subjects: Types of Bonds, Payments, Excel Exercise

(Week 2) Fixed Income Securities Valuation Subjects: Present value of cash flows, Basic Bond Pricing Case: Walt Disney Co.’s Sleeping Beauty Bonds

(Week 4) Duration and Liability Management Subjects: Duration of Bonds, Bond Portfolio Duration, Liability Immunization Case: Ticonderoga: Inverse Floating Rate Bond Midterm Exam (Week 5) Credit Risk and Credit Derivatives Subjects: Credit Risk, Credit Ratings, Value at Risk, Credit Default Swap Case: Saginaw Parts Co. and General Motors Corp. Credit Default Swap

(Week 3) Yield, Yield Curve, and Forward Interest Rates Subjects: Yield-to-Maturity, Term Structure of Interest Rates, Forward Rates

(Week 6) Interest Rate Swaps and Currency Swaps Subjects: Interest Rate Swap, Currency Swap, Swap Valuation Case: State of Connecticut Municipal Swap

(Week 7) Options on Fixed Income Securities Subjects: Fixed Income Securities Option Pricing, Real Options Case: Pension Plan of Bethlehem Steel – 2001

(Week 8) Valuation of Fixed Income Securities with Special Conditions Subjects: Convertible Bonds, Warrants, Call/Put Provision Case: Wells Fargo Convertible Bonds

(Week 9) Mortgages and Securitization Subjects: Mortgages, Refinancing, Asset Backed Securities Case: Traveler’s Mortgage Securities CMO (Week 10) Additional Topics on Fixed Income Securities Subjects: Banks, Insurance Companies, Pension Funds Case: Washington Mutual’s Covered Bonds Final Exam