FIXED INCOME SECURITIES AND MANAGEMENT OF MARKET RISK - BMEGT35M126

Fixed income securities cover a great set of securities ranging from treasury (zero-coupon-yield) securities to all kinds of asset backed and structured products. Investing into these securities entails various types of markets risks (interest rate risk, foreign currency risk, country risk etc.). The aim of this course is to introduce the most relevant risk charac-teristics of these financial products to students and the way of measuring and managing these risks. After a general overview of pricing methodologies, questions relating to interest rate exposure are tackled, for instance how yield curve shifts affect investments in fixed income securities and how basis risk and duration should be calculated. The audience will learn about the basic segments of fixed income securities markets, such as government securities mar-kets, mortgage and covered bonds and newly emerging structured products. The issues of risk management will be presented in several aspects, by dealing with foreign currency and interest rate swaps, duration hedging, CDSs, port-folio risk management methods. Loss distribution and risk models relating to fixed income securities will be briefly discussed as well. The agenda partly covers a the first, third, fourth and fifth topics (Foundations of Risk Management; Financial Mar-kets and Products, Valuation and Risk Models and Market Risk Management) of the FRM (Financial Risk Manager) Exam and the modul VII. (Fixed Income) of the CFA (Chartered Financial Analyst). This gives immensely useful and practical knowledge to the audience in real life.

1. knowledge of all sorts of market risks relating to fixed income assets;
2. knowledge of basic segments of fixed income securities markets;
3. calculation of fixed income securities' yield;
4. measurement approaches of market risk in relation to fixed income securities;
5. learning to use the risk mitigation techniques.
6. Understands the principles and applications of risk management models at both theoretical and practical levels. (EFMD-ILO connections: Finance - Knowledge (Specific competences of the educational programme) - SpecT2 - ILO 1: Analytical thinking)

1. plan and organize independent learning,
2. comprehend and use the professional literature of the topic
3. recognize and measure the risks related to fixed income securities,
4. perform calculations to support decision-making.
5. Is capable of pricing money and capital market instruments, managing and directing capital market transactions, analysing investments and other financial undertakings, and managing financial risks of derivative transactions. (EFMD-ILO connections: Finance - Skills (KKK) - K5 - ILO 1: Analytical thinking)
6. Is able to apply techniques to manage various risks. (EFMD-ILO connections: Finance - Skills (Specific competences of the educational programme) - SpecK2 - ILO 1: Analytical thinking)

1. is open to getting to know and adapting innovations in the financial field,
2. collaborates with their instructors and others during the learning process,
3. gains knowledge and information,
4. uses the possibilities offered by IT tools.
5. Is open to cooperation and participation in group work. (EFMD-ILO connections: Finance - Attitude (KKK) - A5 - ILO 6: Teamwork)

1. is open to accept constructive criticism,
2. collaborates with others to solve problems during the learning process,
3. could make prudent financial decisions,
4. understands the importance and weight of responsibility and can assess the consequences of decisions.
5. Their work is characterised by the independent and responsible consideration and taking into account of economic and non-economic consequences when formulating professional issues. (EFMD-ILO connections: ML - Autonomy and responsibility (KKK) - F5 - ILO 1: Communication)

Lectures, written and oral communication, use of IT tools and techniques, optional problem-solving, analytical and presentation tasks alone and in groups.

• Tanulástámogató anyagok
• Kötelező - Compulsory:
• Az előadások prezentációinak anyaga, ami a félév során folyamatosan frissül a tantárgy oldalán. Slideshows of the lectures which will be uploaded continuously during the semester.
• Zvi Bodie-Alex Kane-Alan J. Marcus, Investments, 13th Edition, MacGrawHill, 2024, 14-16 chapters
• CME Group, Interest rates Risk Management for Fixed Income Asset Managers.https://www.cmegroup.com/education/files/AM-001_RiskMgmt-for-Fixed-Income-AM.pdf
• Riskmetrics Group, Risk Management. A Practical Guide. 1st edition. https://www.msci.com/documents/10199/3c2dcea9-97be-4fb4-befe-a03b75c885aa
• Ajánlott - Recommended:
• Christian Szylar, Handbook of Market Risk. A One-Stop Guide for the Theories, Applications, and Statistical Methodologies of Market Risk, John Wiley & Sons, 2014
• Philippe Jorion, Financial Risk Manager Handbook (GARP), 6th Edition, Wiley, 2011
• John C. Hull, Risk Management and Financial Institutions, Wiley, 2015
• Steve Allen, Financial Risk Management: A Practitioner’s Guide to Managing Market and Credit Risk, Wiley, 2013
• Golub, B. W. (Ed.). (2023). BlackRock's Guide to Fixed-Income Risk Management. John Wiley & Sons.

Assessment of the learning outcomes described under 2.2. is based on a mid-term and an end-term exam (50-50%). The optional homework assignments can affect the outcome as additional points can be reached by completing them (max. +20%).

EFMD-ILO connection: 1.Written exam: Supervised application of financial models, computational tasks and analytical methods. (Finance-ILO1) 10. Group presentation: Demonstrating teamwork and coordination through preparation and joint delivery. (Finance- ILO6) 14. Portfolio: Collection of team contributions and independent work; demonstrating autonomy. (Finance-ILO 6) A. Szorgalmi időszakban végzett teljesítményértékelések részletes leírása - A hallgatós Detailed description of mid-term performance assessments - The audience could gain extra points with the optional homework (problem-solving, written analysis, presentation). - Two mid-term exams assess the knowledge and skill competencies obtained through the subject which cover both theoretical knowledge and problem-solving. Working time for the exam is announced during the semester. B. Detailed description of examination performance assessments - The complete assessment of knowledge happens during the semester

• two mid-term tests: 100
• optional homework: 20
• total: 100

• midterm I: 50
• midterm II: 50
• total: 100

50% based on mid-term test results and homework assignments

The written tests (midterm I and midterm II) can be retaken once in line with the rules laid down in TVSZ.

Consulted with the Faculty Student Representative Committee, approved by the Vice Dean for Education, valid from: 04.05.2026.