ICM519-Bond and Money Markets: Pricing, Trading and Portfolio Strategies

Module Provider: ICMA Centre
Number of credits: 20 [10 ECTS credits]
Level:7
Terms in which taught: Spring term module
Pre-requisites:
Non-modular pre-requisites:
Co-requisites:
Modules excluded: IC314 Bond and Money Markets
Current from: 2023/4

Module Convenor: Dr Ivan Sangiorgi
Email: ivan.sangiorgi@icmacentre.ac.uk

Type of module:

Summary module description:

The module explores the economic drivers and relationships between bonds, money markets and central bank monetary policies, and the impact of key economic drivers on the pricing, trading strategies, and portfolio management for bonds and money market instruments. The module offers students the opportunity to gain an understanding of how these connections affect interest rates, trading positions, portfolio management strategies, funding liquidity management, and the challenges faced by bond issuers, investors, regulators and policy makers in bond and money markets. The course also covers the overall functions, pricing, structure and operation of bond and money markets.

Aims:

The main aims of the module are to provide the tools for understanding the functioning and pricing of money markets, their connection with bond markets and central bank interventions, the fundamental determinants of interest rate markets and the commonly used trading strategies and portfolio management strategies.

The lectures will provide:

1. the fundamentals of money markets, repos and bonds, and their pricing

2. identification of trading strategies and portfolio management strategies,

3. practical examples of current market situations

Assessable learning outcomes:

By the end of the module, it is expected that students will:Ìý

• Define the main aspects of the economic theories of the determination of money market rates and their interlinkages with bond markets and central bank monetary policy operations;Ìý


• Explain the role of collateral and repo markets, their pricing and trading techniques.Ìý


• Evaluate economic situations to determine the likely implications for bonds and money market instruments.Ìý


• Explain and apply common trading strategies of bond and money market instruments and the key features of funding liquidity management.

Additional outcomes:

The module aims to supplement quantitative skills with the knowledge of the economics of money markets necessary to design trading strategies, and to construct and manage portfolios of bonds and money market instruments.

The module also encourages the student to use Bloomberg and other financial data providers for practical real-world examples.

Outline content:

Lectures include:Ìý

• The economics of bond, money markets and interest rates.Ìý


• Central bank monetary policy operations, quantitative easing and tightening policies.Ìý


• Pricing and trading of money market instruments, repos, bonds, and derivatives.


• Yield curve modelling and trading strategies.Ìý


• Pricing and trading of corporate bonds, with a focus on green, social and sustainabilitybonds and loans.


• Bond portfolio management strategies, bond portfolio construction, and liability-driven strategies.


• The impact of regulation on bonds, money markets, and funding liquidity management.

Global context:

The module uses real-world examples taken from a variety of bond and money markets across the world.

Brief description of teaching and learning methods:

Lectures will be used to explain core theory and concepts discussed in the course.Ìý The module’s delivery follows a practice centred approach and extensively utilises Bloomberg and other financial data providers to gain a more in-depth understanding of certain topics. Seminars will be based around set questions and preparation for assessments.

Summative assessment- Examinations:

Summative assessment- Coursework and in-class tests:

Multiple Choice Test: 20%, one hour, twenty questions, scheduled in the last week of the Spring Term.

Individual Project: 80%, up to 3,000 words and separate Excel file with supporting calculations. Students will be required to submit an individual project on trading strategies and portfolio management strategies in bond and money markets, by around week 1 (or 2) of the Summer Term.

Formative assessment methods:

Question sets discussed during the seminars with feedback provided during those seminars and on Blackboard. Non-graded quizzes during lectures help students to receive formative feedback and prepare for their summative assessment.

Penalties for late submission:

Penalties for late submission on this module are in accordance with the University policy.

Assessment requirements for a pass:

50% overall grade.

Reassessment arrangements:

100% coursework.

Additional Costs (specified where applicable):

1) Costs for textbook:

2) Specialist equipment or materials:

3) Specialist clothing, footwear or headgear:

4) Printing and binding:

5) Computers and devices with a particular specification:

6) Travel, accommodation and subsistence: Additional cost of travel, accommodation and subsistence and any other expenses incurred for the purpose of the placement (in the UK or abroad)

Last updated: 5 April 2023