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

Module code: ICM519

Module provider: ICMA Centre; Henley Business School

Credits: 20

Level: 7

When you'll be taught: Semester 2

Module convenor: Dr Ivan Sangiorgi, email: ivan.sangiorgi@icmacentre.ac.uk

Pre-requisite module(s):

Co-requisite module(s):

Pre-requisite or Co-requisite module(s):

Module(s) excluded: IN TAKING THIS MODULE YOU CANNOT TAKE IC314 (Compulsory)

Placement information: NA

Academic year: 2024/5

Available to visiting students: No

Talis reading list: No

Last updated: 19 November 2024

Overview

Module aims and purpose

The module explores the economic drivers and relationships between bond, 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. Students will 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, and policy makers. The course covers the overall functions, pricing, structure and operation of bond and money markets.  

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

Module learning outcomes

By the end of the module, it is expected that students will be able to: 

• Define the main aspects of the economic theories of the determination of interest rates, money market rates, bond yields and their interlinkages with central bank monetary policy operations.  
• Evaluate economic situations to determine the likely implications for bonds and money market instruments, with real-world examples taken from a variety of bond and money markets across the world. 
• Explain and apply common trading strategies and portfolio management strategies of bond and money markets, and the key features of funding liquidity management.  

Module content

Lectures include:  

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

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

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

•Yield curve modelling and trading strategies.  

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

The module also encourages the student to use Bloomberg for practical real-world examples.   

Structure

Teaching and learning methods

Lectures will be used to explain core theory and concepts discussed in the course. 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 examinations. Interactive workshops where students will participate in experiential learning, followed by some input from the facilitator and be signposted to further resources should they wish to continue to develop their knowledge in these areas.

Study hours

At least 28 hours of scheduled teaching and learning activities will be delivered in person, with the remaining hours for scheduled and self-scheduled teaching and learning activities delivered either in person or online. You will receive further details about how these hours will be delivered before the start of the module.

Please note the independent study hours above are notional numbers of hours; each student will approach studying in different ways. We would advise you to reflect on your learning and the number of hours you are allocating to these tasks.

Semester 1 The hours in this column may include hours during the Christmas holiday period.

Semester 2 The hours in this column may include hours during the Easter holiday period.

Summer The hours in this column will take place during the summer holidays and may be at the start and/or end of the module.

Assessment

Requirements for a pass

50% weighted average mark 

Summative assessment

Penalties for late submission of summative assessment

The Support Centres will apply the following penalties for work submitted late:

Assessments with numerical marks

• where the piece of work is submitted after the original deadline (or any formally agreed extension to the deadline): 10% of the total marks available for that piece of work will be deducted from the mark for each working day (or part thereof) following the deadline up to a total of three working days;
• the mark awarded due to the imposition of the penalty shall not fall below the threshold pass mark, namely 40% in the case of modules at Levels 4-6 (i.e. undergraduate modules for Parts 1-3) and 50% in the case of Level 7 modules offered as part of an Integrated Masters or taught postgraduate degree programme;
• where the piece of work is awarded a mark below the threshold pass mark prior to any penalty being imposed, and is submitted up to three working days after the original deadline (or any formally agreed extension to the deadline), no penalty shall be imposed;
• where the piece of work is submitted more than three working days after the original deadline (or any formally agreed extension to the deadline): a mark of zero will be recorded.

Assessments marked Pass/Fail

• where the piece of work is submitted within three working days of the deadline (or any formally agreed extension of the deadline): no penalty will be applied;
• where the piece of work is submitted more than three working days after the original deadline (or any formally agreed extension of the deadline): a grade of Fail will be awarded.

The University policy statement on penalties for late submission can be found at: /cqsd/-/media/project/functions/cqsd/documents/qap/penaltiesforlatesubmission.pdf

You are strongly advised to ensure that coursework is submitted by the relevant deadline. You should note that it is advisable to submit work in an unfinished state rather than to fail to submit any work.

Formative assessment

Formative assessment is any task or activity which creates feedback (or feedforward) for you about your learning, but which does not contribute towards your overall module mark.

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. 

Reassessment

Additional costs