This course introduces the general principles for valuation of fixed income securities. You will learn about how to value a bond, and the factors affecting the price of a bond. You will also learn about the arbitrage-free valuation approach and how a dealer can generate arbitrage profits from mispriced securities. You will apply the time value of money (TVM) skills learned in the reading ‘Time Value of Money’ to calculate the value of a bond.

You will also learn about the yields and spreads and the effect of monetary policy on financial markets. You will learn about the shapes of yield curve, and the theories of term structure of interest rates. You will also learn about spot rates, yield spread measures and credit spreads. The impact of various factors such as embedded options, liquidity, and issue size on yield spreads is discussed. The reading also explains the tax implications on securities' yields. Finally you will learn about LIBOR and its importance.