The essential mathematics of fixed income markets Pricing bonds Basic financial mathematics The yield price relationship Clean, dirty price and accrued interest Fixed income bonds trading cum and ex interest Zero-coupon bond pricing Coupon bond pricing at issue Coupon bond pricing after issue Par, discount, and premium bonds Exercises Pricing a zero coupon bond at issue and in the secondary market Pricing a coupon bond at issue and in the secondary market Duration and convexity of bonds Macaulay duration Modified duration Applying modified duration and Macaulay duration in the bond market The convexity of bond pricing explained Exercises Calculating Macaulay duration for bonds with differing coupons and yields Calculating Modified duration for bonds with differing coupons and yields Calculating the value per point on bonds with differing maturity Repurchase Agreements – Repo The mechanics of the repo market The essentials of the repo market All-in or classic repo structure The characteristics of classic repo The haircut on a repo Sell/buy back repo structure The cost of carry in the repo market Covering short bond positions in the repo market Covering long bond positions in the repo market Positive and negative carry in the money market for repo Risks in the repo market Exercises Using the repo market to fund a long bond position Using the repo market to cover a short bond position Using the repo to benefit from a positive carry in the money market Using the repo to exploit a negative carry in the money market Managing interest rate exposure using derivatives for the fixed income market Bond Futures Futures contract specifications and their application Pricing a futures contract Deriving the implied repo rate given the current futures and spot bond yields Interest Rate Swaps – IRSs Explaining how the swap curve is derived from the observed bond curve Using IRSs to manage long-term interest rate exposure Caps, Floors, and Collars Using Interest rate options as an alternative to IRSs and FRAs to hedge interest rate exposure Exercises Pricing a bond futures contract and calculating the implied repo rate Using interest rate swaps to hedge a long and short bond position Workshop closure

An overview of Bond and Financial Market terminology An overview of the components of the financial markets Bonds defined Features and characteristics of bonds The primary market for bonds The secondary market for bonds Government Bonds ETP for primary dealers JSE Reported Market How bonds differ from equities Types of bonds Zero-coupon bonds Coupon bonds Floating rate notes Inflation linked bonds STRIPS Asset backed securities Corporate bonds Eurobonds Market Participants in the Bond Market Issuers The role of primary dealers Tap issues in the secondary market Inter-dealer brokers Investors Settlement of bonds in the market Essential criteria for an efficient settlement system