Fixed Income and Credit

Quantitative analysis of Fixed Income Securities, including bond pricing models, yield curve fitting, PCA analysis, bond returns predictability and fixed income derivatives.


Fixed Income and Credit

Introduction

This project represents group project work for course in Fixed Income and Credit for advanced degree Masters in Computational Finance, Union University.

Professor: Prof. Nikola Vasiljevic, PhD

Students:

  • Nikola Krivacevic
  • Aleksandar Milinkovic
  • Milos Milunovic

Project goal and scope

The objective of this project is to develop understanding of the concept of time value of money, fixed income securities and markets as well as interest rate derivatives. We study valuation and hedging using these instruments and discuss how these methods are used in practice. Furthermore, we demonstrate how to apply different models for construction of yield curves, valuation and hedging using interest rate derivatives and estimating expected bond returns.

Starting point for analysis of all the previously mentioned things is the dataset that contains:

  • Yield_Curve sheet: monthly yield data, for period from 1/31/2005 - 5/31/2021, containing yields, for bonds from 4m tenor up to 30y.
  • PCA sheet: monthly sport rates for ZBCs (zero-coupon bonds), for period from 1/31/2000 - 5/31/2021, for bonds of 1y, 2y, 3y, 4, and 5y maturities.
  • Fama_Bliss sheet: monthly prices of coupon-bearing bonds, for period from 1/31/1964 - 12/31/2020, for bonds of 1y, 2y, 3y, 4, and 5y maturities.

Project phases:

Each of the project phases has been logically separated based on things we’re analysing and modeling. Every phase has a detailed description of all the steps, implementation details, intuition for modeling, interpretation of data analysis, modeling and evaluation that was performed. You can use the following links to view the notebooks with Google Collab or to view them directly on Github: