Term Structure Models

Course content

This course gives the student an in depth overview of dynamic arbitrage free models of the term structure of interest rates in continuous time. The course will focus both on theoretical aspects as well as the practical implementation of the models.

 Topics will include 

  •  Pricing and risk managing interest rate derivatives i.e. swaps, futures, caps, swaptions etc. 
  •  Affine Processes and Affine Term Structure Models.
  • The Heath-Jarrow-Morton framework
  •  Multicurve Models
  •  Pricing Kernel Models. 
  •  An overview of market and benchmark rates such as xIBOR, RFR and other money market rates

 

Selected topics (may change from year to year)

  • Estimation of term structure models using the Kalman filter 
  • xVA 
  • Credit, liquidity and roll-over-risk 
  • Jumps in interest rates 
  • LIBOR in transition
  • LIBOR Market Model
  • Mortgage-Backed Securities. 

 

 

Education

MSc Programme in Actuarial Mathematics
MSc Programme in Mathematics-Economics
 

Learning outcome

 

Knowledge of the 

  • The mathematical details of selected arbitrage free models of interest rates
  • Market structure and institutional details

 

Skills

  • Apply change-of-numeraire techniques for pricing interest rate derivatives 
  • Ability to implement pricing and risk management models in a high-level programming language e.g. Matlab, R or Python.
  • Applying Fourier methods, Monte-Carlo methods and solution of ordinary differential equations, with a view towards solving term structure models. 

 

Competencies

  • Ability to read and understand the latest litterature in the field of mathematical term structure modelling
  • Assessing the strengths and weaknesses of mathematical financial model

 

5 hours per week of lectures and tutorials.

 

Selected lecture notes and articles. See Absalon for a list of course literature

Knowledge of continuous time finance at the level of Finkon1.

ECTS
7,5 ECTS
Type of assessment
Oral examination, 25 minutes
Type of assessment details
Oral examination with prepared slides 25 minutes, no preparation.
Aid
All aids allowed
Marking scale
7-point grading scale
Censorship form
No external censorship
Several internal examiners
Criteria for exam assessment

The student must, in a satisfactory way, demonstrate that he/she has mastered the learning outcome.

Single subject courses (day)

  • Category
  • Hours
  • Lectures
  • 35
  • Preparation
  • 140
  • Project work
  • 30
  • Exam
  • 1
  • English
  • 206

Kursusinformation

Language
English
Course number
NMAK22016U
ECTS
7,5 ECTS
Programme level
Full Degree Master
Duration

1 block

Placement
Block 1
Schedulegroup
A
Capacity
No restrictions/no limitations
The number of seats may be reduced in the late registration period
Studyboard
Study Board of Mathematics and Computer Science
Contracting department
  • Department of Mathematical Sciences
Contracting faculty
  • Faculty of Science
Course Coordinator
  • David Glavind Skovmand   (8-566e727970647167437064776b316e7831676e)
Teacher

David Skovmand and Jacob Bjerre Skov

Saved on the 07-04-2022

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