Finanzmathematik III / Fixed Income Markets and Credit Derivatives

Prof. Dr. Thilo Meyer-Brandis, Annika Steibel

Schedule and Venue

Prof. Dr. Thilo Meyer-Brandis
Tuesday, 12.15 – 13.45
Thursday, 10.15 – 11.45
Annika Steibel
Thursday, 08.30 - 10.00B004
Final ExamTBATBA
Retake ExamTBATBA

The course will be organised via Moodle. If you wish to participate, please sign up by sending an E-mail from your LMU E-mail address to Annika Steibel.

This lecture introduces into the arbitrage theory of fixed income markets and interest rate/credit derivatives. Topics that are covered include

  • Introduction to interest rates and interest rate derivatives: bonds, various interest rates, swaps, caps, floors, swaptions, market conventions
  • Arbitrage pricing: portfolios, arbitrage, hedging valuation.
  • Short-rate models
  • Affine term structure models
  • HJM models
  • Forward measures
  • LIBOR market models
  • Credit risk and Related Contracts
  • Structural Models
  • Reduced-Form Models

Main reference:

  • Filipovic: Term-Structure Models: A Graduate Course, Springer.

Additional literature:

  • Andersen and Piterbarg: Interest rate modelling, Volume 1,2,3, Atlantic Financial Press.
  • Björk: Arbitrage Theory in Continuous Time, Oxford University Press.
  • Brigo and Mercurio: Interest rate models-Theory and practice: With Smile, Inflation and Credit, Springer.
  • Lando: Credit Risk Modelling: Theory and Applications, Princeton Series in Finance.

Target Participants: Master students in Mathematics or Financial and Insurance Mathematics.

Pre-requisites: Proficiency in measure-theoretic probability, stochastic calculus, and fundamentals in Financial Mathematics is required, as f.ex. covered in the lecture Finanzmathematik II/Stochastic Calcuclus in Arbitrage Theory in Continnuous Time. Chapters 3.2, 3.3 A+B, 5.2 A+B and 5.3 A+B of Brownian Motion and Stochastic Calculus by I. Karatzas and S.E. Shreve (1991) can serve as an introduction/brush-up for stochastic calculus.

Applicable credits: Students may apply the credits from this course to the Master Finanz- und Versicherungsmathematik (WP37 (PO2011) resp. WP9 (PO2019, PO2021)) or to the Master Mathematik.

Problem Sheets: During the course, weekly problem sheets will be uploaded on Moodle. Correcting your answers and thinking through the exercises is the best preparation for the exam. Please try to solve every problem sheet.

Details TBA on Moodle.