Interest Rate Models

This course is the advanced level course offered by Ecole Polytechnique discusses interest rates and many related contracts like floating, fixed bonds, zero-coupon bonds, swaptions, caps, floors, swaps, forwards and futures.

It discusses how the bond portfolio could be hedged and the importance of forward, yield curves. We also learn the estimation of yield curves based on market data of different instruments. The course furthers towards stochastic calculus, which aids in later modules where various financial derivative-pricing models are discussed.

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Click here for solutions

1. Module-1

    I. Interest rate and discount bonds

    II. Forward and Future rates

    III. Coupon bonds and interest swaps

    IV. Duration and convexity

    V. Market conventions

2. Module-2

   I. Bootstraping example

    II. Exact methods

    III. Smoothing methods

    IV. Principal Component Analysis

3. Module-3

    I. Stochastic calculus

    II. Short rate models

    III. Heath-Jarrow-Morton framework

    IV. Forward measures

4. Module-4

    I. Interest rate futures and convexity adjustment

    II. Caps and floors

    III. Swapions

    IV. Calibration example

Along with the notes, I found the following sources very helpful in understanding stochastic calculus basics and related elements in Module-3,

1. profbillbyrne

2. quantpie

3. Mathspartner

4. Sample-Questions