Understanding bonds, yields, and fixed-income securities — the conceptual foundation for DeFi lending protocols such as Aave, Compound, and MakerDAO, as well as on-chain yield strategies. This section covers 19 topics spanning instrument features, valuation, risk measurement, credit analysis, and securitization.
Fixed-Income Instrument Features Learning Objectives Coverage LO1: Describe the features of a fixed-income security Core Concept Fixed-income instruments are debt securities representing contractual agreements where an issuer borrows money from investors in exchange for interest payments and future ...
Topic 10: Interest Rate Risk and Return Learning Objectives Coverage LO1: Calculate and interpret the sources of return from investing in a fixed-rate bond Core Concept Definition: Fixed-rate bonds generate returns from three distinct sources: (1) scheduled coupon and principal payments, (2) reinves...
Topic 11: Yield-Based Bond Duration Measures and Properties Learning Objectives Coverage LO1: Define, calculate, and interpret modified duration, money duration, and the price value of a basis point (PVBP) Core Concept exam-focus Modified duration measures a bond’s price sensitivity to yield changes...
Topic 12: Yield-Based Bond Convexity and Portfolio Properties Learning Objectives Coverage LO1: Calculate and interpret convexity and describe the convexity adjustment Core Concept exam-focus Convexity is a complementary risk metric that measures the second-order (non-linear) effect of yield changes...
Topic 14: Credit Risk Learning Objectives Coverage LO1: Describe credit risk and its components, probability of default and loss given default Core Concept exam-focus credit-analysis Credit risk is the risk of economic loss resulting from a borrower’s failure to make full and timely payments of inte...
Topic 15: Credit Analysis for Government Issuers Learning Objectives Coverage LO1: Explain special considerations when evaluating the credit of sovereign and non-sovereign government debt issuers and issues Core Concept exam-focus credit-analysis Government credit analysis evaluates the ability and ...
Topic 16: Credit Analysis for Corporate Issuers Learning Objectives Coverage LO1: Describe the qualitative and quantitative factors used to evaluate a corporate borrower’s creditworthiness Core Concept exam-focus credit-analysis Corporate credit analysis evaluates a company’s ability and willingness...
Topic 18: Asset-Backed Security (ABS) Instrument and Market Features Learning Objectives Coverage LO1: Describe characteristics and risks of covered bonds and how they differ from other asset-backed securities Core Concept exam-focus Covered bonds are senior debt obligations issued by financial inst...
Topic 19: Mortgage-Backed Security (MBS) Instrument and Market Features Learning Objectives Coverage LO1: Define prepayment risk and describe time tranching structures in securitizations and their purpose Core Concept exam-focus Prepayment risk is the uncertainty about the timing and amount of princ...
Fixed-Income Cash Flows and Types Learning Objectives Coverage LO1: Describe common cash flow structures of fixed-income instruments and contrast cash flow contingency provisions that benefit issuers and investors Core Concept Cash flow structures determine the timing and amounts of interest and pri...
Fixed-Income Issuance and Trading Learning Objectives Coverage LO1: Describe fixed-income market segments and their issuer and investor participants Core Concept exam-focus Fixed-income instruments and markets are categorized along three dimensions: issuer type (sector), credit quality, and time to ...
Fixed-Income Markets for Corporate Issuers Learning Objectives Coverage LO1: Compare short-term funding alternatives available to corporations and financial institutions Core Concept exam-focus Corporate and financial institutions rely on various short-term funding sources to meet cash needs during ...
Topic 5: Fixed-Income Markets for Government Issuers Learning Objectives Coverage LO1: Describe funding choices by sovereign and non-sovereign governments, quasi-government entities, and supranational agencies Core Concept exam-focus Government funding encompasses various debt issuance mechanisms by...
Topic 6: Fixed-Income Bond Valuation: Prices and Yields Learning Objectives Coverage LO1: Calculate a bond’s price given a yield-to-maturity on or between coupon dates Core Concept Bond pricing is the application of discounted cash flow analysis — grounded in the time value of money concepts from Qu...
Topic 13: Curve-Based and Empirical Fixed-Income Risk Measures Learning Objectives Coverage LO1: Explain why effective duration and effective convexity are the most appropriate measures of interest rate risk for bonds with embedded options Core Concept exam-focus Effective duration and convexity mea...
Topic 7: Yield and Yield Spread Measures for Fixed-Rate Bonds Learning Objectives Coverage LO1: Calculate annual yield on a bond for varying compounding periods in a year Core Concept Definition: Bond yields can be expressed with different compounding frequencies (periodicity), requiring conversion ...
Topic 8: Yield and Yield Spread Measures for Floating-Rate Instruments Learning Objectives Coverage LO1: Calculate and interpret yield spread measures for floating-rate instruments Core Concept Definition: Floating-rate notes (FRNs) have coupons that reset periodically based on a reference rate plus...
Topic 9: The Term Structure of Interest Rates: Spot, Par, and Forward Curves Learning Objectives Coverage LO1: Define spot rates and the spot curve, and calculate the price of a bond using spot rates Core Concept Definition: Spot rates are the yields on zero-coupon bonds for various maturities, repr...