This course will be taught by a veteran Wall St. technology manager currently employed at a top tier investment bank. The theme of this course will be “applied case study” and will focus on Fixed Income markets. The semester will begin with a big-picture view of the markets, the inner workings of an investment bank, the market players, and where software engineers fit in. The students will be grouped into small teams to build a financial application using practical software engineering principles.
It is assumed that the students can code in C++ or C for the server side. Students can choose the language/framework for the client side.
No prior experince in the financial
sector is required - just a desire to learn it.
Execution speed & size
Final Presentation - Each
group will demo their application and present design rationale
|Capital Markets - Fixed Income
Market players, where are technology dollars spent?
|Set up development environment
|| Financial instruments
|Implement yield-to-price calculator using slide 2 of NYU_class3.ppt as spec. !||ytm_sheet_closed_formula.xls NYU_class3.ppt||
||Basic Fixed Income Products –
the “bullet” bond
Yield to Maturity formula - Price/Yield
|General YTM formula, coupon bearing and discount type (e.g., "Zero" or "STRIP") implementation||NYU_class4.ppt ytm_sheet.xls||
|Basic Fixed Income Products –
the “bullet” bond (continued)|
Yield to Maturity formula - Price/Yield continued
|Pricing off our yield curve. Performing scenarios by shocking our yield curve, credit ratings.
Quiz on chapters 1-6 of Mythical Man-Month
| Building the onion – start
with simple, fast, separately testable classes libraries|
Mid-term submission specification
||Risk Types, Historical VaR, Stress Testing, Questions a Risk Manager might ask...
Expected output - example formats
Serverize our executable
Mid Term Submission Oct 27
||Requirements Final Project continued. Enhancements||
Risk by Maturity Bucket
Drill-down on VaR
||Variations of VaR. Total Market Risk Framework, server-side recovery ||
Server submission (1 of 2) DUE
Review lecture 8, 9:
- VaR methodology
- Trading book intra-day change
Implement VaR calculation using example spreadsheet as guide
- Calc "1 day 75% VaR"
- For "SBB_0001"
- from "midterm_book_answers.txt"
- Create 5 historical data-points (for 4 PnLs)
We will implement a means to identify how much VaR has changed due to different risk factors in next programming phase...
|10 (Nov 10)
||Attribution of VaR risk factors ...||
Quiz 2 of 3 MMM ( Ch 7-12)
||Risk management methodologies - how we apply what we built to total risk||
LGD and total VaR change start-of-day to end-of-day.
Spreadsheet spec uses dv01 approx for pricing.
You will have to do full pricing!
Walk through example code for doing VaR attribution
||Market Risk measurement
PnL attribution, Value at Risk (VaR), Stress Testing, Notional exposure
Server submission 2 of 2: Quiz 3 of 3 - MMM (Ch 13-17)
Server to return:
Total VaR and LGD change for the day
|13||Summary of Risk Management Principles and how our app helps us measure and manage risk||
Team presentation - Final (GUI demo) final_files.tar.Z