hey there, here's what I've set out for you. Below is a step-by-step guide detailing what we'll tackle each week. In each module, each topic has been chosen to give you the skills and the insights you need. But remember, while this roadmap will guide you, your curiosity will drive you. So, ask questions, be hands-on, and embrace every victory moment.
Day 1: Setting the Foundation
It's about setting up your development environment. You'll familiarize yourself with Anaconda Navigator, which acts as a central tool for managing your data science tools, and Jupyter Notebook, a powerful interactive tool for coding, visualization, and presenting your Python projects. Additionally, we'll delve into the seamless integration with Excel, harnessing its analytical capabilities to augment our data handling and visualization. By the end of the day, you'll have your tools in place and be ready to start your journey.
Installation Guide: Get Started with Anaconda Navigator: Installation
Watch: Anaconda Navigator Application
Everything You Need To Get Started On Your Machine | Installation Process | Integrated Development Environment vs. Code Editor vs. Compiler Learnings | Python Libraries & Packages | Recommendations.
Watch: Jupyter Notebook
Open-Source Web-Based Interactive Computing Platform Launching Application | Default Directories | Creating a New Jupyter Notebook | Menu Options & Toolbar | Keyboard Shortcuts | Code Cell.
To download and install Microsoft Excel, head to Microsoft's official site. Please be aware that a valid license or subscription may be required to access and use Excel fully.
Week 1 to 3: Financial Markets, Fixed-Income Products, And Derivative Instruments
In this week, we dive deep into the world of finance. Financial markets are the bedrock of the global economy, and understanding their mechanics is crucial for anyone looking to make informed decisions, whether you're an investor, a business professional, or just a curious learner. We'll start by examining the different types of financial markets, from equity to forex, and understand their significance. But markets are just venues – what's traded in them? that's where financial products come in. Instruments like stocks, bonds, and derivatives that investors buy and sell.
By the end of this week, you'll have a foundational understanding of the landscape of financial markets and the products that drive them.
Watch: Introduction to Financial Markets
Understanding: Financial Markets - Capital Market - Primary | Secondary - Equity | Debt | Forex / Currency Market | Commodity Market | Derivatives Market - Exchange vs. Over-The-Counter Traded.
Watch: Introduction to Financial Products and Instruments – Equities
Understanding: Financial Products - Securities - Stocks | Debt | Loans | Deposits | Stock Market - Primary | Secondary - Order Book | Private Placement | Equities - Capital Appreciation | Dividend | Reinvestment (DRIP)
Watch: Market Data for Equities
Extract Historical And Intraday Time-Series Data - Stocks - Single | Multiple - Open | High | Low | Close | Adjusted Close | Volume | Data Visualization - Price Chart | Data Indexing
Watch: Historical Time Series Data And Equity Shocks – Excel | Python
Absolute Returns/Shocks | Proportional/Relative Shocks - Discrete | ShockType Use | Comparison And Validation
Watch: Introduction to Financial Products And Instruments – FI Securities
Understanding: Financial Products - Debt Securities | Issuers - Government | Agencies | Municipals | Corporates | Treasury Securities - T-Bills | T-Notes | T-Bonds | TIPS | Interest Rate & Term-Structure of Interest Rates - Short-Term | Medium-Term | Long-Term
Read: Understanding Fixed-Income Treasury Securities
Watch: Historical Time Series Data And Interest Rate Shocks
Absolute Returns/Shocks | Proportional/Relative Shocks - Discrete | Continuous | Profile of Interest Rates – 10Y & 3M | Variability Profile | YC Profile – Current Rates And Shocks
Watch: Market Data for Interest Rates
Treasury Yield Curve - Normal | Inverted | Humped/Flat | Historical Time-Series of Interest Rates | 2007-08 & 2022-23 Interest Rate Profiles | Market Sentiments | FED 2024-25 Targets
Watch: US Treasury Yield Spread
Treasury Yield Spread - 10Y3M Spread | Yield Spread Table | Interpretation & Identification of Yield Curve Profile & Inversions
Watch: Market Report: Monitoring USD10Y3M Yield Spread
Treasury Yield Spread - USD10Y3M Spread | Historical Levels - Peak | Trough | Current | Preparing Market Report - Description | Financial Crisis | Economic Recessions | Advice - Long/Short Position
Investigating the dynamics of the US Treasury Yield Spread and its implications for economic conditions.
Watch: Market Report: Monitoring SnP500 Equity Index
Equity Market Index - SnP 500 Index | Performance Measures - Rolling Maximum Cumulative Loss | Maximum Drawdown | Preparing Market Report - Description | Financial Crisis | Economic Recessions | Chart
Analyzing the performance of the S&P 500 Equity Index, including measures such as cumulative loss and maximum drawdown.
Watch: S&P 500 Performance: Cumulative Loss And Maximum Drawdown
Performance Measures - Growth Index | Cumulative Losses | Maximum Drawdown | Period - 1990 to Present | Generate Consolidated Market Report
Preparing a comprehensive market report to monitor the interplay between yield spreads and equity performance, providing insights into market trends and potential investment strategies.
Project: Monthly Market Report: Monitoring Yield Spreads And S&P 500 Performance
Your objective is to prepare a market report, focusing on the dynamics of the US Treasury Yield Spread and S&P 500 Equity Index data from 1990 to the present.
Engage in a practical project focused on preparing a monthly market report, analyzing the dynamics of the US Treasury Yield Spread and S&P 500 Equity Index performance.
Utilize historical data and performance metrics to provide insights into market trends, economic conditions, and potential investment opportunities.
Generate consolidated market reports to communicate findings effectively and facilitate informed decision-making.
Week 4 and 6: Modeling Term-Structure of Interest Rates
Welcome to Week 4, where we venture into the fascinating domain of modeling the term-structure of interest rates. This week is dedicated to understanding the complexities of yield curve construction through various methods. We'll kick off by exploring Yield Curve Construction using Interpolation Methods such as linear, polynomial, and cubic spline. You'll gain insights into the construction process and the significance of day count conventions.
Next up, we'll delve into the Ordinary Least Squares (OLS) Regression Method for yield curve construction. This statistical approach involves understanding simple linear regression, model coefficients, and the unexplained component, allowing you to grasp the nuances of modeling the term-structure, tops with some advanced models: the Nelson Siegel (NS) and Nelson Siegel Svensson (NSS) models. These polynomial regression models provide a deeper understanding of the level, slope, and curvature components of the yield curve.
Watch: Yield Curve Construction – Interpolation Methods
Yield Curve Construction - Interpolation Methods - Linear | Polynomial | Higher-Order Polynomials - Quadratic | Cubic | Quartic | Day Count Convention - 30/360
Exploring Yield Curve Construction using Interpolation Methods: Linear, Polynomial, Higher-Order Polynomials (Quadratic, Cubic, Quartic)
Understanding Day Count Conventions - 30/360
Analyzing the Limitations of Interpolation Methods
Watch: Advanced Interpolation Methods – Vandermonde Matrix
Yield Curve Construction - Interpolation Methods - Vandermonde Matrix | System of Linear Equations | Determinant | Coefficients | Curve Fitting | Limitations
Understanding deep into Advanced Interpolation Methods: Vandermonde Matrix
Understanding System of Linear Equations, Determinants, and Coefficients
Exploring Curve Fitting Techniques and Limitations
Watch: Advanced Interpolation Methods – Newton Divided Difference
Yield Curve Construction - Interpolation Methods - Newton's Divided Difference | Newton (Divided Difference) - First/Second/Third-Order Derivatives | Coefficients | Curve Fitting | Limitations - Degree & Extrapolation
Understanding deep into Advanced Interpolation Methods: Newton's Divided Difference
Understanding Newton (Divided Difference) - First/Second/Third-Order Derivatives, Coefficients, Curve Fitting, and Limitations
Exploring Lagrange & Cubic Spline Interpolation - Coefficients, Curve Fitting, and Limitations
Watch: Advanced Interpolation Methods – Lagrange And Cubic Spline Interpolation
Yield Curve Construction - Interpolation Methods - Lagrange & Cubic Spline | Coefficients | Curve Fitting | Limitations
Watch: Modeling Yield Curve – Linear Regression Model (Single Factor)
Modeling Term-Structure of Interest Rates - Ordinary Least Squares Method - Simple Linear Regression | Dependent & Independent Variable | Model Coefficients - Slope & Intercept | Unexplained Component - Error Term/Sum of Squared Residuals | Model Predictions | Best Fit Line
Understanding Modeling Term-Structure of Interest Rates using Ordinary Least Squares Method
Exploring Simple Linear Regression and Dependent & Independent Variables
Analyzing Model Coefficients, Unexplained Components, and Model Predictions
Watch: Modeling Yield Curve – Polynomial Regression Model (Single Factor)
Modeling Term-Structure of Interest Rates - Ordinary Least Squares Method - Polynomial Regression | Quadratic Regression | Cubic Regression | Dependent & Independent Variable | Model Coefficients - Slope & Intercept | High-Order Coefficients - Curvature | Unexplained Component - Error Term/Sum of Squared Residuals | Model Predictions | Best Fit Curve
Understanding Modeling Term-Structure of Interest Rates using Ordinary Least Squares Method
Exploring Polynomial Regression and Dependent & Independent Variables
Analyzing Model Coefficients, Unexplained Components, and Model Predictions
Watch: Modeling Yield Curve – Nelson Siegel (NS) And Nelson Siegel Svensson (NSS) Models
Yield Curve Construction - Nelson Siegel & Nelson Siegel Svensson Model - Polynomial Regression | Model Coefficients - Level, Slope & Curvature | Unexplained Component - Error Term | Model Predictions | Best Fit Line
Understanding deep into Nelson Siegel & Nelson Siegel Svensson Models - Polynomial Regression, Model Coefficients (Level, Slope & Curvature), and Unexplained Component
Analyzing Model Predictions and Best Fit Line
Watch: Model Validation – Nelson Siegel (NS) And Nelson Siegel Svensson (NSS) Models
Model Parameters – Level (ß0) | Slope (ß1) | Curvature (ß2, ß3, ß4) | Scale (τ1, τ2) | Evaluation Metrics – Mean Absolute Error (MAE) | Mean Squared Error (MSE) | Root Mean Squared Error (RMSE) | Median Absolute Error (MedAE) | Maximum Error (ME) | Mean Absolute Percentage Error (MAPE) | Residual Sum of Squares (RSS) | Total Sum of Squares (TSS) | Coefficient of Determination (R²)
Model Validation - Parameters, Evaluation Metrics, and Performance Analysis
Project: A Research Beyond Yield Curves: Best-Fit Model For Yield Curve Estimation
Actual vs. Predicted Interest Rates | Coefficient Table | Residuals | R-squared (Coefficient of Determination) | Model Performance
Participants will explore a range of modeling techniques, including interpolation methods, regression models, and advanced polynomial regression models such as the Nelson Siegel (NS) and Nelson Siegel Svensson (NSS) models. By comparing the performance of these models, participants aim to identify the best-fit model for yield curve estimation.
Participants will analyze the performance of each model by comparing actual vs. predicted interest rates. This involves assessing the accuracy of model predictions and identifying any discrepancies or outliers. Additionally, participants will examine model coefficients, residuals, and other performance metrics to evaluate the overall effectiveness of each model.
Based on the analysis of model performance metrics, participants will select the best-fit model for yield curve estimation. This involves considering factors such as prediction accuracy, robustness, and simplicity of the model.
Watch: Modeling Interest Rate Risk Factors – Principal Component Analysis (PCA)
Statistics – Variance | Covariance-Correlation Matrix | Normalization | Principal Component Identification – Level | Slope | Curvature | Eigen Decomposition – Values & Vectors | Dimensionality Reduction | PC Computation & Uncorrelated Shocks
Exploring Statistics - Variance, Covariance-Correlation Matrix, Normalization, and Standardization
Understanding Principal Component Identification (Level, Slope, Curvature), Eigen Decomposition, Dimensionality Reduction, and Uncorrelated Shocks
Watch: Principal Component Analysis (PCA) – The Reduced Model In Perspective
Reduced Model Process | Population | Sample Set Represents The Population | Population Change | The Inverse Problem | Steps To Generate Principal Components | General Data Transformation
Complete: Interview Guide Question(s)
Week 7 and 10: Pricing And Valuation of Fixed-Income Securities
Welcome to Weeks 9 and 10, You'll tackle the Pricing and Valuation of Fixed-Income Securities, focusing on US Treasury securities. You'll learn how to figure out the worth of fixed-income securities, starting with US Treasury Bills. We'll use a method called the Discounted Cash Flow (DCF) model to crunch numbers such as discount rates and present values.
We'll move on to more to analyzing longer-dated Treasury securities and understanding how their value changes over time by mark-to-market securities and recording profit/loss. We'll also look at how to compare our calculated prices with the actual market prices and analyze the price difference due to model errors. Along the way, You'll do a practical project to sharpen analytical skills in valuing US Treasury Securities.
Watch: Full Valuation DCF Model – US Treasury Bills
Market Data - Discount Rates | Fixed-Income Product - 26W Treasury Bill | Discount Factor | Discounting Cashflow Equation | Model Price vs. Issue Price | Discount Basis Yield | Effective Yield | Money Market Yield | Bond Equivalent Yield | Effective Annualized Yield | Valuation Report
Exploring Market Data: Discount Rates
Understanding the 26W Treasury Bill as a Fixed-Income Product
Analyzing Discount Factor and Discounting Cashflow Equation
Comparing Model Price vs. Issue Price
Understanding Discount Basis Yield, Effective Yield, Money Market Yield, Bond Equivalent Yield, and Effective Annualized Yield
Evaluating Effective Annualized Yield and Generating Valuation Reports
Watch: Interest Rate Movement And Mark-to-Market PnL
Mark-to-Market Price And PnL | Constant Rate Simulation | Incremental PnL – Interest Rate Movement vs. Pull-to-Par Effect | Price-Yield Relationship | Analysis Report And Commentary
Understanding Mark-to-Market Price And PnL
Simulating Interest Rate Scenario with Constant Rate Simulation
Analyzing Incremental PnL: Interest Rate Movement and Pull-to-Par Effect
Exploring Price-Yield Relationship and Generating Analysis Reports with Commentary
Watch: Full Valuation DCF Model – US Treasury Notes/Bonds
Market Data - Interest Rates Term-Structure | Interest Rate Curve Construction | Fixed-Income Product - 10Y US Treasury Note | Discounting Cashflow Model | Discount Factors | Present Values | Model Price vs. Issue Price | Model Price Difference | Valuation Report
Utilizing Market Data: Interest Rates Term-Structure
Constructing Interest Rate Curve and Analyzing Fixed-Income Product: 10Y US Treasury Note
Applying Discounting Cashflow Model and Evaluating Discount Factors and Present Values
Comparing Model Price vs. Issue Price and Analyzing Model Price Difference
Generating Detailed Valuation Reports
Watch: Full Valuation DCF Model – US Treasury Notes/Bonds – Mark-to-Market
Mark-to-Market Price And PnL | Accrued Interest | US Treasury Interest Rate Curve Analysis – Valuation Date vs. Issue Date | Model Price Difference – Model Price vs. Market Price | Model Limitations | Valuation Report
Understanding Mark-to-Market Price And PnL for US Treasury Notes/Bonds
Evaluating Accrued Interest and Analyzing US Treasury Interest Rate Curve
Comparing Valuation Date vs. Issue Date and Model Price vs. Market Price
Addressing Model Limitations and Generating Detailed Valuation Reports
Project: Valuation Report of US Treasury Securities And Mark-to-Market
We're thrilled to introduce our fixed-income pricing and valuation project, the "Valuation Report of US Treasury Securities And MTM" – A unique opportunity for participants to deepen their understanding with respect to the pricing and valuation of fixed-income securities, impact of change in market risk factors on portfolio performance, and market commentaries.
Participants will apply theoretical concepts learned throughout the course to conduct comprehensive valuations of US Treasury Securities. This includes utilizing various valuation models and methodologies to determine the fair value of these securities.
Participants will analyze the impact of market risk factors on portfolio performance. By incorporating scenario analysis and sensitivity testing, participants will assess how changes in interest rates, yield curves, and other market variables affect the valuation of US Treasury Securities.
Participants will provide insightful market commentaries within the valuation report. This involves synthesizing valuation results with broader market trends, economic indicators, and geopolitical events to offer a holistic view of the fixed-income landscape.
Complete: Interview Guide Question(s)
Week 11 to 15: Fixed-Income Portfolio Risk Measurement And Management
Welcome to Weeks 11 to 15, where our focus shifts squarely to understanding scenario and sensitivity analysis, as well as risk measures for fixed-income portfolios. During this phase, we aim to equip ourselves with the knowledge needed to effectively navigate through historical and potential future market conditions.
Understanding deep into various market scenarios and their impact on fixed-income portfolios, we explore how interest rate fluctuations can affect portfolio performance and risk management strategies. through a combination of theoretical learning and hands-on projects, we'll develop a comprehensive understanding of how to analyze and mitigate risks in fixed-income portfolios.
Watch: Market Interest Rate Scenario – Parallel Shifts
Interest Rate Scenario Shock Definition – Parallel Shift Up, Parallel Shift Down | EOD vs. Scenario Present Value | Scenario PnL | Scenario Spot Ladder | Bond Price-Yield Relationship | Bond Convexity | Market Risk Scenario Report
Understanding Interest Rate Scenario Shocks: Parallel Shift Up, Parallel Shift Down
Exploring EOD vs. Scenario Present Value
Analyzing Scenario PnL and Scenario Spot Ladder
Understanding Bond Price-Yield Relationship and Bond Convexity
Generating Market Risk Scenario Reports
Watch: Market Interest Rate Scenario – Non-Parallel Shifts
Interest Rate Scenario Definition – Bull & Bear Steepening, Bull & Bear Flattening | Stress Test Scenario Definition – 2023 Exploratory Market Shock Component Scenario, 2022 Severely Adverse Scenario | EOD vs. Scenario Present Value | Scenario PnL | Market Risk Stress Test Report
Defining Interest Rate Scenarios: Bull & Bear Steepening, Bull & Bear Flattening
Stress Test Scenario Definitions: 2023 Exploratory Market Shock Component Scenario, 2022 Severely Adverse Scenario
Comparing EOD vs. Scenario Present Value
Examining Scenario PnL and Generating Market Risk Stress Test Reports
Watch: Sensitivity-Based Risk And PnL Attribution – Fixed-Income Securities
Partial Revaluation vs. Full Revaluation DCF Methodologies | Taylor-Series Approximation | Risk Sensitivities – Duration | DV01 | Convexity | Duration-Convexity PnL | Residual PnL | Methodology Difference – Full Valuation vs. Duration-Convexity PnL | Model Limitations | Market Risk Report
Differentiating Partial Revaluation vs. Full Revaluation DCF Methodologies
Understanding Taylor-Series Approximation
Analyzing Risk Sensitivities: Duration, DV01, Convexity
Exploring Duration-Convexity PnL and Residual PnL
Comparing Methodology Differences: Full Valuation vs. Duration-Convexity PnL
Addressing Model Limitations and Generating Market Risk Reports
Watch: Introduction to Value-at-Risk (VaR) Measure
Basic Concepts | VaR Calculation Methods - Historical Simulation, Parametric, Monte-Carlo Simulation | VaR Limitations | Advancements And Improvements - CVaR/Expected Shortfall, Stress Testing And Scenario Analysis, SVaR, IVaR, MVaR, Backtesting And Model Validation
Introduction to Value-at-RIsk Measure And Basic Concepts - Definition And It's Significance in Financial Risk Management. Measurement of Potential Loss, Financial Institutions to Manage Financial Risk
Understanding Value-at-Risk Measure: Confidence Level, Time Horizon, Lookback Period
Value-at-Risk Calculation Methods And Step-by-Step Process
Limitations of Traditional Value-at-Risk Measure
Advancements And Improvements to Address Limitations of Value-at-Risk Measure
Watch: Fixed-Income Portfolio Value-at-Risk – Historical Simulation Method
Historical Time-Series Risk Factors Data | Risk Factor Shocks Revaluation Methodology – Full Revaluation DCF Model | Historical Scenario Generation & Shock Computation | Scenario Revaluation And PnL Determination - Individual Assets, Portfolio | Absolute & Relative Value-at-Risk | Risk Attribution to Market Risk Factor(s) And Specific Factors - TMR, GMR, ESR | Methodology Limitations | Market Value-at-Risk Report
Exploring Revaluation Methodology: Full Revaluation DCF Model
Generating Historical Scenario And Shock Computation
Analyzing Scenario Revaluation And PnL
Understanding Absolute & Relative Value-at-Risk and Methodology Limitations
Generating Market Value-at-Risk Reports
Project: Market Value-at-Risk Report for US Treasury Securities and Portfolio
We're thrilled to introduce our latest fixed-income risk measurement project, the "Market Value-at-Risk Report for US Treasury Securities and Portfolio" – A unique opportunity for participants to deepen their understanding of risk calculations on fixed-income securities, the impact of change in market risk factors on portfolio risk, and insightful market risk commentaries.
Watch: Stressed Period Selection for Stressed VaR Calibration
Introduction to Historical Period Identification Methods - Judgement-Based, Formula-Based | Model Calibration | Practical Examples
Analyzing Key Risk Factors And Identifying the Most Stressed Periods
Running the VaR Model or Its Approximation Over Historical Periods for Sressed Period Selection
Calibration Challenges in Stressed Period Selection Models
Watch: Stressed VaR in Market Risk Management for Fixed-Income Portfolios
Applying Stressed VaR to Real-Time Risk Management and Regulatory Reporting in Fixed-Income Portfolios
Overview of Stressed VaR in Fixed-Income Portfolios And Real-Time Risk Monitoring
Regulatory Requirements for Stressed VaR Reporting, Stress Testing, And Scenario Analysis in Stressed VaR
Portfolio-Level Risk Attribution under Stressed VaR
Challenges in Implementing Stressed VaR in Real-Time Systems And Advanced Techniques: Liquidity-Adjusted Stressed VaR
Complete: Interview Guide Question(s)
Here's to your success and the exciting path ahead! happy learning, Professional!
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