About this Course
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Advanced Level

Approx. 43 hours to complete

Suggested: 5 weeks of study, 6 hours per week...

English

Subtitles: English

Skills you will gain

CalibrationStochastic CalculusYield CurveInterest Rate Derivative

100% online

Start instantly and learn at your own schedule.

Flexible deadlines

Reset deadlines in accordance to your schedule.

Advanced Level

Approx. 43 hours to complete

Suggested: 5 weeks of study, 6 hours per week...

English

Subtitles: English

Syllabus - What you will learn from this course

Week
1
1 hour to complete

Introduction

...
1 video (Total 5 min), 5 readings
1 video
5 readings
Evaluation10m
Certificate10m
Course discussions10m
Where to get help10m
Do you like our course?10m
Week
2
8 hours to complete

Interest Rates and Related Contracts

We learn various notions of interest rates and some related contracts. Interest is the rent paid on a loan. A bond is the securitized form of a loan. There exist coupon paying bonds and zero-coupon bonds. The latter are also called discount bonds. Interest rates and bond prices depend on their maturity. The term structure is the function that maps the maturity to the corresponding interest rate or bond price. An important reference rate for many interest rate contracts is the LIBOR (London Interbank Offered Rate). Loans can be borrowed over future time intervals at rates that are agreed upon today. These rates are called forward or futures rates, depending on the type of the agreement. In an interest rate swap, counterparties exchange a stream of fixed-rate payments for a stream of floating-rate payments typically indexed to LIBOR. Duration and convexity are the basic tools for managing the interest rate risk inherent in a bond portfolio. We also review some of the most common market conventions that come along with interest rate market data.

...
5 videos (Total 55 min), 2 readings, 6 quizzes
5 videos
Duration and Convexity9m
Market Conventions5m
2 readings
Compounded Interest Rates10m
Continuously Compounded Forward Rate (Forward Yield)10m
6 practice exercises
Interest Rates and Discount Bonds1h 20m
Forward and Futures Rates1h 10m
Coupon Bonds and Interest Rate Swaps1h
Duration and Convexity50m
Market Conventions30m
Interest Rates and Related Contracts2h 10m
Week
3
5 hours to complete

Estimating the Term Structure

We learn how to estimate the term structure from market data. There are two types of methods. Exact methods produce term structures that exactly match the market data. This comes at the cost of somewhat irregular shapes. Smooth methods penalize irregular shapes and trade off exactness of fit versus regularity of the term structure. We will also see what principal component analysis tells us about the basic shapes of the term structure.

...
4 videos (Total 56 min), 5 quizzes
4 videos
Principal Component Analysis11m
5 practice exercises
Bootstrapping Example30m
Exact Methods30m
Smoothing Methods40m
Principal Component Analysis30m
Estimating the Term Structure2h
Week
4
6 hours to complete

Stochastic Models

Models for the evolution of the term structure of interest rates build on stochastic calculus. We start with a crash course in stochastic calculus, which introduces Brownian motion, stochastic integration, and stochastic processes without going into mathematical details. This provides the necessary tools to engineer a large variety of stochastic interest rate models. We then study some of the most prevalent so-called short rate models and Heath-Jarrow-Morton models. We also review the arbitrage pricing theorem from finance that provides the foundation for pricing financial derivatives. As an application we price options on bonds.

...
4 videos (Total 76 min), 1 reading, 5 quizzes
1 reading
Definition of Brownian Motion without Filtration10m
5 practice exercises
Stochastic Calculus1h 30m
Short Rate Models1h 10m
Heath-Jarrow-Morton Framework40m
Forward Measures40m
Stochastic Models1h
4.6
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Top reviews from Interest Rate Models

By PVMay 27th 2019

This course is very good in regaining your knowledge in Interest Rate model. However, the exchange is that you have to spend time with it. But believe me it is worth your time spending

By MBJan 31st 2017

Great course! Level of difficulty is about first or second year Ph.D. in economics/finance. I learned a lot.\n\n-Michael

Instructor

Avatar

Damir Filipović

EPFL
The Swissquote Chair in Quantitative Finance and Swiss Finance Institute Professor

About École Polytechnique Fédérale de Lausanne

Frequently Asked Questions

  • Once you enroll for a Certificate, you’ll have access to all videos, quizzes, and programming assignments (if applicable). Peer review assignments can only be submitted and reviewed once your session has begun. If you choose to explore the course without purchasing, you may not be able to access certain assignments.

  • When you purchase a Certificate you get access to all course materials, including graded assignments. Upon completing the course, your electronic Certificate will be added to your Accomplishments page - from there, you can print your Certificate or add it to your LinkedIn profile. If you only want to read and view the course content, you can audit the course for free.

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