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**
Lectures for the "Fixed Income"
advanced course, **

**Master in Science - ****
Bocconi University**

**
(CLEFIN, Corso di Laurea in Economia delle Istituzioni e dei
Mercati Finanziari)**

**Course Syllabus: **
Click here.

**
Lectures 7 to 10: Prof. Damiano Brigo**

Lecture 7 (DB 1): The Libor and the swap market models:
Introduction and motivation.

Lecture 8 (DB 2): The Libor market model. Derivation and Pricing of Caplets and Swaptions. Calibration and diagnostics.

Lecture 9 (DB 3): The swap market model. Analytical approximations and further
developments on calibration.

Lecture 10 (DB 4): Pricing of structured products in the Libor Market Model: Libor in
Arrears, CMS, Ratchet, ZC Swaptions.

**
Exercises on lectures 7 to 10: Prof. Brigo**

Exercise set 1 (the solutions have been given "live" during the lectures);

Exercise set 2 (detailed solutions included);

Mid-term exam of December 2005 (detailed solutions included);

**
Detailed program for the Exam on lectures 7 to 10, Academic year 2005-06: Prof.
Brigo**

For the earlier lectures:

**Lectures 1 to 6:
Prof. Gianluca Fusai.**

Lecture 1 (GF1): Basic
elements of financial math. Building Blocks: Money Market Rates, TBills, FRA,
Eurofutures, Swaps.

Lecture 2 (GF2): Yield Curve Stripping. Caps and Swaptions.

Lecture 3 (GF3): Stochastic Calculus. The Black Model.

Lecture 4 (GF4): Build an interest rate model. The Heath-Jarrow-Morton Model.

Lecture 5 (GF5): Gaussian Heath-Jarrow-Morton Models.

Lecture 6 (GF6): Why a multifactor model? PCA analysis of the term structure.
Multivariate HJM models.

For the last two lectures

**Lectures 11 to
12: Prof. Fabio Mercurio**

Lecture 11 (FM1): Introduction to the volatility smile. Smile modeling in interest
rate markets.

Lecture 12 (FM2): Smile-extensions of the market models.