SYLLABUS

FINANCE X51.9015
Fixed Income Portfolio Management
Woolworth Building
15 Barclay St.
Monday 6:30 PM 8:30 PM
February 9 April 27
Instructor: Zachary Michaelson
Adjunct Lecturer, Finance, NYU
zm13@nyu.edu

COURSE DESCRIPTION:
This advanced course develops an understanding of the theories and
quantitative methods of portfolio optimization, forecasting, and risk
management. It covers market inefficiency and how it can be exploited
with strategy development, as well as issues specific to the
management of fixed income portfolios, including funding, yield curve
dynamics, and monetary economics. Additional topics include
international markets and foreign exchange, financial market history,
and the management of mortgage and credit instruments. Basic
understanding of statistics, college algebra, fixed income securities,
macroeconomics, and modeling in MS Excel are required.

PREREQUISITES:
Fixed Income Securities (X51.9104) or equivalent knowledge.

COURSE OBJECTIVES:
This course is designed to be a challenging study of the tools and
strategy of fixed income portfolio management for those who seek to
develop expertise beyond introductory knowledge. It is intended for
students who have familiarity with financial markets and interest rates
securities, but would like to learn more about the ways that
practitioners attempt to be profitable in trading bonds and managing
portfolios.
The course will be highly interactive. Students will be asked to engage
and critically analyze each topic. In class debate will be an important
component of each class. By the end of the course, students will have
developed a portfolio of work, both written and technical assignments
applicable for industry.
This course is
Management.

applicable

towards

the

Certificate

in

Portfolio

MATERIALS:
Required Book:
Inside the House of Money: Top Hedge Fund Traders on Profiting
in the Global Markets, by Steven Drobny
Buy it on Amazon for $11.53

Students Choice of One of the Following:

Manias, Panics, and Crashes: A History of Financial Crises, by
Charles Kindleberger & Robert Aliber
Buy it on Amazon for $13.57

The Panic of 1907: Lessons Learned from the Markets Perfect

Storm, by Robert Bruner & Sean Carr
Buy it on Amazon for $18.85

Why Stock Markets Crash: Critical Events in Complex Financial

Systems, by Didier Sornette
Buy it on Amazon for $21.55

Financial Crises, Liquidity, and the International

System, by Jean Tirole
Buy it on Amazon for $32.00

Monetary

Coursepack: Available from University Readers

SCHEDULE & READINGS:

Topic 1 (Feb. 9): The Mathematics of Portfolio Management, Portfolio
Optimization, and Principal Component Analysis
Reading 1 (from the Coursepack):
Principal Component Analysis, by I.T. Jolliffe
Chapters 1 3
Reading 2 (from the Coursepack):
Fundamentals of Investments (Ed. 2), by Alexander,
Sharpe, & Bailey
Chapter 8
Reading 3 (from the Coursepack):
Foundations for Financial
Litzenberger
Chapter 3

Economics,

by

Huang

&

Topic 2 (Feb. 23): Yield Curve Analysis

Reading 1 (from the Coursepack):
Advanced Bond Portfolio Management, by Fabozzi,
Martellini, and Priaulet (Eds.)
Chapter 1
Reading 2 (from the Coursepack):
Fixed-Income Securites: Valuation, Risk Management and
Portfolio Strategies, by Martellini, Priaulet, & Priaulet
Chapters 3, 8
Reading 3 (from the Coursepack):
Fixed Income Securities, by Tuckman
Chapters 13 14
Reading 4 (from the Coursepack):
Advanced Bond Portfolio Management, by Fabozzi,
Martellini, and Priaulet (Eds.)
Chapters 10 & 12
Topic 3 (Mar. 2): Funding, Repo, and the Money Market
Reading 1 (from the Coursepack):
Stigums Money Market (4 Ed.), by Stigum & Crescenzi
Chapters 9, 12, 13

Topic 4 (Mar. 9): Relative Value Strategy

Reading 1 (from the Coursepack):
The Eurodollar Futures and
Burghardt
Chapters 11, 16

Options

Handbook,

by

Reading 2 (from the Coursepack):

The Treasury Bond Basis (3 Ed.), by Burghardt, Belton,
Lane, & Papa
Chapters 1 3
Topic 5 (Mar. 23): Technical Strategy
Reading 1 (from the Coursepack):
New Trading Systems and Methods (4 Ed.), by Kaufman
Chapters 1, 6, 8, 21
Topic 6 (Mar. 30): Discretionary Strategy
Reading 1 (from the Coursepack):
The Psychology of the Foreign Exchange Market, by
Oberlechner
Chapters 2, 3, 7
Topic 7 (Apr. 6): Global Macro Strategy
Reading 1 (from Drobny):
Inside the House of Money: Top Hedge Fund Traders on
Profiting in the Global Markets, by Steven Drobny
All
Topic 8 (Apr. 13): History
Reading 1:
Students Choice of 1 of the 4 listed books on history
April 20 & 27: Student Presentations

ASSIGNMENTS:
1.)
Each student will prepare small weekly assignments responding
to questions from the readings with either short form essays or
technical assignments. These questions will be given in class not later
than
the
week
before
they
are
due.
2.)
Each student will write a critical review of approximately 2000
words
on
the
financial
history
book
they
select.
3.)
Each student will prepare a proposal for a fixed income strategy
to be presented at the end of the semester. The proposal should
include both written and technical support work.

GRADING:
35%
35%
20%
10%

Weekly Assignments
Class Participation
Strategy Proposal Project
Financial History Critical Review Paper

There will not be a curve for the course. Any students that average
satisfactory work will receive at least a B. There will be no limit or
quota on the number of students that can receive any particular grade.
Only work that is consistently below standard or incomplete will
receive a B-, C or below.

INSTRUCTOR BIO
Zack Michaelson has over five years of experience as a global macro
portfolio manager and proprietary trader. He has managed multiasset class alpha driven strategies for the Fortress Investment Group
and Graham Capital Management, as well as managed a proprietary
trading group for Barclays Capital, the investment bank of Barclays
PLC. He also co-founded a start-up hedge fund in 2003. He is an
Adjunct Lecturer in Finance at New York University and has also taught
at the Cotsakos College of Business at William Paterson University. As
a consultant he has done work for Bain & Company and The Boston
Consulting Group. Mr. Michaelson has a business degree from the
Wharton School of the University of Pennsylvania, where he earned a
BS and completed two years of doctoral study in financial economics
and applied mathematics.
Outside of finance, Zack is a committed human rights activist and is
currently a candidate for upcoming openings on the Board of Directors
of Amnesty International (USA), the worlds largest human rights
organization. As an AI volunteer he is the Manhattan Coordinator and
serves as a Corporate Action Network Coordinator. He is also an
activist with Oxfam America and a grant funding consultant for the
social entrepreneurship organization Ashoka International. He has
worked in orphanages in Africa and Central America and does English
tutoring with the Darfur refugee community in New York.
http://homepages.nyu.edu/~zm13