This course covers valuation, pricing and forecasting of fixed income instruments and portfolios mainly, but not only, from an active fixed income management perspective. We will look at these markets from a top-down perspective, by computing the expected returns of fixed income asset classes and strategies. We will look at the same markets from a bottom-up perspective, by describing and pricing the most important fixed income cash and derivative instruments (fixed and floating rate bonds, repos, swaps and futures for trading interest rate, credit and inflation risk). The course leverages the 30-year instructor's experience in fixed income and equity research, financial innovation and automation in financial markets and product development for institutional investors, Learning how Fixed Income markets and instruments work is critical for anybody pursuing a career in finance and banking, as interest rates are used to discount any kind of cash flow. The link between macroeconomics (monetary policy and public debt management) and fixed income markets is the bridge between macro people and finance people, but few people are able to link the two domains. For the finance students, fixed income is a specialist market, with a number of niches and domains across instruments, strategies, and functions across the value chain of asset managers, issues, investment ks and regulatory agencies. We cover a number of these specific topics and new areas in the course, especially in the final section which will help you pursue specific career opportunities. Up to four very senior guest lectures complement the instructor and give a broader perspective.as well as different viewpoints on the asset class. The TA for this course is Gaetano Romano, a Portfolio Manager and Quant at Generali AM. Gaetano will focus on teaching sections on fixed income instruments and helping the group work exercise.

• Knowledge and understanding: Learning about sources of expected returns and how to implement them by appropriate portfolio construction following a realistic active fixed income investment protocol. Look at the links between finance and macro. • Applying knowledge and understanding: Most professional knowledge and understanding comes from Team based learning by doing. This is the goal of the group work. We implement most concepts into liquid bond portfolios and look at how exogenous/forecasted variables impact portfolio performance. • Making judgements: The course is based on understanding the main concepts and vocabulary in fixed income markets. Learn independent judgement and forecasting. Learn to mix theory and data in approaching problems. Premium to thinking and problem solving rather than content memorization. • Communications Skills: Group work to be presented delivered in PPT format with data and output documentation in Excel. • Learning skills: Learning by doing approach. Navigating different levels of knowledge: a) from individual securities, to portfolios to macro drivers of portfolio performance b) Multi-dimensional approach to measuring expected returns

The course is divided into five main parts. • The first part of the course (three weeks) covers the study of the shape of the Yield Curve and Bond Risk Premia in treasury market. After reviewing basic fixed income concepts, we look at the relation between rate expectations, bond risk premia, convexity and the shape of the Yield curve. • The second part (two weeks) discusses active management of treasuries, which is the backbone for the group work assignment. We also cover the most important fixed income instruments such as zero coupon bonds, strips, repos, swaps and bond and money market future. • The third part (two weeks) covers the determinants of Credit Risk Premia in sovereign and non-sovereign markets, active management of credit risk and debt restructuring, with a main focus on sovereign debt). . • The fourth part of the course (one week) covers fixed income strategies. • The final part of the course covers special topics presented by myself and by a number of guests from Italian Treasury MEF, The Bank of Italy and Generali Asset Management .

The course textbooks (optional) are: • A. Ilmanen (2011) “Expected Returns: An Investor's Guide to Harvesting Market Rewards (ER) by Antti Ilmanen, John Wiley and Sons, 2011. • B. Tuckman and A.Serrat (2011) “Fixed Income Securities. Tools for Today’s Markets”, Third Edition, 2011, Wiley Finance (FIS) • A. Ilmanen, Liquid Asset Class Premia, Chapter 4 of Investing amid low Expected Returns, Wiley 2022. All the Teaching Materials are available on this Course website (password protected). • For each class, I will send you an e-mail with the relevant materials and data in excel

Lectures and presentations on relevant empirical issues. Extensive monthly data set on Sovereign Yield and their determinants directly soured from Bloomberg. Coverage main DM and BRICS markets. Period (2000 to 2025). Guest presentations. See the last part of the course. Guests will come from MEF, Bank of Italy and General Investment. TA: Classes on Fixed Income Instruments. Excel spreadsheet on all the instruments covered in class In order to facilitate interaction, the instructor will open a dedicated Whatsapp Group for the Class, encouraging participation. Contacts: Alberto Cybo: hal2001y@gmail.com Gaetano Romano: Gaetano.romano@generali-invest.com

The assessment method is consistent with the teaching methods in combining different approaches. • Midterm Exam/Continuous Assessment (30% of the final grade). Open ended questions on the main concepts covered the first two parts of the course • Final Exam (30% of the final grade) Open ended questions on the main concepts covered remaining three parts of the course • Group Work (40% of the final grade) ). A team project on active asset management of bonds will be run during the course. • A special bonus will be assigned to the most active participant in the class lecture discussion. • Students may take an additional oral examination worth -2/+2 on proposed grade (NB: +2 only for exceptional performance + relatively low starting grade)

• Willingness to do some original/research work. • Focus on the empirical project rather than literature survey. • Good knowledge of Excel. • Look at past dissertations here: https://tesi.luiss.it/view/supervisor/Cybo-Ottone=3AAlberto_Adolfo=3A=3A.html