Room 1802, 18/F, 1 Duddell Street, Central, Hong Kong

Tel: (852) 2521 2543 Fax: (852) 2869 4800 E-mail: info@hksfa.org URL: http://www.hksfa.org A MEMBER SOCIETY OF CFA INSTITUTE

The Hong Kong Society of Financial Analysts

Presents A Workshop On

Fixed Income Portfolio Management

2014 Training Workshops

HKSFA Office Room 1802, 18th Floor, 1 Duddell Street, Central, Hong Kong

24th June 2014 – Fundamentals of Bonds, Yield Curves, and Interest Rate Risk 25th June 2014 – Fixed Income Portfolio Construction and Rebalancing

26th June 2014 – Credit Risk, Options, Yield Enhancement and other Advanced Topics

HKSFA is recognized by The Securities and Futures Commission as an institution for providing Continuous Professional Training. Each one-day workshop is qualified for 6.5 CPT hours. As the recognized institution approved under SFC’s CPT Program, the 6.5 CPT hours of each one-day workshop are to receive due recognition from the Mandatory Provident Fund Scheme Authority (MPFA) as non-core CPD hours. Each one-day workshop is also qualified for 6.5 Continuing Professional Development (CPD) Hours for Registered Business Valuers (RBV) of Business Valuation Forum (BVF). CFA Candidates may find this workshop useful practice for Candidate Body of Knowledge (CBOK) skills in Fixed Income (VII), Derivatives (VIII), Portfolio Management and Wealth Strategies (X), with light coverage of Quantitative Methods (II).

As a participant in the CFA Institute Approved-Provider of Continuing Education Program, the Hong Kong Society has determined that the above event qualifies for credit for the CFA Institute Continuing Education Program. The three-day workshop is eligible for 19.5 CE credit hours, or 6.5 CE credit hours per day.

Fixed Income Portfolio Management Workshops

HKSFA is proud to present our “Fixed Income Portfolio Management” workshop series held in conjunction with Global Financial Markets Training. Each one-day workshop covers 3 - 4 case studies in a modular format:

Day 1: Fundamentals of Bond Math, Yield Curves and Interest Rate Risk Day 2: Fixed Income Portfolio Construction, Hedging and Rebalancing

Day 3: Credit Risk, Options, Yield Enhancement and other Advanced Topics

Highlights:

Dates: 24th, 25th and 26th June 2014 (Tue, Wed, Thu) Time: 9:00am – 5:00pm

These training workshops develop hands-on skills in constructing, evaluating and managing a portfolio of fixed income instruments. The workshops begin at a basic level and develop concepts through 10 sequential modules. Participants learn through hands-on case studies and simulations using actual market data, which are used to demonstrate step-by-step the main techniques used by leading investment banks and asset managers. Participants obtain a thorough understanding of risk and return in fixed income securities and portfolio strategies, and practice with basic fixed income derivatives.

The requirement for getting the best out of these workshops is an interest in bond markets and some familiarity with Microsoft Excel.

(*Rating: Intermediate)

COURSE OBJECTIVES:

- Day 1: Participants work through price and risk factors of individual fixed income instruments o Bond Calculations – How changes in interest rates, credit spreads, volatility and other

factors affect bonds individually and as a portfolio. o Yield Curves – How yield curves have moved historically, what today’s curves say about

future interest rates, and how to position intelligently across the yield curve. - Day 2: Participants combine simple fixed income instruments and derivatives into a portfolio

o Portfolio Construction and Optimization – How different securities assembled in a long-only or long-short portfolio contribute to the overall characteristics of risk and return.

o Hedging – Using futures and swaps, and how cross-currency swaps can open opportunities to diversify into foreign bonds without taking on currency risk.

- Day 3: Participants look at adding credit and option risk to the portfolio for yield enhancement o Option Basics – Evaluating bonds with call features and other embedded options using z-

spreads, OAS and other metrics, and hedging against unwanted risks. o Credit Spreads – Comparing credit spreads measured against benchmarks, asset swaps

and credit default swaps against fundamental measures of default risk.

Participants receive all case studies and exercises used in that day’s workshop, as well as all spreadsheet models and tools to take back with them.

* Ratings

1. General - Material presented will be basic and of interest to a general audience having no background in the area. 2. Intermediate - Material presented will have technical elements requiring a working knowledge of the subject to

make full use of the presentation. 3. Advanced - Highly focused technical presentations of interest to participants with a high level of technical

knowledge in the subject area. 4. Unrated - HKSFA has yet to receive sufficient information to grade the content of this event.

This highly interactive workshop develops practitioner skills through real-world case studies. "Flight simulator" style exercises demonstrate step-by-step the main techniques used daily at top tier financial institutions. Instructors will also relate these exercises with their actual trading desk experience and present the context in which these techniques were used to solve specific problems.

Participants completing all three workshops should be comfortable constructing, evaluating and managing a fixed income portfolio using nothing more than freely available market data and spreadsheets.

Fixed Income Portfolio Management Workshop

AGENDA DAY 1 (Tuesday, 24th June 2014)

Case 1: Doubling an amount of money in 16 years whether interest rates go up or down

Basics Concepts: Bond mechanics, coupon payments and interest calculations

Duration matching for elementary Asset-Liability Management

DV01 exposure via tenor vs. allocation vs. leverage Case 2: Breaking down the yield curve

Bootstrapping the present value of future cashflows

Spot / zero curves

Par curves vs. YTM curves

Forward curves and what they mean Case 3: Modeling the future of the yield curve

A simple yield curve model, and how some traders actually use it

Forward rate bias and Japanese volatility

Advantages and disadvantages of an alternative model Case 4: Measuring how the yield curve actually moves

Practical introduction to Principal Component Analysis

Alternatives to Principal Component Analysis – Key Rates and Parametric measures

AGENDA DAY 2 (Wednesday, 25th June 2014)

Case 5: Optimizing a sample fixed income portfolio

Calculating portfolio-wide exposure to yield curve moves

Mean-variance analysis and portfolio optimization

Introduction to repo markets and curve trades: the many varieties of steepeners, flatteners and butterflies Case 6: Hedging and fine-tuning risk with futures and swaps

Bond futures and Eurodollar futures for a fixed income portfolio

Interest rate swaps for a fixed income portfolio

Cross-currency swaps: how to benefit from foreign bond spreads without taking FX risk Case 7: Modeling and preparing for portfolio shocks

Interest rate and credit shocks

Liquidity risk

AGENDA DAY 3 (Thursday, 26th June 2014)

Case 8: Options in Fixed Income – Callable Bonds, Swaptions, Caps and Floors

Option Basics: Trees and Formulas

Caps and Floors: Where they appear and how to price them

Callable Bonds and other Bond Options: Pricing and applications to yield enhancement Case 9: Credit risk and spreads

Benchmark spread vs. Asset Swap spread

Credit Default Swaps: Basis trades and more advanced yield enhancement trades

Assessing credit risk vs. spread-implied risk

The credit-equity relationship and basics of capital structure arbitrage and convertible bonds Case 10: Putting it all together: Option-Adjusted Spread (OAS) of a real credit risky, callable bond

Option Adjusted Spread (OAS) vs. z-spread

Building the option tree with default risk

Credit spread risk vs. default risk

Liquidity risk

All of these risks back into or out of the portfolio

About the Instructors:

Mr. Anand Batepati Mr. Anand Batepati is a partner at Global Financial Markets Training, and has over 18 years of experience in financial markets. Previously he was Head of Multi Asset Structuring for Asia at Rabobank. He has held prior roles at HSBC, Bear Stearns, JP Morgan and the World Bank. He holds two masters degrees in finance from London Business School and Asian Institute of Management / McGill University.

Anand has served institutional clients such as insurance companies, pension funds, asset managers, wealth managers and securities companies with ALM solutions, structured investments and smart beta strategies. He has experience in multiple asset classes, helped set up a Fund of Hedge Funds practice and worked as a private equity investor in the past. He has worked in New York, London and Hong Kong in his career.

Mr. Tariq Dennison Mr. Tariq Dennison is partner at Global Financial Markets Training, and has previously worked at Societe Generale, CIBC, JP Morgan, Bear Stearns, Commerzbank, and Andersen Consulting (now Accenture). He earned his Masters in Financial Engineering from the University of California at Berkeley’s Haas School of Business and his Bachelor of Science in Mathematics from Marquette University. Tariq is often praised for his ability to explain complex financial concepts in clear and simple terms to both financial experts and lay people, and for his pioneering work in new financial products. He traded the first Thai Baht denominated credit-linked note at Societe Generale, CIBC’s only Canadian Dollar structured note in Asia in 2010, and numerous “firsts” for Bear Stearns, including their first structured FX and Commodity structured notes, their first access product to India, and their first suite of US and Latin American algorithmic strategy indices.

Details of workshops:

Date & Time: Fixed Income Portfolio Management Workshops

9:00am - 5:00pm Tue, 24th June 2014

Day 1: Fundamentals of Bonds, Yield Curves and Interest Rate Risk

9:00am - 5:00pm Wed, 25th June 2014

Day 2: Fixed Income Portfolio Construction and Rebalancing

9:00am - 5:00pm Thu, 26th June 2014

Day 3: Credit Risk, Options, Yield Enhancement and other Advanced Topics

Fee: HKSFA Member(s) at HK$2,750 /person per one-day workshop Guest(s) and Non-member(s) at HK$4,250/person per one-day workshop (The fee includes case studies, exercises, spreadsheets and other tools used in the workshop.) Venue: HKSFA Office, Room 1802, 18th Floor, 1 Duddell Street, Central, Hong Kong (Classrooms are not equipped with computers, participants WILL HAVE to bring their own laptops with Microsoft

Excel 2007 (or later) installed. Course material will be distributed through USB memory sticks to load into the laptops.)

EARLY BIRD DISCOUNT: Registrations by Tuesday, 10th June 2014 are eligible for a 10% discount. PACKAGE DISCOUNT: Registrations for ALL three one-day workshops are eligible for a 5% discount.

Registration :

1. Interested parties are requested to register online at http://www.hksfa.org. 2. Registration is only confirmed upon receipt of payment. 3. For cheque payment, cheques should be crossed and made payable to “HKSFA” and posted to Room 1802, 18th

Floor, 1 Duddell Street, Central, Hong Kong. 4. A place will be reserved for registrant upon successful online registration with email notification of registration

details. 5. After completing the online registration and payment process, registrants will receive email notifications with

registration details. A reminder will also be sent before the event begins. If you have not received the email notification and reminder from HKSFA, it is the delegate’s responsibility to contact HKSFA to confirm their place.

Policy for Substitutions, Cancellations and No Show:

1. Registrations should be paid in full before the commencement of the event. Immediate payment is required upon email confirmation. Should the registration fee remains outstanding, HKSFA reserves the right to disallow entrance to the event.

2. Full amount will still be charged for no show or enrolment made after Tuesday, 17th June 2014, this would include those whose payment mode is “by cheque” but have not sent in the cheque to complete the payment process.

3. An administration fee HK$50 will be charged for any cancellation of confirmed enrollment made on or before Tuesday, 17th June 2014. All cancellation requests must be made in writing and be confirmed by email from HKSFA.

4. Refund of the event fee (less an administration fee of HK$50 per person) will be given for cancellation received on/before Tuesday, 17th June 2014.

- For payment made by credit card, refund will be handled through the bank, please allow 4 to 6 weeks for processing. The amount will be refunded to the paid credit card account.

- For registrants whose payment mode is “by cheque”, even if the cheque has not been sent to HKSFA in full amount, the HK$50 administration fee is also applicable and must be settled by registrants.

- For payment made by cash, HKSFA will arrange the refund cheque sending to registrants by mail, the amount will be the event fee less the administration fee HK$50.

5. No refund will be given for cancellation received after Tueaday, 17th June 2014. For registrant whose payment mode is “by cheque” but have not sent in the cheque to complete the payment process, will still have to settle the event fee in full amount.

6. Substitutions are allowed. Please notify us prior to the event. Non-member rate applies if the substitute is not an HKSFA member.

7. The Society reserves the right to change the venue, date or speaker of the event due to unforeseen circumstances. 8. To be awarded CPT/CPD/CE credit hours, full attendance of all parts of the event is required. No pro-rata credit

hours will be awarded.