Test Objectives-NISM-Series-XXII: Fixed Income Securities Certification Examination

Unit 1: Overview of the Indian Debt Market
1.1. Describe broadly the Debt market and its need in financing structure of Corporates and Government
1.2. Understand the importance of Debt Markets
1.3. Know the Bond market ecosystem
1.4. Discuss briefly the role of the Regulators and relevant Regulations
1.5. Understand the role of Credit Rating Agencies
1.6. Discuss the role of monetary policy in Debt markets
1.7. Evolution of debt markets globally and in India
1.8. Know the market dynamics of debt markets in India

Unit 2: Types of Fixed Income Securities
2.1. Discuss the classification based on the type of Issuer
2.1.1. Government
2.1.2. Municipal issuers
2.1.3. Corporate
2.1.4. Secularized Debt
2.2. Understand the classification based on Maturity
2.2.1. Overnight Debt
2.2.2. Ultra Short Term Debt (Money Market)
2.2.3. Short Term Debt
2.2.4. Medium Term Debt
2.2.5. Long Term Debt
2.3. Understand the classification based on Coupon
2.3.1. Plain Vanilla Bonds
2.3.2. Zero-Coupon Bonds
2.3.3. Floating Rate Bonds
2.3.4. Caps and Floor
2.3.5. Inverse Floater
2.3.6. Inflation Indexed Bonds
2.3.7. Step Up/Down Bonds
2.3.8. Deferred Coupon Bonds
2.3.9. Deep Discount Bonds
2.4. Discuss the classification based on Currencies
2.4.1. Foreign Currency Denominated Bonds
2.4.2. Masala Bonds
2.5. Briefly discuss the classification based on Embedded Options
2.5.1. Straight Bonds
2.5.2. Bonds with a Call Option
2.5.3. Bonds with a Put Option
2.5.4. Convertible Bonds (including FCCB)
2.5.5. Warrants
2.6. Briefly discuss the classification based on security
2.6.1. Secured Debt
2.6.2. Unsecured Debt
2.6.3. Subordinated Debt
2.6.4. Credit Enhanced Bonds
2.7. Other fixed income securities
2.7.1. Sovereign Gold Bonds
2.7.2. Perpetual Bonds
2.7.3. AT1 Bonds
2.7.4. Tier-2 Bonds
2.7.5. Savings Bonds
2.7.6. High Yield Bonds
2.7.7. Green bonds,
2.7.8. REITs and InvITs
2.7.9. Tax-free Bonds
2.7.10. Asset Linked Bonds
2.7.11. Equity Linked Notes
2.7.12. Participatory Bonds
2.7.13. Income Bonds
2.7.14. Payment in Kind Bonds
2.7.15. Extendable Bonds
2.7.16. Extendable Reset Bonds

Unit 3: Risks Associated with Investing in Fixed Income Securities
3.1. Briefly describe various kinds of risks associated with fixed income securities
3.1.1. Interest Rate Risk
3.1.2. Call risk
3.1.3. Reinvestment Risk
3.1.4. Credit Risk
3.1.4.1. Downgrade Risk
3.1.4.2. Spread Risk or Basis Risk
3.1.4.3. Default Risk
3.1.5. Liquidity Risk
3.1.6. Exchange Rate Risk
3.1.7. Inflation Risk
3.1.8. Volatility Risk
3.1.9. Political or Legal Risk
3.1.10. Event Risk
3.2. Discuss the Risk mitigation tools
3.2.1. Use of Credit Derivatives to manage Risk of Default
3.2.2 Use of Interest rate derivatives like Interest rate swaps and Interest rate futures, etc. to manage interest rate risk
3.2.3. Use of Currency derivatives

Unit 4: Pricing of Bonds
4.1. Discuss the concept of “Par Value”
4.2. Describe the concept of Time Value of Money
4.3. Understand the process of determining Cash Flow, Yield and Price of bonds
4.4. Understand the Pricing of different bonds including:
4.4.1. Valuing bonds with maturities less than one year
4.4.2. Valuing bonds at non-coupon dates
4.4.3. Valuing perpetual bonds
4.4.4. Pricing of treasury bills
4.4.5. Understand discount factors and bootstrapping
4.5. Discuss Price-Yield relationship
4.6. Describe the Price Time Path of a bond
4.7. Understand the pricing of a Floating Rate Bond

Unit 5: Yield Measures and Total Return
5.1. Understand the Sources of Return
5.1.1. Coupon Income
5.1.2. Capital appreciation
5.1.3. Reinvestment income
5.2. Describe the Traditional Yield Measures
5.2.1. Current Yield
5.2.2. Yield to Maturity
5.2.3. Effective Yield
5.2.4. Yield to Call
5.2.5. Yield to Put
5.2.6. Yield to Worst
5.2.7. Yield for Portfolio
5.2.8. Yield for Money Market
5.2.9. Yield for floating rate bonds

Unit 6: Term Structure of Interest Rates
6.1. Understand the concepts of
6.1.1. Yield curve and yield curve theories:
6.1.1.1. Pure expectation theory
6.1.1.2. Liquidity preference theory
6.1.1.3. Market segmentation theory
6.1.1.4. Preferred habitat theory
6.1.2. Spot curve or Zero coupon yield curve
6.1.2.1. Estimation of Zero coupon yield curve using various models
6.1.2.2. Cubic spline
6.1.2.3. NS and NSS model
6.1.3. Spreads
6.1.4. Forward Rates
6.2. Briefly describe the relationship between Spot and Forward Rates
6.3. Understand the determinants of the Shape of the Term Structure

Unit 7: Measuring Interest Rate Risk
7.1. Identify the Price Volatility characteristics of Option Free Bonds and Bonds with Embedded Options
7.2. Understand the concept of Duration
7.2.1. Macaulay Duration
7.2.2. Portfolio Duration
7.2.3. Modified Duration and Interest rate Sensitivity approximation
7.3. Identify difference between Modified Duration and Effective Duration
7.4. Understand the Price Value of Basis Point (PV01)
7.5. Briefly describe Convexity measures
7.6. Identify Modified Convexity and Effective Convexity
7.7. Understand the Taylor’s Expansion and its application in approximating Bond Price changes

Unit 8: Indian Money Market
8.1. Introduction to Money market
8.2. List the types of instruments in Money market
8.2.1. Borrowing and lending activities
8.2.2. Asset segment (call money, notice money, term money, market repo, triparty repo, T-bills, cash management bills, commercial paper, certificate of deposit and corporate bond repo).
8.3. Know the trends in Indian Money Market
8.4. Understand the importance of Call money market
8.5. Know the important rates in the Indian inter-bank call market
8.5.1. MIBOR
8.5.2. Weighted Average Overnight Call Money Rate (WACR)
8.5.3. Understand the economic utility of Repo market and discuss an example of a Repo transaction

Unit 9: Government Debt Market
9.1. Introduction to Government Debt Market
9.2. List the types of instruments in Government debt market
9.2.1. Treasury bills
9.2.2. Cash management bills
9.2.3. Dated G-Secs (Fixed rate bonds, Floating rate bonds, Zero coupon bonds, Capital indexed bonds, Inflation indexed bonds, Embedded option bonds, Special securities, STRIPS, SGB, Savings bonds and State development loans)
9.3. Know the trends in Indian G-Sec market
9.4 Briefly describe the Issuance Mechanism for Government Debt Market
9.4.1. Discuss the Primary Market and Government Borrowing Programme
9.4.2. Discuss the mechanism of Auctions
9.4.3. Underwriting provisions
9.4.4. Institutional Participants
9.4.5. Foreign Investors
9.4.6. Retail Investors
9.5. Briefly describe the secondary market infrastructure for G-Secs in India
9.5.1. NDS-OM trading platform
9.5.1.1. Trading
9.5.1.2. Reporting
9.6. Briefly describe the Clearing and Settlement system for secondary market trades of G-Secs in India
9.6.1. Know the Qualified Central Counterpart for clearing and settlement
9.6.2. Describe the Default Handling Mechanism
9.7. Understand G-Sec valuation
9.8. Know the key regulatory guidelines for Government Debt Market

Unit 10: Corporate Debt Market
10.1. Introduction to Corporate Debt Market in India and know the key players in this market
10.2. List the types of instruments in Corporate Debt Market
10.3. Know the trends in Corporate Debt Market in India
10.4. Briefly describe the issuance mechanism for Corporate Bonds
10.4.1. Public Issuance
10.4.2. Private Placement
10.5. Briefly describe Secondary market mechanism for Corporate Debt Markets
10.5.1. Trading mechanism
10.5.2. Reporting mechanism
10.5.3. Clearing & Settlement
10.6. Know the key regulatory guidelines for Corporate Debt Market
10.7. Briefly mention the valuation of Corporate Bonds

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