by Masaaki Fukasawa, Mitsumasa Ikeda, Naoki Iida, Reo Adachi, Ryota Tsurumi, Tomohisa Yamakami, Yo Nakatsu
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Suggested foundations for rates and fixed income and stochastic processes and pricing. Specialist prerequisites vary by paper.
Understand discounting in a stochastic-rate model.
Translate yield movements into first-order price risk.
Understand what it means to condition on current information.
Follow Brownian dynamics and the second-order term in Itô calculus.
Build a consistent discount curve.
Study a tractable mean-reverting rate model.
Connect stochastic dynamics to no-arbitrage prices.
Start in discrete time, move to Brownian motion, then read the original pricing argument and simulate it.