Bloomberg Integration in

Bloomberg for Education Seminar July 21, 2017 San Francisco

Paul Fjeldsted, CFA Senior Lecturer Jon M. Huntsman School of Business Utah State University Outline

Overview

• Rationale • Class Overview • Bloomberg Market Concepts • Problem Sets • Bloomberg In-Class Integration • Investing Practicum Integration Rationale

Why Bloomberg?

Pros Cons • Connection to practice • Cost • Dynamic • Interface • Robust Rationale

Configuration

• 9 desktop licenses in dedicated lab for students

• 3 Bloomberg Anywhere licenses for professors

• Bloomberg Anywhere can be launched in any classroom Fixed Income Course Overview

FIN 5300 FIXED INCOME

• 20-25 students, masters level course

• CFA Curriculum integration – Level 1 and Level 2 Fixed Income volumes Fixed Income Course Overview

Grading

Exams (4 @ 100 each) 400 Problem Sets 50 Investment Activity 30 In-Class Questions 20 Total 500 Bloomberg Market Concepts

Bloomberg Market Concepts

• Required within first two weeks of semester • Prerequisite to handing in first problem set • Overview – high level • Brings students up to speed on language of Bloomberg Problem Sets

Bond Valuation Problem Sets – General Approach

• Select a in Bloomberg • Model its cashflows in excel • Replicate price • Replicate risk measures Bloomberg Problem Sets Example – US Treasury Note Problem Set

• In Bloomberg, select US Treasury note or bond with at least 10 years remaining

• Pull up the bond in Bloomberg. Assume $1,000,000 face value

• Type "YA" for yield analysis. Download this page

• Create excel model of the bond. Calculate full price, accrued , flat price, duration, modified duration, risk, and DV01

• Turn in Bloomberg YA page and spreadsheet. For full credit spreadsheet should match Bloomberg YA page precisely Bloomberg Problem Sets US Treasury Note Screenshot

• Bloomberg Problem Sets US Treasury Note – Excel Model Bloomberg Problem Sets US Treasury Note - Side by Side Comparison

Bloomberg Student Spreadsheet

Duration (Macaulay) 8.776 Convexity Calc Modified 8.672 Change in YTM 0.01% Risk 8.691 P0 997,808.42 Convexity 0.852 P- 998,677.92 DV01 869 P+ 996,939.77 Face 1,000,000 (P- + P+ ) - 2(P0) 0.854 Full (Dirty) Price 1,002,132.47 Full Price 100.21325 Less Accrued 4,324.05 Convexity 0.852 Flat (Clean) Price 997,808.42 Bloomberg Problem Sets Apple Corp Bond Screenshot

• Bloomberg Problem Sets Apple Corp Bond – Excel Model Bloomberg Problem Sets Apple Corp Bond - Side by Side Comparison

Bloomberg Student Spreadsheet

Duration (Macaulay) 4.525 Convexity Calc Modified 4.472 Change in YTM 0.01% Risk 4.566 P0 1,015,815.64 Convexity 0.230 P- 1,016,272.33 DV01 457 P+ 1,015,359.19 Face 1,000,000 (P- + P+ ) - 2(P0) 0.235 Full (Dirty) Price 1,020,915.64 Full Price 102.09156 Less Accrued 5,100.00 Convexity 0.230 Flat (Clean) Price 1,015,815.64 Bloomberg Problem Sets Citigroup FRN Screenshot

• Bloomberg Problem Sets Citigroup FRN – Excel Model Bloomberg Problem Sets Citigroup FRN - Side by Side Comparison

Bloomberg Student Spreadsheet CITIGROUP FRN - CUSIP XS1134518312 Face 100 Bloomberg Price 96.793 Last LIBOR Reset 1.18456% Margin 0.25% Total Current 1.43456% YTM 2.34% Goal Seek Assumed LIBOR Rate - Future Periods 1.31% Discount Margin (%) 1.03% Discount Margin (bp) 103.37 Periods / Year 4 Current Period USD Coupon 0.35864 Future Periods USD Coupon 0.38881 Date 7/21/2017 Last Coupon 5/10/2017 Elapsed Days 71 Bloomberg Problem Sets US Treasury TIPS Screenshot Bloomberg Problem Sets US Treasury TIPS – Excel Model Bloomberg Problem Sets US Treasury TIPS - Side by Side Comparison

Bloomberg Student Spreadsheet

Index Assumptions Base CPI at Issue Date 218.08532 CPI at last Coupon Date 244.61839 Flat Index Ratio 1.12166 Reference CPI Settlement Date 244.65884 Index Ratio 1.12185 Face Value 1,000 Flat Price 1,166.93 Inflation Accrual 0.19 Principal (Adjusted for Inflation) 1,167.12 Accrued Interest 0.23 Full Price 1,167.35 Inflation Compensation 121.85 In-Class Bloomberg Integration Concept Illustration – Perpetual Bonds • Finder , Fixed Income, Govt • Tab =>Perpetual • City of Hull, UK 3.5 Issued 8/1887 In-Class Bloomberg Integration Concept Illustration – Real vs Nominal Rates • Bring up current 10-year UST • Graph Curves • Add Curve [type in TIP, US Treasury TIPS curve populates] In-Class Bloomberg Integration Concept Illustration – MBS Prepayment • Bring up MBS to be analyzed (cusip 3135AFTA2) • Yield Table In-Class Bloomberg Integration Concept Illustration – OAS and Z Spread • Bring up to be analyzed (cusip XS1568966672) • Yield and Spread Course Overview - Practicum

FIN 5470 FIXED INCOME PRACTICUM

• 10-12 students, masters level course

• Students manage $100K fixed income portfolio over two semesters Course Overview - Practicum

Bloomberg Integration – Bond Portfolio Management

PRTU Portfolio Administration PORT Portfolio & Risk Analytics PTT Portfolio Trade Ticket FA Financial Analysis DRSK Default Risk MRSK Muni Credit Risk TDH Trade History FIHZ Fixed Income Horizon Analysis In-Class Bloomberg Integration Concept Illustration – Credit Risk Model DRSK • Bring up bond to be analyzed (cusip 94974BNF5) • Default Risk In-Class Bloomberg Integration Concept Illustration – Horizon Analysis • Bring up bond to be analyzed (cusip 631060BP4) • FI Horizon Analysis section title optional

“Anything you can do Bloomberg can do better.”

Cordell Hull, USU Huntsman School MSFE Student Thank You [email protected] Appendix

Bloomberg Fixed Income Pages

USD US Treasurys Benchmark Issues TII Listing of all TIPS C Listing of all bonds issued by Citigroup AAPL Listing of all bonds issued by Apple YA or YAS Yield and Spread Analysis SECF Security Finder CT10 Current 10Y US Treasury GC Graph Curves () YT Yield Table (mortgage backed securities) PRTU Portfolio Administration PORT Portfolio Analysis DRSK Default Risk (corporate) MRSK Default Risk (muni) TDH Trade History FIHZ Fixed Income Horizon Analysis