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Schill, Michael J.
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Schill, Michael J. Book SM-1333 / Published November 25, 2021 / 2 pages.
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Product Overview

Bond Trader is a simulation designed to help students experience the dynamics of financial market behavior by putting them in a simple simulated securities market. Bond Trader serves as an engaging introduction and powerful illustration of such foundational themes as time value of money, equilibrium-required return, the yield curve, market efficiency and the pricing of information, financial substitutes and arbitrage-based security pricing, bond math, and financial market mechanics. In the simulation, students compete in teams or individually to maximize the value of a trading portfolio by choosing when to take positions in bond securities and when to hold cash. Student performance is ranked against their peers. Students make weekly buy-and-sell decisions with weekly trading periods of 10-15 seconds. Bond prices are dynamically determined based on the aggregate buy-and-sell order flow from student and randomized computer traders in the market using an Internet-based interface. Bond Trader has been used effectively in Darden's first-year corporate finance course and is designed to work as an effective introduction to any standard corporate finance or investments curriculum.



Learning Objectives

Motivate fundamental themes of finance, including time value of money, equilibrium-required return, the yield curve, market efficiency and the pricing of information, and financial substitutes and arbitrage-based security pricing. Introduce and reinforce simple bond market concepts such as bond math mechanics, interest rate risk, reinvestment risk, and the expectations theory of the yield curve. Establish a powerful markets-oriented mindset among students that can be leveraged throughout the course to motivate equilibrium behavior. Illustrate and emphasize the competitive incentives in markets that move security prices toward fair pricing. Build appreciation for market efficiency and how markets incorporate news into prices. Introduce such financial market mechanics as bid-ask spread, leverage and margin, short selling, and market making.


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  • Overview

    Bond Trader is a simulation designed to help students experience the dynamics of financial market behavior by putting them in a simple simulated securities market. Bond Trader serves as an engaging introduction and powerful illustration of such foundational themes as time value of money, equilibrium-required return, the yield curve, market efficiency and the pricing of information, financial substitutes and arbitrage-based security pricing, bond math, and financial market mechanics. In the simulation, students compete in teams or individually to maximize the value of a trading portfolio by choosing when to take positions in bond securities and when to hold cash. Student performance is ranked against their peers. Students make weekly buy-and-sell decisions with weekly trading periods of 10-15 seconds. Bond prices are dynamically determined based on the aggregate buy-and-sell order flow from student and randomized computer traders in the market using an Internet-based interface. Bond Trader has been used effectively in Darden's first-year corporate finance course and is designed to work as an effective introduction to any standard corporate finance or investments curriculum.

  • Learning Objectives

    Learning Objectives

    Motivate fundamental themes of finance, including time value of money, equilibrium-required return, the yield curve, market efficiency and the pricing of information, and financial substitutes and arbitrage-based security pricing. Introduce and reinforce simple bond market concepts such as bond math mechanics, interest rate risk, reinvestment risk, and the expectations theory of the yield curve. Establish a powerful markets-oriented mindset among students that can be leveraged throughout the course to motivate equilibrium behavior. Illustrate and emphasize the competitive incentives in markets that move security prices toward fair pricing. Build appreciation for market efficiency and how markets incorporate news into prices. Introduce such financial market mechanics as bid-ask spread, leverage and margin, short selling, and market making.

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