INTEREST RATE DERIVATIVES: Hedging and Managing Risk

 

"A very comprehensive course exploring the fundamentals of interest rate derivatives with practical use of worked examples using live market data."

Timothy Mount - Commerzbank
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Course Outline

A comprehensive seminar on pricing and managing interest rate derivatives.

This course is charged and can be booked by the day. Select the days that meet your needs, or participate in the whole course for a thorough grounding in these instruments.

Who The Course is For

This course is designed for anyone who wishes to be able to price, use, market, manage or evaluate interest rate derivatives and currency swaps including:

• Directors, treasurers, dealers and trainees
• Corporate finance and investment managers
• Accountants, auditors and IT personnel

• Derivatives marketing executives, consultants, advisors and brokers

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Course Objectives

• Explore the relationship between futures, forwards and FRAs
• Build a zero coupon yield curve
• Construct hedges
• Price and revalue swaps
• Structure asset and debt swaps
• Design, price and use caps, floors, collars and swaptions
• Structure and market combinations of derivative products
• Use these instruments for taking positions or hedging exposures

This program is eligible for 32 Continuing Education credit hours from the CFA Institute. If you are a CFA Institute member, CE credit for your participation in this program will be automatically recorded in your CE Diary.

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Day One

The building blocks

• The nature of interest rates
• Basis periodicity and compounding
• The time value of money
• Forward rates and discount factors
• Sensitivity and duration

The essentials of futures & FRAs

• The instruments
• Comparative advantages
• Futures FRAs and convexity
• Hedging short-term rate moves
• Practical applications

Workshops: applying the basics, hedging interest rate risk

Day Two

Yield curves and how to build them

• Why a yield curve
• Building zero curves manually
• Linear and spline interpolation

Interest rate swaps

• Definitions and history
• Today's market
• Cash flows and pricing for zero NPV
• Revaluation and buyout
• Amortising and accreting structures
• Hedging

Workshops: yield curve building, swap pricing and valuation

Day Three

Currency and asset swaps

• Swaps and forward FX
• Basis swaps
• Conversion factors
• Pricing and structuring currency swaps
• Using and pricing par and proceeds asset swaps

Interest rate options: caps and floors

• Definitions and structure
• Determination of prices
• Volatility and its effects
• Black's model and assumptions
• Hedging factors

Workshops: using currency swaps, valuing caps and floors

Day Four

Using and marketing combinations

• Cap-floor-swap mix
• Zero cost collars
• Participating caps
• Market developments

Interest rate options - swaptions

• The mechanics
• How values are determined
• Pricing models and assumptions
• Caps and swaptions
• Hedging factors

Workshops: evaluating the alternatives, using swaptions