Swap transactions which involve exchange of one set of cash flows for another, represent one of the cornerstones of derivatives trading. Since its inception, the swaps market has experienced phenomenal growth. Financial institutions and corporate treasuries are increasingly employing swaps. As financial institutions and corporate treasuries increasingly employ swaps and the market experiences further growth in size and number, a professional guide to understanding swaps is essential for the various participants.
- Know common derivatives and their features.
- Understand the use of futures to hedge different exposures.
- Know the working mechanism of interest rate and currency swaps.
- Examine how financial institutions create a market in swaps.
- Calculate yield to maturity and par yield, forward rates, and duration.
- Understand primary interest rate futures contracts and the concepts that underlie their use.
- Understand the zero curve calculated from LIBOR and swap rates.
- Know forward rate agreements.
- Valuation of swaps as a series of forward rate agreements.
- Valuation of swaps as the difference between a fixed-rate and floating-rate bond.
Every professional involved in the global financial services industry (as a provider, user, regulator or advisor of product/services, marketplace/exchange) would benefit from KESDEE’s innovative solutions.
- Supervisory Agencies
- Central Banks
- Financial Institutions
- Commercial Banks
- Investment Banks
- Housing Societies/Thrifts
- Mutual Funds
- Brokerage Houses
- Stock Exchanges
- Derivatives Exchanges
- Insurance Companies
- Multinational Corporations
- Accountancy Firms
- Consultancy Firms
- Law Firms
- Rating Agencies
- Multi-lateral Financial Institutions
1. Derivative Instruments
Introduce common derivatives
Describe significant features of forward and option payoffs
Describe how forwards and options are used by market participants
2. Futures Contracts & Hedging
Introduce exchange-traded instrument known as futures
Understand purpose of margin
Learn how futures are used to hedge a variety of different exposures
Discuss how well futures hedges perform
How interest rate and currency swaps work
How interest rate and currency swaps are used
Discuss other swap products developed by financial engineers
Examine how financial institutions create a market in swaps
4. Interest Rates, Zero Curves and Duration
Understanding the compounding frequency of an interest rate quote
Converting interest rates from one compounding frequency to another
Calculating yield to maturity and par yield
Calculating zero rates from Treasury securities using the bootstrap method
Calculating forward rates
Calculating and using duration
5. Interest Rate Futures
Understanding day count conventions
Understanding how bonds are quoted in the US
Understanding conversion factors
Learning the concept of a cheapest to deliver bond
Learning how Treasury bond and Eurodollar futures are used to hedge interest rate exposures
6. Swap Valuation
Understanding the zero curve calculated from LIBOR and swap rates
Building a knowledge base for forward rate agreements
Valuing swaps as a series of forward rate agreements
Valuing swaps as the difference between a fixed-rate and floating rate bond