Training Courses

Introduction to Interest Rate Derivatives

Category: Derivatives

Course level: Introductory

In house

This one-day workshop is designed to unlock the mystery of interest rate derivatives. It will cover swaps, forwards, future and options.

No prior knowledge is assumed and all terms will be clearly explained.

Case studies form an integral part of the course, to allow the delegates to consolidate the information and provide the basis for group discussions.

Objectives

By the end of this workshop delegates will be able to:

  • understand the different interest rate derivatives in the market
  • understand the role for initial, variation and maintenance margins
  • calculate margin requirements
  • appreciate the role of interest rate derivatives in fixed income portfolios
  • understand how portfolio managers use derivative contracts to boost returns

Length

1 day

Course Content

Introduction

Definition of derivatives
Types of derivatives
Users and uses of derivatives

Interest rates

Time value of money
Annual vs semi-annual
Day count basis conventions
Term structure of interest rates

Short-term interest rates and futures

What is a forward?
FRAs
Implied forward rates
What is a future?
Specification of a futures contract
Role of the clearing house
Daily settlement and margins
Short-term interest rate futures
Basis risk
Futures vs FRAs

Bonds

Bond prices and yields
Bond duration and modified duration
Convexity
Bond futures
Conversion factors and cheapest to deliver
Spread risk
 

Swaps

What is a swap?
Vanilla interest rate swap
Role of the financial intermediary
Market makers and the interbank swap market
Quotes and spreads
Credit risk
VAR
Cross currency swap
Other types of swap

Options

Definition of an option
The options market
Option types
Option positions and payoff diagrams
Terminology
Determinants of option prices
Put-call parity
Caps/Floors/Collars
Swaptions

This course would be suitable for:

  • Finance and accounting
  • Investment administration and operations
  • Investment professionals
  • IT and software developers
  • Legal & Compliance
  • Risk management
  • Sales and marketing

This course would be suitable for these exams:

  • CFA - Level 1
  • CFA - Level 2
  • CFA - Level 3
  • SII Certificate - Derivatives
  • SII Certificate - Financial Derivatives Module
  • SII Certificate - Securities & Financial Derivatives
  • SII Diploma - Financial Derivatives
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