Advanced Swaps

State of the art strategies for pricing, hedging and trading generic and non-generic swaps

Course Highlights

The course was well tailored to my needs

A.R., Autoliv AB

examine advanced aspects of non-generic and exotic swaps, focusing on their structures, pricing methodologies, risk management and product applications
measure and manage risk within complex swaps and options portfolios
get to grips with sophisticated trading applications of swaps
discover why swaps are increasingly used within structured debt instruments
understand the applications of interest rate swaps and options in financial engineering

For details of the course trainer, please download the course brochure

Booking Information

Dates	Prices	Book This Course	Discount
23 - 25 Sep 2009	£ 2299		-
10 - 12 Mar 2010	£ 2299		-

You can also book Advanced Swaps & Fundamentals Of Swaps together at discounted price £3699.00. For more details about Fundamentals Of Swaps click here.

Course Programme

The course was well tailored to my needs

A.R., Autoliv AB

Very good course leader, clear and concise

C.D., Lloyds TSB

Pricing and Valuation of Interest Rate Swaps

Discounted cash flow (DCF) methodology
Zero coupon yield approach - a rationalisation
Modelling the yield curve: deterministic and stochastic term structure models
Practical challenges in deriving benchmark curves
Interpolation and curve fitting and smoothing techniques
Parametric and non-parametric yield curves
Stochastic term structure models (e.g. BDT, Vasicek, Hull-White)
Convexity adjustments
Yield curve construction using par swap rates and bond yields
Pricing and valuation using implied forward rate data

Case Study : Building a LIBOR term structure model - pricing and valuation of generic swaps

Applications of Swaps in Debt (Liability) Management

Creating 'synthetic' liabilities
Credit risk arbitrage - identifying and realising comparative advantages
Understanding the relationship between swap and new issue debt markets - what drives the new issue marketplace ?
Derivatives 'Overlay' strategies - tactical applications of swaps in debt portfolio duration management

Case Study : Reverse engineering of a swap driven new issue - pricing and analysis

Applications of Swaps in Asset Management - Asset re-packaging

Mechanics of pricing and structuring asset swaps
Investor rationale

Arbitrage - exploiting pricing discrepancies
Credit diversification

Structured product Asset swaps (Convertibles, Reverse FRNs, option embedded bonds)
Asset swaps and the interrelationship between swap and bond markets
Fixed income analysis - Using Asset Swap spreads in Relative value analysis

Case Study: Structuring and pricing asset swap transactions

Non-Generic Swaps - Structuring, Pricing & Applications

1st Generation non-generic swap types:

Forward start swaps - structures and pricing
Amortising and Rollercoaster swaps
Deferred coupon, stepped coupon and zero coupon swaps
Applications to asset and liability management and trading strategies

Pricing and Valuation of Cross Currency Swaps

Generic and non-generic cross currency swaps
Cross currency coupon swaps
LTFX
Pricing and valuation of cross-currency basis swaps
Accounting for basis swaps
Basis point conversion factors; PVBP conversion matrix
Calculation and applications

Case Study : structuring, pricing and hedging a cross currency swap transaction

Exotic swaps

Constant Maturity Swaps (CMS) and Constant Maturity Treasury Swaps (CMT)

Pricing and valuation of CMS, CMT swaps
Optionality of CMS, CMT swaps
Determination of convexity adjustment
Stochastic term structure models
Applications of Constant Maturity Swaps

Yield curve exposure management
CMS/CMT structured notes
Trading and risk management considerations

Arrears Swaps

LIBOR-in-arrears swaps
Pricing and valuation of arrears swaps
Convexity bias in pricing arrears and other mismatch structures
Estimation of convexity adjustment
Motivations of arrears swaps usage

CPI (Real Interest Rate) Swaps

Construction: basic mechanics and parameters of operation
Pricing and valuation of Inflation Swaps
Applications of Inflation Swaps: Trading and risk management

Differential (Quanto) Swaps

Structures and applications
Pricing and valuation
Volatility and Correlation effects
Risk management of quanto structures

Option Embedded Swaps

Extendible and cancellable swaps (callable and putable swaps)
Index Amortising Swaps
European and Bermudan structures
Pricing and valuation techniques
Applications:

Structured (callable, putable) bonds; call monetisation
Asset packaging; re-structuring structured debt

Accrual Swaps

Digital (Binary) options
Pricing of digital options
Risk management of digital options: replication and hedging
Applications:

'Range' structured notes
Digital interest rate caps and floors

Interest Rate Options

Interest rate caps and floors
Interest rate Collars/Range forwards/Zero cost collars/Partial swaps/Switchable swaps
Swap options
European and Bermudan style swap options
Barrier option structures: Chooser options
Corporate applications of interest rate options
Embedded option structures

Swap Portfolio Risk Management

Interest rate risk measures
Duration, PVBP
Delta vector analysis
Option risk sensitivities (Delta, Gamma, Vega, Theta)
Considering fixed and floating legs
Cross-currency swaps - portfolio management
Transaction based and portfolio based approaches to risk management
Swap portfolio representation
Cash flow 'bucketing': theoretical and empirical techniques
Dynamic considerations in portfolio management methodologies
Measuring sensitivity to par rates, zero coupon rates, forward rates and futures
Using short term and long term (bond) futures to risk manage swap portfolios
Advantages and shortcomings of the use of futures

Case study: Using Delta vector analysis to measure and manage swap portfolio risk

Using Value-at-Risk to measure and manage the risks of complex swaps portfolios

Introduction to VaR
VaR calculation methods
The delta-normal method (RiskMetrics)
Linear and non-linear instruments
The delta-gamma approximation
Estimation of volatility and Correlation
Forecasting methods (Outline of ARCH, GARCH techniques)
VaR applications:

market risk management: Firm-wide and trader risk limits
setting VaR limits
strengths and weaknesses of VaR methodologies

Trading Strategies Using Interest Rate and Currency Swaps

Interest rate swaps as a substitute for fixed income bond investment
Basis trading: swap spread trading
Credit spread trading - asset swap spreads
Benchmarking: Using the swaps yield curve in relative value analysis
Yield curve arbitrage strategies:
delta neutral yield curve trading
forward swap yield curve arbitrage trading
relative value and directional trading strategies

Financial Engineering - Structured Products and Embedded Derivatives

Elements of financial engineering
Creation and analysis of structured products
Decomposition of structured bonds and derivatives into component transactions
The rationale for structured products: investor and borrower strategies
Application of interest rate swaps and options in financial engineering

Case Study: Reverse engineering of structured debt products

Delegates will have the opportunity of analysing a variety of structured debt products - decomposing them into their constituent risk elements, evaluating pricing and hedge requirements, as well as designing and pricing structured products to meet investor specified risk objectives.