Advanced Swaps

A practical guide to the strategies and techniques necessary to understand, analyse, assess and utilise the swaps market fully

Course Highlights

By the end of this course, participants will be able to:

Understand the key concepts of yield curve modelling

Apply and use interest rate derivatives effectively

Price and hedge interest rate swaps

Price exotic swaps

Calculate the risks and rewards of swaps market

Structure interest rate options into structured bonds

Fully grasp the complexities of the CDS market

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

Booking Information

Dates	Prices	Book This Course	Discount
08 - 10 Sep 2010	£ 2299		-
23 - 25 Mar 2011	£ 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

Day One

Broad introduction to the Swaps Market

Evolution of the swap market
Main uses of swaps
Examples of the concept of comparative advantage
Some market statistics

Building the Yield Curve

Zero coupon yield curve approach
Yield curve construction using a futures strip and par swap rates
Bootstrapping a curve from market data

Short-term Money Market Swaps

Estimation of forward rates
Pricing a FRA
Hedging a FRA with a pair of deposit futures contracts:

Measuring hedge effectiveness

Pricing a short-term swap using a futures strip

Exercise: Completing the pricing and hedging of the swap
Demonstrating hedge effectiveness

Generic IRSs and their Relationship to Bond Markets

Valuing the floating side
Valuing the fixed side
Components of the swap spread
Valuation using forwards method
Comparison with a notional principal approach

Pricing simple non-generic swaps using implied forwards

Forward start
Amortising
Rollercoaster

Exercise: Pricing simple non-generic swaps

Pricing Cross-Currency Swaps

Pricing and valuation of cross currency swaps
Generic and non-generic cross currency swaps
Cross currency coupon swaps
Pricing and valuation of cross-currency basis swaps; pricing bias
Basis point conversion factors; PVBP conversion matrix
Basis point conversion factors

Day Two

Single Market Exposure: Interest Rates

Using company reports to:

Identify and quantify the risks and opportunities
Identify possible sources of internal or external conflict

Using derivatives to improve the risk-return trade-off
Selling it all to the clients – and to their shareholders
Counterparty credit exposure

Case study: Transportation (British Airways and a European company)

Asset Swaps

How significant is the business
Looking at the drivers and spreads
Using notional principals
Structuring and pricing methodologies for asset swaps
Par/par asset swap
Yield/yield asset swap
Yield Curve Shift – Z spread analysis

Exercise: Valuing an asset swap

Swap Trading

How to manage a portfolio
What risks do you want to run – understanding Value-at-Risk (VaR)
Yield curve arbitrage
Delta neutral curve trading
Relative value and directional trading strategies

Hedging and Arbitrage

Creating a delta-sensitivity ladder of a swap portfolio
Building an equivalent portfolio
Hedging a swap portfolio
Practical issues of swap risk management

Case study: Demonstrating an effective hedge for a portfolio

Day Three

Interest Rate Options - The Greeks

The volatility trader – how they review their positions
Delta hedging and its dynamics
Delta and Gamma
Rho, Theta, Vega
Volatility trades – straddles, strangles

Case study: Understanding delta hedging

Applications of Interest Rate Options in Structured Bonds

Concept and rationale
Key structural features
Value aspects
Capped and floored floaters
Range floaters and leveraged floaters
Reverse FRNs
Callable bonds
European and Bermudan style swap options
Pricing:

Black model

Option embedded swaps
Callable and puttable swaps
Switchable swaps, accrual swaps
Applications: structured (callable, puttable)bonds; call monetisation
Index amortising swaps

Case study: Comparing caps, collars and swaps

Advanced Swaps and Options

Different types of exotic option
Volatility trades – straddles, strangles
Volatility and correlation effects
Inflation swaps
Pricing and valuing inflation swaps
Constructing an inflation swap curve
Applications of inflation swap
Constant Maturity swaps

Case study: Using combinations to achieve desired view

Credit Default Swaps

Understanding the CDS market
Pricing a CDS
Understanding the relationship with asset swaps
Review both sovereign and corporate CDS pricing
The relationships between credit spreads
Reverse engineering a credit linked notes

Case study: An analysis of structured products - understanding the components