Fundamentals of Swaps Training Course

This training programme will take you step-by-step through the fundamentals of pricing and trading generic and simple non-generic interest rate and currency swaps. It will explore and apply the different strategies, techniques and methods commonly employed by the industry.  Equal attention will be given to the theoretical concepts and the practical applications.

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Overview of the Swaps Markets

• Introduction to the OTC market
• Development of the swap market
• Identifying key players, their roles and motivations
• Understanding the basic definitions and jargon

Identifying and Analysing Main Swap Instruments

• Definitions of a generic swap
• Examining the structure of generic and simple non-generic swaps
  - interest rate swap
  - currency swap
  - coupon swap
  - basis swap
  - equity swap
  - commodity swap
  - asset and liability swap
  - money market and term swap

Uses and Applications of Swaps

• Trading
• Risk management: taking risk or hedging risk
• Arbitrage
• Speculation
• Cash flow and treasury management
• Asset and liability management

Workshop: Simple swap strategies

• Issuing / buying fixed and converting to floating
• Issuing / buying floating and converting to fixed
• Issuing / buying in one currency and converting to another

Understanding Basic Swap Mathematics

• Interest rate quotations
• Interest rate calculation
• Present and future values
• Introduction to discounted cash flow
• Discount factors
• Using maturity rates
• Calculating yields
• Calculating par, zero and forward rates
• Zero coupon discount factors

Workshop: Bootstrapping

This session will bring together the concepts underlying the mathematics of swaps

Practical Introduction to Swaps Pricing

• Swap quotations
• Market making
• Warehousing a swap
• Marking to market

Interest Rate Swaps Pricing and Valuation

• Discounted cash flow methodology
• Zero coupon yield approach
• Cash arbitrage techniques
• Floating leg valuation
• Unwinding swap method of valuation

Cross Currency Swaps Pricing and Valuation

• Cross-currency basis swaps
• Pricing short-term forward exchange swaps
• Pricing long-term currency swaps

Examining the Structures and Uses of Non-Generic Swaps

• Rollercoasters
• Forward starts
• Yield curve swaps

Workshop: Swap structuring and pricing

This session will give delegates the opportunity to structure and price a variety of swaps

Commodity-Linked Swaps

• Types of swap
• Examples of the uses of commodity-linked swaps
• Pricing commodity-linked swaps

Equity Swaps

• Types of swap
• Examples of the uses of equity-linked swaps
• Pricing equity-linked swaps

Credit-Linked Swaps

• Types of swap
• Examples of the uses of credit-linked swaps
• Pricing credit-linked swaps

Introduction to Swaps Risk Management

• Identifying risks associated with swaps
  - interest rate risk
  - mismatch risk
  - basis risk
  - counterparty credit risk
  - cost of capital considerations
• Introducing swaps portfolios risk management approaches
  bucketing
  - hedging on a price sensitivity basis
  - the Delta vector method
  - Value-at-Risk
  - integrating market risks
  - choosing hedging instruments to suit portfolio needs

Workshop: Identifying and managing swap risks

Regulatory issues

• Deal confirmation
• Cancellation
• Assignment
• Netting and insolvency
• Calculating risk capital requirements
• Calculating credit and interest rate risk for Basel

Attend this intensive two-day course and gain a practical understading of:

• The development of the swaps market, its current size and key players
• Main swap instruments including interest rate swaps, currency swaps and simple non-generic swaps
• Uses and applications of swap products
• Swap portfolio risk management
• Capital requirements, documentation and regulatory issues