SWAPS

Course details

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.

Learning Outcomes

• 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

Who Should Attend

• International and investment bankers
• Country and bank risk managers
• Corporate treasurers
• Risk analysts
• Investors and fund managers
• Financial institution bankers and relationship managers
• Banking system regulators and supervisory staff

Course Content

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