Advanced Excel PC Workshop - Yield Curve Construction and Term Structure Modelling

Day One

09.00 - 09.15 Welcome and Introduction

09.15 - 12.00 Bootstrapping and Curve Fitting

• Yield Curves, Par Curves and Zero Coupon Curves
• “Bootstrapping” the Curve
  • Convexity-Adjusted Deposit Futures
  • FRAs
  • Par Swap Rates
• Smoothing and Fitting Techniques
  • Nelson-Siegel
  • Cubic Splining
• Using the Fitted Curve to Price Bonds, Swaps etc.
• Computer Workshop (Excel/VB):
      Participants Program and Test Yield Curve Estimation Routines in Excel/VB

12.00 - 13.00 Lunch

13.00 - 16.30 Term Structure Modelling

• Introduction to Interest Rate Models
• Equilibrium Models (quick overview)
  • Rendleman and Barter
  • Vasicek
  • Cox, Ingersoll, & Ross (CIR)
• No-arbitrage Models
  • The BDT Model
  • Forward Induction
• Computer Workshop (Excel/VB):
      Participants Program and Test the BDT Model

Day Two

09.00 - 09.15 Recap

09.15 - 12.00 Term Structure Modelling (continued)

• No-arbitrage Models (continued)
  • The Hull-White Model (quick overview)
  • The Libor Market (BGM) Model (quick overview)
• A General Tree-Building Procedure
• Extracting sub-trees and calculating forward curves using reverse forward Induction
• Computer Workshop (Excel/VB):
      Participants extract forward curves from the BDT Tree

12.00 - 13.00 Lunch

13.00 - 15.45 Pricing Interest Rate Options (continued)

• Pricing Caps, Floors and Swaptions
  • Using Analytical Approaches
  • Using Numerical Approaches
• Risk Analysis
  • Estimating Delta, Gamma, Vega etc. for Interest Rate Options
• Pricing Constant Maturity Swaps
• Analyzing Instruments with Embedded Options
  • Callable and Putable Bonds
  • Cancellation Swaps
  • Extendable swaps
• Computer Workshop:
      Participants Analyse Selected IRO Structures Using the BDT Model

Evaluation and Termination of the Workshop