Advanced Swaps - Pricing, Trading and Risk Management

Day One

09.00 - 09.15 Welcome and Introduction

09.15 - 12.00 Quick Recap of Swap Valuation Techniques

• Bootstrapping
• Cubic Splining
• Incorporating Credit Spreads
• Projecting Cash Flows

Swap-Related Options and Option Embedded Swaps

• Interest Rate Guarantees, Caps, Floors and Collars
  • Pay-of profiles
• Swaptions
  • Receiver/payer swaptions
  • European, American, Bermudan types
• Using Swap-Related Options to Manage Interest Rate Risk
  • Case Study : Hedging Loan with Swap, Cap or Collar
• Analytical/numerical valuation
• Analytical valuation (Black)
  • Extending the standard Black framework
  • Calculating the greeks
• Exercises

12.00 - 13.00 Lunch

13.00 - 16.30 Swap-Related Options and Option Embedded Swaps (Continued)

• Numerical valuation
  • The BDT-model
  • Calibrating a binomial tree to discount factors and time varying volatility
  • Extracting sub-trees from the binomial tree
  • Finding future Par-rates using subtrees
• Option Embedded Swaps
  • Cancellation swaps
  • Extendable swaps
  • Calculating the exercise probability
  • Calculating the expected lifetime of the Swaption

Day Two

09.00 - 09.15 Brief recap

09.15 - 12.00 Using Swaps and Interest Rate Options in Financial Management

• Creating Synthetic Cash Flows
  • Asset swaps
  • Liability swaps
  • Locking In Unrealized Profits
• Utilizing Funding Opportunities in Foreign Markets
• Tax and Regulatory arbitrage
• Credit Risk Management
  • Asset swaps
  • Bonds
  • Credit default swaps
  • N’th to default swap
  • Total return swap
  • Equity default swap
• Portfolio Management with Swaps and IROs
  • Using swaps in duration management
  • Cash-Flow Matching with Swaps
  • Swap overlay strategies
  • Using Caps, Floors and Swaptions
• Exercises

12.00 - 13.00 Lunch

13.00 - 15.45 Financial Engineering with Swaps/Options

• Constructing Synthetic Instruments
  • Goals and building blocks
• Examples of Structured Products with Embedded Swaps and/or Options
  • Reverse Floaters
  • Bear Notes
  • CMS Floaters
  • Targeted Redemption Notes
  • Capped Floaters
  • Callable Snowball Notes
  • Range Accrual Notes
• Case Studies and Exercises

Evaluation and Termination of the Seminar