Interest Rate and FX Risk Hedging Workshop

Thursday, November 25

09.00 - 09.15 Welcome and Introduction

09.15 - 12.00 General Introduction to Interest Rate and FX Risk Management

• The Anatomy of Interest Rate and FX Risk
• Overview of Tools and Methods for IR and FX Risk Management

Hedging Interest Rate Risk

• The Hedging Process
• Measuring Interest Rate Risk
  • Positions, sensitivities and IR volatility
  • Cash flow sensitivity to IR changes
  • NPV sensitivity to IR changes
  • Duration and convexity
  • Yield curve risk (key rate durations)
  • Measuring aggregate interest rate risk (VaR)
• Practical Exposure Calculation Examples
• Workshop:
      Measuring Interest Rate Risk

12.00 - 13.00 Lunch

13.00 - 16.30 Hedging Interest Rate Risk (Continued)

• Overview of Strategies for Interest Rate Risk in Portfolio Management
  • Matching
  • Immunization and factor immunization
• Using FRAs and Futures to Manage Fixing Risk
• Using Interest Rate Swaps to Hedge Fixed and Floating Rate Assets and Liabilities Loans
  • “Fair Value” and “Cash Flow” hedges
• Using Caps, Floors and Collars
• Using Swaptions Hedge Long-Term Interest Rate Risk
• Using Swaptions to Hedge Contingent Interest Rate Risk
• Hedge Accounting: Fair Value and Cash Flow Hedges
• Practical Hedging Examples
• Workshop:
      Using Interest Rate Derivatives to Hedge Interest Rate Risk at the “Micro” Level

Friday, November 26

09.00 - 09.15 Recap

09.15 - 12.00 Hedging Interest Rate Risk (Continued)

• Using “Macro Swaps” to Hedge Loan and Deposit Portfolios
• Macro Hedging of Bond Portfolios Using Futures, Swaps
• Workshop:
      Macro Hedging of Loan and bond Portfolios
• Practical Hedging Examples

FX Risk Management

• Sources of Currency Risk
• Identifying and Measuring FX Exposure
  • Economic exposure
  • Translation exposure
  • Transaction exposure
• Measuring FX Exposure at the “Micro” Level
• Measuring FX risk at the Portfolio Level (VaR)
• Practical Hedging Examples
• Workshop:
      Identifying and Measuring FX Exposure

12.00 - 13.00 Lunch

13.00 - 16.00 Hedging FX Risk

• Hedging Economic FX Exposure
• Hedging Transaction Risk Exposure
  • Using forwards
  • Using “protective puts”
  • Using “covered calls”
  • Using swaps
• Hedging Contingent Exposures
• Using Exotic Options for Hedging Currency Risk
• Using Cross Hedges and Proxy Hedges
• Hedge Accounting: Fair Value and Cash Flow Hedges
• Practical Hedging Examples
• Workshop:
      Hedging FX Transaction Exposure
• Workshop:
      Hedging FX Risk of Investment Portfolio

Evaluation and Termination of the Workshop