FRAs, Swaps and Interest Rate Options

Agenda Program
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Prague, NH Hotel Prague
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Recent Developments in IR Derivatives
Forward Rate Agreements
Interest Rate Swaps and Currency Swaps
Non-generic Swap Structures
"Bootstrapping" and Swap Pricing
Using Swaps in Risk Management
Caps, Floors and Swaptions
The purpose of this seminar is to give the participants a thorough introduction to FRAs, swaps and their related option products (caps, floors, swaptions) and a good understanding of how these instruments are traded, priced, used and managed. The basic characteristics of the instruments are explained, illustrated with numerous examples of cash flows. We explain in detail how the instruments are valued for mark-to-market purposes, for the calculation of replacement value and for risk management purposes, illustrated with lots of examples. In addition to the "generic" structures we shall present and analyze special swap structures including "amortizing", "accreting", "forward starting", "arrears reset", "overnight index" and "differential" swaps. We demonstrate how the instruments are used to create synthetic cash flows (asset and liability swaps) and for managing interest rate and foreign exchange risk at the micro as well as the macro level. Finally, we explain how a "book" of swaps, caps, floors etc. should be managed.

Program of the seminar: FRAs, Swaps and Interest Rate Options

The seminar timetable follows Central European Time (CET).

09.00 - 09.15  Welcome Address

09.15 - 10.15  General Introduction to the OTC Markets

  • Historical Background
  • Overview of lst-, 2nd- and 3rd- generation instruments
  • OTC - versus listed instruments

10.30 - 12.30  Forward Rate Agreements (FRAs)

  • Definitions
  • FRA time profile
  • Fixing and settlement
  • Pricing and mark-to-market
  • Interest rate sensitivity
  • Risk management with FRAs
  • Exercises

12.30 - 13.30  Lunch

13.30 - 16.30  Interest rate Swaps (I)

  • Swaps - general introduction
  • Types and markets
  • Time profile for swap trading
  • Fixing and settlement
  • Conventions
  • Par swaps
  • Comparison swap
  • Zero coupon valuation
  • Mark-to- Market and close-out
  • Exercises

09.00 - 09.15  Recap

09.15 - 12.00  Interest Rate Swaps (II)

  • Applications of swaps (cases)
  • Synthetic loans with liability swaps
  • Synthetic investments with asset swaps
  • Managing interest rate risk with micro swaps
  • Managing interest rate risk with macro swaps
  • Exercises

12.00 - 13.00  Lunch

13.00 - 14.30  Currency Forwards and Swaps

  • Definitions, types
  • Pricing
  • Asset and liability swaps
  • Hedging of FX risk with forwards
  • Hedging of FX risk with swaps
  • Cases
  • Exercises

14.45 - 16.30  Non-generic Swaps

  • Amortizing and Accreting Swaps
  • Rollercoaster Swaps
  • Forward Starting Swaps
  • Arrears Reset Swaps
  • Constant Maturity Swaps
  • Differential swap
  • Overnight Index Swaps
  • Cases and Exercises

09.00 - 09.15  Recap

09.15 - 12.00  Interest Rate Options

  • Why Use Options?
  • Interest Rate Guarantees
  • Caps, Floors
  • Collars
  • No-cost collars
  • Swaptions
  • Cases
  • Exercises

12.00 - 13.00  Lunch

13.00 - 16.00  Structured Products

  • What is a Structured Product?
  • Financial Engineering
  • Equity-linked Structures
  • Reverse Convertibles
  • Reverse Floaters
  • Bear Notes
  • Capital Market Floaters
  • Superfloaters
  • Limited Caps
  • Fairway Bonds
  • Other Structured Products
  • Exercises

16.00 - 16.15  Evaluation and Termination of the Seminar

Training catalogue in PDF
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