The purpose of this seminar is to give you a good and practical understanding of the pricing and applications of generic and simple non-generic swaps.
We start with a thorough introduction to swaps. We explain how swaps have evolved from "back-to-back" and "parallel" loans to a modern, financial instrument. We give an overview of different swap structures, and we explain the mechanics of a "plain vanilla" interest rate swaps, basis swaps, and cross currency swaps. We also show the "time profile" of a swap and give a practical explanation of how swap transactions are agreed, settled and terminated.
Further, we explain how swaps are priced and valued. We give an overview of different valuation techniques, and we explain and demonstrate in detail how swaps are correctly priced using zero coupon analysis. We show how swap curves can be "bootstrapped" and how swaps can be valued using the resulting discount factors. We explain how the instruments are valued for mark-to-market and risk management purposes, illustrated by lots of examples. We also give an overview of currency swap structures and explain the pricing of currency swaps.
Having gained a good understanding of fundamental swap pricing, we then turn to examine a number of more advanced swap structures and their related option instruments. We analyze and discuss the application of structures such as "Amortizing", "Accreting", "Forward Starting", "Arrears Reset", "Constant Maturity" and "Differential" swaps.
Finally we explain and demonstrate, using very practical examples, how swaps can be used to hedge interest rate and currency exposures of bonds and bond portfolios, loans and other types of financial instruments and transactions.