A Trader’s Guide to Interest
Objectives: 3-day programme focusing on the pricing, structuring, and
risk management of IR derivatives in real world settings.
Additionally, the course will consolidate existing knowledge and provide a
"level playing" field of knowledge within the various groups. The
course has been design to permit future courses to bring the participants up to
a strong "working" knowledge.
market professionals with some exposure to IR products (past market experience
useful, or having attended one of the precursor seminars such the A Trader's
Guide to Interest Rate Markets)
Traders, sales, support,
· Management, treasurers,
1) Overview of
IR Derivatives: review of "big-picture" issues of P&L and risk
for IR derivatives, as well as terminology of
supply/demand, uses and the economic need for derivatives (hedging, market making, risk taking), as well as examination of
arbitrage valuation concepts.
2) Basic IR and
Present Value Theory: thorough examination of PV concepts and tools
providing all of the essential machinery for valuation and funding issues.
IR Derivatives: comprehensive examination of the terminology and pricing methods of IR
with a large number of worked examples including FRAs, Futures, Bond Futures, vanilla and near-vanilla Swaps using both traditional IRR
method as well as the zero-coupon method. Additionally included treatment of complex
and structured derivatives such as asset swaps, diff-swaps, and discussions
on the merits and uses/abuses of such products.
3) IR Curves: complete top-to-bottom treatment of market convention method for
producing zero-coupon curves, with detailed step calculations, discussions of
shortcomings, and qualitative treatment of advanced concepts.
and Position Risk: Risk Assessment and Control with consideration beginning
with Types of Risk (focusing on Market risk) using Sensitivities and Sensitivity matching
for Position Risk with both Traditional (Duration, Convexity, etc) as well as
empirical ("bucket" methods for additional assessment of rotations and
so forth). Additionally considering Market Risk and Homogeneity Covariance and Liquidity
and using Sample “Bucket reports”.
Options 1: thorough presentation on the concepts
and methods for pricing IR products/options starting with an analyses of
uncertain market processes creating an
options model that everyone can understand. The "risk
neutral" (Black-Scholes) approach and its limitations is also
provided. Explanation of volatility concepts and term-structure dynamics
is given in an intuitive fashion. The section concludes with a review of
term-structure methods (1- and 2- factor), including issues of calibration.
Options 2: description and pricing of important IR options including options
on futures, bond options, callable/putable bonds,
caps/floors/swaption. Additionally, selected exotic IR options and credit
derivatives are also included, and aspects of structuring are introduced. The section concludes with analyses of
option's position risk.
Simulation and Trading Efficiency: an introduction to the methods required
for real world hedging and portfolio risk management by constructing
strategy simulations of directional, structured, and hedged IR portfolios, as well as techniques for choosing "optimal"
comprehensive and extensively illustrated Handout Notes (see samples
Plus copies of relevant TG2 Books/e-Books
Seminars can be tailored to your trading, risk, client, and systems needs.
Submit your needs, and/or "cut/paste" from other Seminars (see entire "standard"