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A Trader’s Guide to Interest Rate Derivatives


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.

Audience: 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,

·      Risk Management

Table of Contents 

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.

3) Non-contingent IR Derivatives: comprehensive examination of the terminology and pricing methods of IR (non-contingent) derivatives 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.

4) Hedging 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”.

5)  IR 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.

6)  IR 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.

7) Portfolio 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"  strategies.


722 Pages of comprehensive and extensively illustrated Handout Notes (see samples here)

Plus copies of relevant TG2 Books/e-Books

Note: 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" list HERE)

    Get a Syllabus in more detail

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Last modified: July 25, 2011