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FINANCIAL MARKET COURSES

Equity Derivatives - Equity Index Swaps

An equity index swap is a contractual agreement between two parties to exchange cash flows or streams of payment, with one stream linked to the performance of an equity index and the other stream linked to an interest rate index. These swaps provide a way of synthetically investing in a stock market index and replicating cash investments in the underlying, resulting in a reduction in costs.

 

This course discusses the structure of equity index swaps, along with the associated cash flows. It also describes the role of a swap dealer, the pricing of equity swaps and other related issues.

  • OBJECTIVES

    On completion of this course, you will be able to:

    Describe the mechanics and structure of an equity index swap

    Calculate the payments associated with the different legs of an equity swap

    Define the role of the equity swap dealer and recognize how equity swaps are priced

    Identify the risks involved in equity index swaps and distinguish between equity swap variants

  • COURSE OUTLINE

    Topic 1: Structure & uses of Equity Index Swaps

    Equity Index Swaps

    Structure of an Equity Swap

    Features of an Equity Swap

    Users & Uses of Equity Swaps

    Advantages of Equity Swaps

    Topic 2: Equity Index Swap Payments

    Calculating Payments

    Importance of Notional Amount

    Equity Swap with Constant Notional Principal

    Topic 3: Risks & Variations of Equity Index Swaps

    Credit Risk of Equity Swaps

    Methods of Reducing Credit Risk

    Topic 4: Role of the Swap Dealer & Pricing

    Role of a Swap Dealer

    Swap Dealers & Liquidity

    Pricing an Equity Swap

  • PREREQUISITE KNOWLEDGE

  • ESTIMATED COMPLETED TIME

    90 Minutes

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