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FINANCIAL MARKET COURSES

Interest Rate & Currency Swap Fundamentals

Courses In This Course

OTC derivatives, such as interest rate and currency swaps, have been a vital component of the global derivatives market since currency swaps were first introduced in the 1970s. Therefore, understanding swaps, their pricing, and their uses is fundamental for anyone looking to gain an understanding of today's financial markets. This course describes the various applications of swaps, and explains in detail the pricing and valuation of these instruments. Documentation and credit issues associated with swaps are also described, along with the management of a swaps book.

Objectives

In this course, you will explore:

The key applications of swaps for various market participants

The pricing and valuation of swaps

The credit issues that arise in the trading of interest rate and currency swaps

Documentation and settlement procedures associated with swaps

The day-to-day trading and risk management of a swaps portfolio

Prerequisite Knowledge

An understanding of the Introduction to Derivatives course is required.

Learner Profile

This course is designed for:

New recruits to banking and financial organizations

Trainee dealers and traders

Operations and support staff

Sales and marketing executives

Finance and accounting staff

IT staff

Compliance and regulatory staff

Personnel managers and recruitment staff

  •    SWAPS - APPLICATIONS

    Overview

    Swaps are derivative products that are used to alter the exposure of investment portfolios or any series of cash flows. They represent an efficient way for institutions to manage their interest rate risk or gain desired investment exposure.

     

    In this course, we will look at the various uses of interest rate swaps. We will also identify the major players in the swap market and outline their key roles and responsibilities.

    Course Duration

    60 mins

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    Prerequisite Knowledge

    Prior to studying this course, you should have a basic knowledge of swaps as described in the following course:

     

    Swaps – An Introduction

  •    SWAPS - APPLICATIONS FOR CORPORATES

    Overview

    Financial and non-financial corporates often tap the capital markets to raise money. In borrowing money, corporates seek sources that provide the lowest cost of funds and the type of borrowing (fixed or floating) that best match their business’s cash flow.

     

    In this course, you will learn about the different types of corporate borrowers and understand the factors that influence the rates at which they borrow. The course also explains their business goals and the use of derivatives with respect to their capital generation activities.

    Course Duration

    75 mins

    Prerequisite Knowledge

    Swaps – An Introduction

    Swaps – Applications

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  •    SWAPS - APPLICATIONS FOR INSTITUTIONAL

       INVESTORS

    Overview

    Institutional investors can be grouped as leveraged and unleveraged. These investors vary in their investment approach, but commonly apply swaps to achieve their goals.

     

    In this course, you will learn about the different types of institutional investors and learn how to measure their performance. The course also explains the use of swaps by these investors with respect to activities such as hedging, capital generation, and risk management.

    Course Duration

    75 mins

    Prerequisite Knowledge

    Swaps – An Introduction

    Swaps – Applications

    Swaps – Applications for Corporates

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  •    SWAPS - PRICING & VALUATION (PART I)

    Overview

    Valuation of swaps is a two-stage process. It requires determining the size and timing of the cash flows and then calculating the present value of these cash flows. The 'value' of a transaction is simply the difference between the present values of the flows that are due to be received and those that are due to be paid.

     

    This course focuses on the general approach necessary to calculate the value of a swap transaction. It concentrates on the generation and discounted value of future cash flows.

    Course Duration

    60 mins

    Prerequisite Knowledge

    Prior to studying this course, you should have a solid understanding of the fundamentals of swaps as outlined in the following courses:

     

    Swaps – An Introduction

    Swaps – Applications

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  •    SWAPS - PRICING & VALUATION (PART II)

    Overview

    This second course on swap pricing and valuation extends from the basic techniques introduced in the first course. This second part focuses on the minutiae particular to individual swap markets, and asks the question "Where do the swap rates come from?" The course also shows how simple calculations can give good approximations to otherwise complex results.

    Course Duration

    75 mins

    Prerequisite Knowledge

    Prior to studying this course, you should have a basic understanding of swaps and their valuation as outlined in the following courses:

     

    Swaps – An Introduction

    Swaps – Applications

    Swaps – Pricing & Valuation (Part I)

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  •    SWAPS - CREDIT EXPOSURE

    Overview

    This course provides an insight into the credit issues that arise in the trading of interest rate and currency swaps. It focuses on the way in which future credit exposure can be generated, how estimations of the exposure can be made, and how the future exposure can be reduced through different forms of credit enhancement. It also briefly addresses the issues raised by the management of these exposures.

    Course Duration

    75 mins

    Prerequisite Knowledge

    Swaps – An Introduction

    Swaps – Currency Swaps

    Swaps – Pricing & Valuation (Part I)

    Swaps – Pricing & Valuation (Part II)

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  •    SWAPS - DOCUMENTATION & SETTLEMENT

    Overview

    If a trader buys or sells a security, then the settlement and documentation processes are fairly straightforward. The trader usually just enters the details of the trade into a computer system and any payments, transfer of securities, and documentation are all automatically processed. Swaps, however, are generally long-term contracts that generate substantial credit exposure, so they require documentation describing the way defaults can occur and any actions pursuant to such a default. There are multiple, unique, cash flows over many years. Making these payments is more complex than a simple transfer of funds. At various times in the past, the combination of complex transactions and the explosive growth of the market has caused a logjam at financial institutions – they have been unable to get documentation out in time. Moreover, as the market has developed, legal problems have moved from the realm of anticipation to realization.

     

    This course describes the complexities and evolution of the swap settlement and documentation processes. It covers the trade cycle, the participants, and the standard documentation.

    Course Duration

    75 mins

    Prerequisite Knowledge

    Swaps – An Introduction

    Swaps – Pricing & Valuation (Part I)

    Swaps – Pricing & Valuation (Part II)

    Swaps – Credit Exposure

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  •    SWAPS - BOOK MANAGEMENT

    Overview

    Thirty years ago, the swap desks of global banks were small, arcane areas of finance. Things have changed considerably since then. According to a 2005 BIS survey, the global swap market had outstanding contracts with a notional value of almost USD 150 trillion. The USD sector alone had a size of nearly USD 60 trillion; in comparison, the USD bond market had just USD 23.5 trillion of outstanding issues.

     

    In this course, we will cover the day-to-day trading and risk management of a swaps portfolio. We will examine the position management and cash management of a swaps book from a trading perspective. We assume that the basic structures and mathematics of swaps(such as cash flows and the derivations of zero curves) are already understood.

    Course Duration

    90 mins

    Prerequisite Knowledge

    Prior to studying this course, you should have a good understanding of the basic mechanics of interest rate and currency swaps as detailed in the following courses:

     

    Swaps – Pricing & Valuation (Part I)

    Swaps – Pricing & Valuation (Part II)

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