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FINANCIAL MARKET COURSES

Interest Rates & Benchmarks

This course introduces official interest rates and their influence on financial markets and the economy as a whole. The course outlines the use of simple, zero-coupon, interest rates and their application to accrual products in the money markets. It also examines market rates and the currency day count conventions used in money market calculations. Finally, the course shows how reference rates such as LIBOR and Euribor are calculated in today’s money markets, and how overnight indices have developed as a benchmark replacement for LIBOR and Euribor

  • OBJECTIVES

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

    Recognize the influence of official central bank rates on money market rates of various maturities

    Calculate interest on various money market products

    Identify market benchmark rates such as LIBOR and Euribor, and the growing significance of overnight indices as market benchmarks

  • COURSE OUTLINE

    Topic 1: Market Rates & Maturities

    Interest Rates & The Economy

    How Central Banks Influence Official Interest Rates

    o Open Market Operations

    o Official Interest Rates

    o Lender of Last Resort

    o Central Bank Reserves

    Official Rates & Interbank Rates

    Money Market Zero-Coupon Rates

    Interest Rates & Yield Curves

    o Normal Yield Curve

    o Flat Yield Curve

    o Inverted Yield Curve

    Topic 2: Interest Rate Calculations

    Day Count Conventions

    o Actual/365 Fixed

    o Money Market Basis Actual/360

    Interest Calculations

    o Formula

    o Example

    Comparing Interest Rates with a Different Day Basis

    o Formula

    o Example

    Topic 3: Reference Rates & Indices

    Reference Rates

    o LIBOR

    o Calculating LIBOR

    o Euribor

    o Why Are LIBOR & Euribor Important?

    o Other Interbank Benchmark Rates

    o Using Reference Rates

    Overnight Indices

    o Overnight Index Swaps

    o Types of Overnight Average Rate

    o Calculating the Overnight Average Rate for a Trade

    o LIBOR-OIS Spread

  • PREREQUISITE KNOWLEDGE

  • ESTIMATED COMPLETED TIME

    60 Minutes

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