Interest Rates : Basics And Market Applications

Overview

This course ensures delegates are fully conversant with the basics of Interest Rates and then explores how to exploit the market applications.

Who should attend

Bond and Equity fund managers, money market and bond traders, middle and back office staff.

Course objectives

This practical two-day course enables delegates to:

> Understand interest rate markets

> Gain a good grasp of interest rate mechanics

Course content

Players and Instruments in the Interbank Market

> The role and functions of the interbank market

> The role of the Central Bank

> Tools for monetary policy

Money Market Instruments

> Instruments types

> Quotes and pricing

> Interest rate risk for money market instruments

Yield Curve Analysis

> Long bonds basics and types

> Understanding YTM, quotes, clean and dirty prices, accrued interest

Zero Coupon Bonds

> Limits of the traditional YTM analysis

> Building a zero-coupon yield curve

Bond Portfolio Fundamentals

> Yield/price relationship

> Bond risk indicators: Macaulay duration, modified duration, BPV, convexity

> Bond switch strategies

Hedging Interest Rate Risk

> Risk identification

> Yield curve shift analysis and forecasts

> Dynamic hedging

FRAs and the Money Market

> Cash and future rates

Using FRAs

> Interest rate risk hedge

> Position-taking in the Futures market

> How to replicate cash positions

Interest Rates Swaps (IRS)

> IRS basics and bonds vs IRS

> Building cash-flow diagram/table for an IRS

Hedging with IRS

> Identification and monitoring of interest rate risks

> IRS as hedging instruments

> Yield curve trading and arbitrage

> Dynamic hedging of credit risk

Advanced Bond Structure and Strategies

> Inflation swaps

> Bond stripping, barbells and butterflies - Asset swaps