Introduction to Swaps

In addition to your class tuition and study materials, you will receive the following:


Case Study

• A simple interest rate swap is valued as an illustration using the concepts outlined above. Delegates then build on the illustration themselves to derive a very simple swap curve.

Exercises

• A series of calculations to consolidate on the key concepts

Other Extras

• Certificate of attendance

Level: Introductory


Synopsis:
The market for interest rate swaps is the largest in the world; some reports value it in excess of fifty trillion dollars by nominal value. Interest rate swaps are constantly being used by both investment banks and corporations, yet many people do not fully understand what they are or how they work. This one day course has the simple objective of providing the delegate with a solid understanding of what swaps are, how they function and what they may be used for.


At the end of the course participants will be able to: Know what swaptions are and how they may be used . Know the characteristics of other swaps including currency swaps, equity swaps and credit swaps . Be able to apply interest rate swaps in fund management and business to manage interest rate risk . Know the non-vanilla structures of interest rate swaps . Know what swap rates are and how to construct swap curves . Know the characteristics and workings of a plain interest rate swap (vanilla swaps) . Understand the principles behind valuing an interest rate swap . Understand the importance of the swaps market in today's financial markets .


Prerequisites:
None


Suitable For:
Individuals working in Fixed Income and Liquidity products. Staff seeking a further insight into how swaps are traded and why they are used will also find this course useful. The course is also suitable for anyone whose role is not directly involved in, but requires understanding of, the swap markets e.g. IT/ Technology.


Key concepts

• An overview of the over-the-counter (OTC) market swaps
• An overview of money market rates and corporate floating rate borrowing
• An introduction to spot (zero coupon rates)
• Calculating forward-forward rates
• Discounting and discount factors

Interest Rate Swaps (IRSs)

• A description and definition of the an interest rate swap
• Interest rate swap terminology
• Calculating interest rate swap cash flows
• The fundamentals of interest rate swap valuation
• The swap curve
• Asset swaps and liability swaps
• Using interest rate swaps to manage interest rate risk
• Interest rate swaps in investment management

Currency swaps

• The structure of a currency swap
• Currency swap illustration
• Applications of currency swaps

Equity swaps

• Definition and structure of a simple equity swap
• Variations on the equity swap format
• Uses of equity swaps

Trading swaps

• Introduction to swap market making
• Relative value trading with swaps
• Calculating profit/loss on holding a swap position

Swaptions

• Definition and characteristics of a swaption
• Swaption payoffs
• Uses of swaptions