Advanced Interest Rate Derivatives

Euromoney Learning Solutions

How long?

  • 3 days
  • in person

Euromoney Learning Solutions


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About the course

Interest Rate Derivatives are an essential part of the financial marketplace. This intensive three-day programme, Advanced Interest Rate Derivatives, will teach you advanced techniques to use, price, manage and evaluate interest rate and cross-currency derivatives.

The first day of the course explores interest rate swaps, from terminology, settlement and clearing through to modern yield curve construction and cross-currency swaps. We will then proceed to examine interest rate options, exotics and structured products in detail.

This hands-on course contains a healthy mix of theory and client applications, which are illustrated and examined through real-life examples, practical exercises and group discussions.

Summary of course content:

  • Day 1 Interest rate derivatives, swaps and cross-currency swaps, modern yield curve construction
  • Day 2 Interest rate options and exotics, CMS and applications, structured products
  • Day 3 Constant maturity swaps, modelling interest-rate volatility, the impact of stochastic volatility, SABR

Why attend this course?

  • Gain familiarity with modern multi-curve interest-rate derivatives pricing
  • Learn how to build and analyse yield curves and then bootstrap the discount curve
  • Improve your understanding of interest rate derivatives documentation, clearing and settlement
  • Discuss potential customer applications of interest rate swaps
  • Review formal swaps pricing, from par rates to discount curves and forwards
  • Understand the mechanics of a cross-currency swap (CRX) and the drivers of the CRX basis spread


Day 1: Swaps

Interest rate swaps

  • Quotation and terminology
  • Drivers of yield curve shape and level
  • Understanding swap spreads

Settlement and clearing

  • OTC versus central clearing
  • Collateral and netting
  • Briefly on CVA adjustments

Customer applications

  • Using swaps to hedge debt issuance
  • Asset swaps
  • Curve trades and other proprietary positions

Formal swaps pricing

  • From par rates to discount curves and forwards
  • Bootstrapping the discount curve
  • The choice of the discount curve – why OIS?
  • Tenor basis and projection curves
  • Modern yield curve constructiuon

Cross-currency swaps

  • Mechanics of a CRX swap
  • Understanding the drivers of the CRX basis spread
  • Customer applications

Day 2: Interest Rate Options

Caps, floors and collars

  • Mechanics and settlement


  • Structure and mechanics
  • European versus Bermudan settlement
  • The exercise decision for Bermudans
  • Managing a trading book

Customer applications

  • Hedging funding exposures
  • Conditional curve trades and other prop positions

Structured products

  • Callable bonds
  • Embedding options for yield-enhancement: capped FRNs, reverse floaters
  • Corporate liability management

Interest rate exotics and structured products

  • Digitals and range accruals
  • Target redemption structures

Day 3: Options, Exotics and Structured Products

Constant maturity swaps

  • Mechanics, quotation and settlement
  • Understanding the convexity adjustment
  • Model-independent replication and hedging of the convexity
  • Applications in liability-management
  • CMS spread-linked

Understanding the volatility surface

  • Drivers of the skew and smile
  • The key role of stochastic vol
  • Normal versus lognormal vol, CEV models, shifted lognormal
  • Hedging skew and smile
  • Introduction to stoch vol and SABR

Introduction to interest rate modelling

  • Single-factor models
  • Mult-factor models and the LMM


Richard Fedrick

Richard started his career in 1988 in the Derivatives Product Group at Morgan Stanley, which he joined after three years of post-grad research in Theoretical Physics. He spent three years as a rates and FX structurer at Morgan Stanley before moving to a similar role at Deutsche Bank in London. In...

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Advanced Interest Rate Derivatives at Euromoney Learning Solutions

From  3565 GBP$4,802

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