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Euromoney Learning Solutions

Advanced Interest Rate Derivatives

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About the course

Learn about interest rate options & swaps with this course - book now!

This is a three day programme, covering all the essential principles with which someone working in the area of interest-rate derivatives should be familiar.

  • 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 CMS, modelling interest-rate vol, the impact of stochastic volatility, SABR

The emphasis is on a healthy mix of theory and client applications, and is illustrated throughout with real-life examples and case-studies.


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

Trust the experts

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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