Who should attend
Professionals in the Treasury department of a bank or a corporate along with Relationship Managers, Accountants, Risk Managers, Internal/External Auditors, Regulators, Operations Staff and other financial professionals will find this course very helpful in his or her work.
About the course
This course studies the latest strategies & best practice within the Treasury Function.
To understand how the treasury department works, we must have a good idea of the products in the treasury department. This program will focus on the Products of the Treasury Department and their uses. In the first part, we will focus on how to fund the treasury department using interbank and capital market products. We will then discuss risk management (derivative) products to manage interest rate and foreign exchange risk. Products will include, IRS, Interest rate Options, FX spot, FX forward, FX swaps, Currency swaps and currency options. Each product will be analysed and price using Bloomberg screens with extensive discussion on their applications and uses.
By the end of the program, participants will be able to:
- Analyse the key components of yield conventions and yield curve in funding pricing.
- Describe and Structure key short term funding money market products such as inter-bank deposits, Repo, etc… in the conventional and Islamic markets
- Describe and Structure key capital market products and loan products such as US Bond, Eurobond, 144A, Private Placement, loan syndication.
- Understand and use interest rate derivative products like FRA, Interest rate swaps and caps/floors/swaptions.
- Understand and use foreign exchange products such as FX spot, FX forwards, cross-currency swaps,
- Structure and use the latest derivative products in exotic options such as average rate, basket, lookback etc…
The course forms part 1 of the Treasury Management Training Week.
Days 1 - 3: Part 1 - Treasury Products Days 4 - 5: Part 2 - Treasury Management
Module 1: Introduction to Treasury Products
Module 2: Funding the Bank and Company
This module will examine the different products in the market that could be used to fund the treasury department. In the banking market, this could include inter-bank deposits, Commercial Paper, Repo and various bond structures. We will discuss these products - their structure, quoting convention, pricing and use. By the end of the program, participants should have a good understanding of the products to help fund their organisation
Session 1: Yields and Yield Curves
This session will discuss the fundamental aspects of any interest-bearing product which are yield conventions and yield curve analysis
- Yield Conventions
- What are yield conventions: Discount Rate, MMY, BEY
- Understanding annual day count conventions
- Understanding Effective Period
- What is the difference between annual bond and quarterly money
- Using Yield Conventions in marketing Treasury products
- Yield Curves
- Yield Curve and pricing of debt
- Risk free yield curve
- Credit risk pricing and credit spread
- The par yield curve and pricing loans/bonds
- The forward yield curve and pricing
- The zero-coupon yield curve and discounting cash flow to Mark to market Session 2: Money Markets
Discussion of key Interbank Money Market Products for funding Financial Institutions and Large Corporates in the conventional and Islamic markets.
- What is the Money Market?
- Inter-bank borrowing and placement
- What is Libor/Euribor and how are they set and used in Money Market?
- Libor and the pricing of loans
- Fraud Issues with Libor
- Replacement for Libor: SOFR, SONIA, ESTR
- Challenges in Libor Replacement
- Domestic local Money Market
- Repurchase Agreement (REPO)
- What is a Repo agreement?
- Repo versus Libor borrowing
- Structuring a Repo and Reverse Repo (for Placement)
- Pricing of Repo transactions
- Repo crisis in USD market in 2019?
Session 3: Bond Markets
In this section, we will discuss the different bond markets and bond products. In these discussions we will look at the market size, rating, issuers, investors, structures, accounting, and pricing of different bond markets
- The US Bond Market
- The 144A Market
- The Eurobond (Regulation S) Market
- Traditional Private Placement (Regulation D) Market
- Commercial Paper Market
- Global Bond Issues
- The Bond Issuance Process
Module 3: Interest Rate Risk Hedging
In this module, we will examine the different products that will help the treasury department hedge interest rate risk. This will include discussions on Interest Rate Swaps, caps, collars, floors, and swaptions.
Session 4: Interest Rate Swaps
In this section, we will discuss IRS and how the product is used to manage interest rate risk.
- Introduction to IRS
- IRS structure, terminology, cash flow, convention and pricing (outright or T+)
- Yield Curve and IRS pricing
- Pricing of IRS and Bloomberg IRSB screen
- Using IRS to hedge Interest rate risk
- Understanding ISDA documentation in Treasury for IRS
- Master Agreement
- CSA Schedule and credit support
- Terms and conditions
- Netting and Clearing through CCP and reporting of transactions under Basel 3
- Mark to market and pricing of IRS using Bloomberg screens
- Uses of IRS
- Using IRS to manage Asset Liability Risk
- Using IRS to hedge Bond issues
- Using IRS to fund cheaply
- Using IRS to structure structured notes
Session 5: Caps and Floors
In this section we will examine interest rate options such as caps and floors in the treasury market. We will discuss how they are used to manage interest rate risk in the treasury department. Also, the structuring of zero cost collars and participating caps will also be analysed.
- Introduction to caps and floors: market conventions, pricing convention
- Series of Puts and Calls options on money market
- Options pricing issues
- Pricing Caps and Floors using Bloomberg CCF screens
- Amortizing the premium
- Clients buying options for hedging risk
- Clients selling options to reduce cost or enhance yield
- Structuring Zero cost collars and participating caps using CCF screens
- Uses of caps and floors in Treasury
Module 4: Managing Foreign Exchange Risk
In this module, we will discuss the different products that will help the company manage foreign exchange risk. We will examine the foreign exchange products, cross-currency swaps and currency options and discuss how they can help the treasury department manage FX risk.
Session 6: Foreign Exchange
In this section we will discuss the hedging of foreign exchange risk with spot and forward FX products. Special attention will be given to Quoting conventions of FX and forward point. We will also discuss how FX swaps are structured and used.
- Introduction to the Foreign Exchange Market
- Market conventions and quoting conventions
- Using the Bloomberg WFX screens and quotation of spot rates
- Calculation and quotations of forward FX rates
- Understanding the FX forward formula
- Using Bloomberg FX forward screens
- Non-deliverable forwards (NDF) and their use
- Introduction to the FX futures market
- OTC versus Exchange traded products in FX forward and futures
- Application of spot and forward products in hedging FX risk
- Structuring and Using FX swaps
Session 7: Cross- Currency Swaps
By the end of this section, participants will understand the structure and use of Cross-Currency Swaps.
- Introduction of CCS
- Cash Flow of a Fixed CCS structure
- Floating to Floating CCS market conventions
- Hedging CCS with money market and FX products
- Fixing Floating rate CCS with Cross-currency interest rate swaps
- Structuring and Using CCS
Session 8: Foreign Exchange Option
By the end of this session, participants will understand the structure, pricing and use of FX conventional and exotic options.
- Introduction to FX Option
- Puts and Calls in FX Options
- Option convention: what we buy/sell
- Option pricing convention: % spot, % amount, %strike
- Option pricing model
- Using Bloomberg option pricing model
- Client’s buying options as insurance
- Client’s selling options to reduce cost or increase return
- Structuring FX option products
- Range forward and participating caps
- Exotic Options: Knock-in, knock-out, average rate, digital etc…
Thierry is a highly experienced trainer and consultant in Treasury Management. Since 1997 he has worked as a consultant and trainer with the Top Three Investment Banks in the World (Goldman Sachs, Morgan Stanley, BofA Mer-rill Lynch), most of the largest 20 Banks in the World (Citi, J.P. Morgan C...
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