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New York Institute of Finance

Valuation of Interest Rate Derivatives

Aug 22—23, 2019
2 days
New York, New York, United States
USD 2695
USD 1347 per day

How it works

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Description

Develop expertise in the theory and application of numerical methods to price interest rate instruments including the use of finite difference and Monte Carlo techniques. The Bloomberg Professional terminal is used extensively.

This course is a component of the Advanced Fixed Income Professional Certificate.

Prerequisite knowledge:

  • Intermediate to advanced MS Excel skills
  • Some knowledge of differential and integral calculus
  • Intermediate probability and statistics
  • Basic linear algebra
  • Familiarity with fixed income instruments, term structures, etc.

*CURRICULUM *

Day 1

MODULE 1: PRICING AMERICAN OPTIONS

  • Callable bonds
  • American swaptions
  • Prepayment options

MODULE 2: OVERVIEW OF NUMERICAL METHODS

  • Valuation techniques for path dependent options
  • Monte Carlo basics
  • Finite difference methods
  • Numerical Integration

MODULE 3: MONTE CARLO SIMULATION: DISCRETE MODELS

  • Exotics: Path dependency
  • Monte Carlo simulation for Asian interest rate options
  • Spot rate duration by Monte Carlo simulation

Day 2

MODULE 1: MONTE CARLO SIMULATION: CONTINUOUS MODELS

  • Simulating continuous interest rate processes
  • Pricing a range floater
  • Hedging with Monte Carlo simulation
  • Convexity by Monte Carlo simulation
  • Techniques for accelerating convergence
  • Pros and Cons of Monte Carlo techniques

MODULE 2: FINITE DIFFERENCE METHODS: ONE FACTOR MODELS

  • The fundamental PDE and boundary conditions
  • Explicit finite difference methods
  • Implicit finite difference methods
  • Crank-Nicolson method Pricing bond options by Crank_Nicolson

MODULE 3: FINITE DIFFERENCE METHODS: TWO FACTOR MODELS

  • Explicit finite difference methods
  • Alternating direction implicit method Hopscotch method

WHAT YOU'LL LEARN

  • Understand calibration techniques for rate models
  • Understand the pros and cons of using Monte Carlo simulation to price interest rate derivatives
  • Understand the strenghths and weaknesses of various finite differnce techniques for pricing interst rate derivatives
  • Price interest rate derivatives using numerical methods including Monte Carlo techniques and finite differences

Who should attend

  • Portfolio managers
  • fixed income traders
  • fixed income desk quants
  • research analysts and financial analysts
  • term structures
  • etc.

Next dates

Aug 22—23, 2019
2 days
New York, New York, United States
USD 2695
USD 1347 per day

How it works

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