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A swaps book is similar to a house in that it requires a foundation to ultimately manage the risks associated with the identification, measurement and management of the swaps book. The foundation for a swaps book includes the features and characteristics of the instruments, understanding yield curves for valuation and pricing, and properly grouping the cash flows to identify the amount of risk along the curve and in the portfolio. Risk limits and the relevant reports are also discussed.
Course Objectives
By the end of the course, participants will be able to:
- Identify the features, characteristics, and differences between Eurodollar futures, forward rate agreements (FRAs) and interest rate swaps
- Describe how forward cash flows are grouped and how the corresponding risk measurements, along the yield curve and portfolio, are used to measure and manage risk
- Analyze how different yield curve interpolation methodologies and assumptions affect valuation
- Identify market and counterparty credit limits required for this business
- Discuss risk management reports and limits
- Analyze the swaps book in the context of a portfolio
Suggested Prerequisites:
- Swaps
- Futures and Forwards
- Bond Math or equivalent knowledge
Program Level: Intermediate
Advance Preparation: None
Computers and Financial Calculators: Computers
Recommended CPE Credits: 7