Forecasting Interest Rates and Applications workshop: December 28th, 29th

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Interest Rate Forecasting and Modeling workshop moves to 28th and 29th December 2010

Once upon a time Interest Rate Modeling was treated as an exotic topic reserved for the truly driven quants amongst us. In today’s interest rate environment it has become an essential skill set necessary for traders, treasurers and risk managers. Based on feedback and requests from a number of clients, I am pleased to announce our second hands on interest rate modeling workshop for both quant and non-quantitative audiences. The workshop date has now been moved to 28th and 29th December 2010 on account of a change in my travel schedule to the Middle East.

The workshop is aimed at treasury, risk and fixed income investors who use interest rate forecasting tools for arbitrage, ALM, risk or credit policy decisions. Teaching methodology is based on intensive hands on model building and application cases.

The workshop covers four different families of interest rate models starting with the simplest CIR (Cox, Ingersoll & Ross) and finishing up with the multi-factor HJM model. We then look at applications of the same models in Asset Liability Management, Fixed Income Arbitrage, monetary policy announcements and predicting unexpected interest rate shocks. A final session extends the analysis to a macro economic model of the economy using core interest rate drivers and Monte Carlo simulation.

By the end of this workshop participants will be able to:

  • Use models to identify fixed income arbitrage opportunities in treasury term structure
  • Build basic and advance interest rate models in excel for forecasting and extrapolating interest rates across the full range of maturity tenors
  • Review the impact of external shocks (such as oil prices) on domestic interest rate environment and monetary policy
  • Review interest rate inputs for ALCO meetings as well as ALM models.


The packaged workshop represents an integrated skill building exercise that combines concepts with practical hands on application and is aimed at professionals who deal with pricing, valuation and portfolio management issues related to fixed income products in Pakistan.

Interest rate models: Outline





The Interest Rate Modeling Crash Course in 90 minutes

The term structure, Zero and Forward Rates.

Building Static Interest Rate Models.

Bootstrapping the Zero and Forward Curve.

Using interpolation and interpreting the Forward Curve.


Interest Rate Model Families.

Cox, Ingersoll and Ross (CIR), Black, Derman and Toy (BDT) and the multifactor HJM.

Building models using macro factors.


Case Study A: CIR and ALM – Generating Rates and re-pricing products

Building a simple interest rate generator and linking it to the ALM model.

Revaluing loan book and collateral impairment.

Linking ALM inputs with model drivers.

Calibrating CIR for domestic interest rate data.



Case Study B: Term Structure model and BDT: When issued pricing

Building BDT (Black, Derman and Toy).

Filling in the blanks for intermediate tenor rates.

Using BDT to price when issued securities and identifying opportunities for fixed income arbitrage.


Case Study C: Forecasting forward rates and HJM

Forward rates and the multifactor HJM model.

Using HJM to price interest rate derivatives.

Building the HJM model.


Case Study C: Forecasting forward rates and HJM

Multifactor model applications continued.

Building and testing the HJM model. PCA Analysis and HJM calibration.


Case Study D: Simulating the Economy

Building a macro economic model for simulating a national economy and monetary policy decisions. Identifying drivers. Implementing the model. Interpreting results. Review, wrap up and closure.


3.0 Facilitator profile

Jawwad Ahmed Farid is a Fellow Society of Actuaries (Chicago), a MBA from Columbia Business School (New York City) and a computer science graduate. During the last 18 years, he has worked as a consultant in North America, Pakistan and the United Kingdom with a number of blue chip clients including Hartford Life, Aegon, American General, Goldman Sachs, ING, Manu Life, Safeco, Merrill Lynch, Met Life, Sun America, Nationwide, Phoenix Life, Sumitomo Mitsui Bank, Sun Life of Canada, Pacific Life, AllState, Fidelity Investments, Transamerica, Skandia, GE Financial Assurance, Lincoln National, Ohio National, AXA Equitable and Washington Mutual Bank.

Jawwad’s core areas of expertise include Asset/Risk Management, Investments, Product Development & the Financial Services Back Office. Jawwad blends a rare combination of risk management, information systems, international standards, business and product development skill set side by side with his actuarial expertise. His regional client list includes First Gulf Bank, Riyad Bank, Dubai Islamic Bank, Noor Islamic Bank, Dubai Bonds, Deutsche Bank, State Bank of Pakistan, National Bank of Pakistan, Muslim Commercial Bank, Crescent Commercial, MyBank, Dawood Islamic Bank, KASB Bank, United Bank Limited, Pak-Kuwait Investment, Saudi Pak Commercial Bank, ABN AMRO, State Life Insurance, Dawood Family Takaful, Asia Health Care, Adamjee Insurance, Shell Pakistan, International General Insurance and others.

For more information, please contact

Jawwad Farid, Uzma Salahuddin at:

Alchemy Technologies (Pvt.) Ltd.

166 Block 7/8, KMCHS, Karachi

Phone: +9221 3 455 64 31 / 52 Fax: +9221 3 455 6447

Email: [email protected],
[email protected],

Web:, Learning Corporate Finance