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Finance Training Course – Course Outline – Derivative Pricing – Interest Rate products

1. COURSE OBJECTIVES

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

  1. Construct the par, zero coupon and forward curve using market data
  2. Price Interest Rate Swaps and Forward Rate Agreements using the forward curve
  3. Price Interest Rate Caps, Floors, Inverse Floaters & Range Floaters using the forward curve
  4. Review of credit derivatives, buy and sell side motivations & local market applications
  5. Develop a conceptual understanding of interest rate models, alternative pricing models, market calibration and cross checks

2. TRAINING WORKSHOP LEVEL

Intermediate and advance users.

3. TRAINING COURSE PREREQUISITES

Comfort with basic mathematics, numbers and EXCEL, some familiarity with local structures and products is required. All participants are requested to arrange Laptops with a functional version of Microsoft Excel.

4. COURSE OUTLINE

Session & TitleTopics
Session 1: IntroductionIntroduction to core concepts and terminology including

  • The forward market – mindset, approaches, applications
  • The par curve, zero curve and forward curve
  • From par rates to forward rates
  • Bootstrapping process and walk through
  • Pricing framework and process
  • Building the zero curve
  • Building the forward curve
Session 2 : Building curves and pricing structuresInterest rate curves and Vanilla product valuation & MTM:

  • Forward Rate Agreements
  • Interest Rate Swaps
  • Solving for a Swap rate
  • Index amortizing swaps
  • Broken period valuation
Session 3: Pricing more advance structures
using the same framework
The Black Scholes pricing formulaCaps and FloorsCaplets and FloorletsPricing Caps and FloorsRange Accrual Notes, Commodity Linked Notes, Equity Linked Notes
Session 4 –
Exchange Rate Risk
Cross Currency Swaps Model extensions.Qualifications, caveats and model riskSensitivity testing

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