The treasury operations and products course is a mix of core topics and four separate applications. Three of the applications deal with trading product families while the fourth deals with forecasting monetary policy (interest rate rise and cut decisions). Of the core topics the primary
Forecasting the monetary policy The next monetary policy announcement is due in the last week of May 2010. We attempt to forecast the cut in the policy discount rate by looking at oil prices, the relationship between oil prices and imports, exports, remittances, the current
Option Trading Strategies refer to a combination of trades that can be used to reduce premiums, reduce downside, reduce upside, increase leverage, reduce leverage or a combination of one or more of the above elements. We start off with a review of the simplest of option trades and then use them as building blocks for other more complex combinations.
Settlement Settlement entails carrying out a series of duties in respect of all transactions emanating from the front office effectively leading to making an actual payment. Settlement risk is the risk that after having sent the payment instructions, there is a delay in receiving the
Liquidity enhancement tactics For Systemic Crisis Liquidity management tactics may include the following: Do not plan to rely on selling assets during cyclical peaks or credit crunches As a cushion for capital market disruption hold very high quality assets such as treasury securities Manage the
Contingency Funding Plan The liquidity contingency plan addresses alternative sources of funds if initial projections of funding sources and uses are incorrect. As it is not feasible to hold funds to such an extent that it covers least likely events as well, the contingency plan
Liquidity Management Setting limits for liquidity risk In general liquidity limits have to be assessed for ‘normal’ business operation conditions as well as for stressed scenarios to ensure that there is sufficient liquidity at all times. The following should be considered when determining liquidity risk
Liquidity Risk Liquidity risk is the potential for loss to a company arising from the company’s failure to pay its debts and obligations when due because of its inability to convert assets into cash or its failure to procure enough funds at a reasonable cost.
Credit products Credit Default Swaps This swap transfers the credit risk of fixed income products, like municipal bonds, mortgage backed securities and corporate debt between two parties. The buyer of the credit swap receives credit protection against default, a credit rating downgrade or any other
Structured Products 1. Range Accrual Notes Range accrual notes are notes that pay a higher than market coupon as long as an external index stays within a pre-specified range across pre-specified dates and a lower (or no) coupon if it doesn’t. a.Pricing Range Accrual Notes