Pricing Interest Rate Options – Module III

About the course

This course is part three of a three module course on pricing interest rate & cross currency swaps, and interest rate options. This module focuses on the pricing of various interest rate options.

A step by step methodology for calculating the value of interest rate options, in particular caps and floors is presented. The use of cap floor parity in pricing a swap is also illustrated. This is followed by walkthroughs of how the values of other derivative products such as accrual swaps, commodity linked notes and range accrual notes are calculated.

Learning Objectives

After taking this course you will be able to:

• Define and price caps and floors
• Understand how the cap floor parity may be used to price a swap
• Define and price accrual swaps
• Define and price commodity linked notes
• Define and price range accrual note

Prerequisites

The candidate should be comfortable with basic mathematics, statistics, probability, EXCEL and must also be familiar with deriving spot and forward rate term structures.

Target Audience

This course is for individuals involved in pricing and valuation of derivatives, in particular interest rate sensitive instruments.