Value at Risk Example for Fixed For Floating Interest Rate Swaps - EXCEL

About the Course

This course consists of an EXCEL file that demonstrates a methodology for calculating Value at Risk (VaR) for a fixed for floating interest rate swaps. It includes:

• A fixed for floating interest rate swap pricing model
• The use of EXCEL’s Data Table functionality to input the term structure for a given day into the model. This process is repeat for 180 days of term structure historical rates data.
• Data tables for zero rates, forward rates and IRS prices that are the results of the pricing model
• Returns series determined from the 180-day price series
• Calculation of daily historical simulation VaR using the output from the distribution of returns determined and graphed using EXCEL’s Data Analysis Histogram function

Learning Objectives

After taking this course you will be able to:

• Determine zero rates and forward rates from a given term structure of interest rates
• Construct a pricing model for a fixed for floating interest rate swap
• Use EXCEL’s Data table functionality to generate a price series for the interest rate swap
• Calculate historical simulation VaR for a fixed for floating interest rate swap

Prerequisites

Should be comfortable with basic mathematics, statistics, probability and EXCEL. Some familiarity with markets, in particular interest rate swaps and derivative markets and their pricing, and portfolio management.

Target Audience

The course is targeted towards intermediate and advanced users and is aimed primarily at individuals responsible for capital allocation, limit setting and risk management within banks, insurance companies, mutual funds, as well as finance departments of non-financial organizations who need to quickly review or refresh their understanding of VaR methodologies for work or professional development.