Interest Rate Derivatives


Interest rate derivative products are some of the most widely traded contracts in the international derivatives markets. This two day seminar looks at the role of interest rate derivatives in different types of trading strategies, including hedging, speculation and arbitrage. There is a particular focus on the pricing and risk measurement principles which are applicable in this market. Throughout the session, computer simulations are used to illustrate real life trading practices

Session 1: An overview of the interest rates derivatives markets
  • The term structure of interest rates: repo rate vs. long term rates
  • Interbank lending vs. treasury lending
  • Fixed and floating rates of lending
  • An overview of basic derivatives building blocks including forward rate agreements, futures, swaps, and options
  • Structure of the global interest rate derivatives markets
  • Overview of the markets in India

  • Session 2: Forward rate agreements and interest rates swaps
  • The relationship between spot and forward rates
  • Mechanics of interest rate swaps
  • Introduction to interest rate swap valuation
  • The MIBOR overnight index swap market in India
  • Hedging interest rate risk using overnight index swaps
  • Building the interest rate outlook implied by the overnight index swap market

  • Session 3: The options market
  • Introduction
    •     1. Mechanics of an interest rate options contract
    •     2. Payoff profiles
  • Application of interest rate options
    •     1. Strategies
    •     2. Markets
  • Option valuation
    •     1. Put call parity
    •     2. Models for valuing interest rate options
    •         • Black model
    •         • Black Derman Toy model
  • Inherent risks in option trading

  • Session 4: The interest rate futures market
  • Introduction to futures trading.
  • The relationship between the spot and forward price of a bond
  • An overview of the global bond futures contracts
  • A review of the interest rate future contract in India
  • Delivery of underlying asset on expiry of future
    •     1. Identifying the “cheapest to deliver” bond
    •         • Using the 'basis'
    •         • Using the 'implied repo rate'
    •     2. Invoice price
  • Uses of the interest rate futures contract
    • Neutralizing interest rate risk
    • Reducing the duration of a bond portfolio
  • Current status of the Indian market
  • Future expectations

  • Session 5: Global trends in the interest rate derivatives markets

    Session 6: Regulation Applicable to IRD
  • Corporate treasury managers
  • Fixed income portfolio managers, traders and strategists
  • Analysts with Debt Mutual Funds and Rating Agencies
  • Technology & Compliance professionals at Mutual Funds and Bond Dealers
  • Product consultants and consulting firms
  • 1 day
    10.00 am to 5.30 pm

    Rs. 3500/- + Applicable Taxes per participant inclusive of tuition fees, reference material and (morning / evening) refreshments only.

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