Explore the Pricing of Constant Maturity Swaps, along with their Structure and Uses - E-Learning Course: Interest Rate & Currency Swap Structures.
In order to cater for specific user requirements, a number of variations of plain vanilla interest rate and currency swaps have been developed over the years. The ability of the OTC markets to enable market participants to develop customized and creative products for counter-parties has facilitated the growth in swap variations. This course examines the structure, features, applications and pricing of many of these variations, including in-arrears swaps, constant maturity swaps and asset swaps.
In this course, you will explore:
--Popular interest rate and currency swap variations
--The structure, pricing and applications of in-arrears swaps
--The pricing of constant maturity swaps, along with their structure and uses
--Forward, amortizing and zero-coupon swaps and their pricing and applications
--The fundamentals, pricing and unwinding of an asset swap
This course is designed for:
--New recruits to banking and financial organizations
--Trainee dealers and traders
--Operations and support staff
--Sales and marketing executives
-- - Finance and accounting staff
--Compliance and regulatory staff
--Personnel managers and recruitment staff
The following tutorials are included in this E-Learning Course:
1. Swaps - Variations
In order to deal with specific user requirements, there are a number of variations to both interest rate and currency swaps. This tutorial describes many of these variations in detail. By basing all the examples on the same market rates and the same maturity, the tutorial makes it easy for you to compare the different types of swaps.
2. Swaps - In-Arrears Swaps
An in-arrears swap is a variation of a traditional interest rate swap. The difference between the two relates to the floating rate payment. With a traditional swap, floating rate payments are based on the level of the reference index at the start of the interest period. With an in-arrears swap, floating rate payments are based on the level of the reference index rate at the end of the interest period.
In-arrears swaps are used to speculate on changes in the shape of the yield curve and are particularly well suited to steep yield curve environments. This tutorial looks at how in-arrears swaps are structured and describes in detail how they are priced. Other topics, such as price sensitivities and hedging, are also covered.
3. Swaps - Constant Maturity Swaps
Constant maturity swaps (CMS), a variation of interest rate swaps, are relatively new in the derivatives market. The basic CMS structure offers the exchange of two floating rate coupon streams, one based on a par swap rate or government bond yield and the other based on a short-term rate (such as Libor). These instruments are an ideal product for investors looking to take a view on the shape of the implied forward curve.
In this tutorial, the author describes the structure of constant maturity swaps and explain how these instruments are priced. Concepts related to their pricing, such as sensitivities and convexity adjustments, are also included.
4. Swaps - Forward, Amortizing, & Zero-Coupon Swaps
Forward, amortizing and zero-coupon swaps are variations of the traditional interest rate swap structure that are often used in combination with one another. Forward swaps are used to take a view on forward interest rates, amortizing swaps are used to match the underlying principal to an amortizing loan, while zero-coupon swaps are useful if the floating rate receiver has a short-term cash flow deficit. In this tutorial, you will learn about how each of these swap types is used, structured and priced.
5. Swaps - Asset Swaps - An Introduction
Asset swap is a generic term for the repackaging of an interest-bearing security using one or more interest rate swaps. The asset swap adds value for investors because it allows the repackaging of bonds issued under different market conditions, giving them par prices and floating rate coupons more or less at the current market rate. The result is a synthetic security that presents the characteristics uniquely sought by the investor. In this tutorial, the author will explain the structure of asset swaps and outline some of their uses and applications.
6. Swaps - Asset Swaps - Pricing
An asset swap is a package consisting of an interest-bearing security and an interest rate swap. Through an asset swap, a fixed rate security is transformed into a variable rate instrument without affecting the underlying fixed interest position. Any spread above or below the floating rate reflects the credit spread difference between the bond in question and the swap rate.
This tutorial focuses on pricing the initial spread and examines the price sensitivity of an asset swap. It also demonstrates how the mark-to-market value is determined and outlines the process of unwinding an asset swap.
7. Swaps - Differential Swaps
A differential swap - also known as diff swap, index differential swap, cross currency interest rate swap or quanto swap - is a variation of an interest rate swap, distinguished by the fact that at least one (and possibly both) of the payment rates refers to a currency different from that of the notional principal. By using a differential swap, a counterparty can exploit the interest rate differential between two currencies without directly incurring any exchange rate risk. This tutorial looks at differential swaps in detail, examining their features and characteristics and showing how to price these structures.
8. Swaps - Overnight Indexed Swaps
An overnight indexed swap (OIS) is a special type of fixed-to-floating interest rate swap. The floating rate is linked to a published overnight interbank call money index. The term of an OIS typically ranges from two days to two years, but can extend beyond this if required. Overnight indexed swaps are used primarily to manage the interest rate risk on overnight rates. They are also use to speculate on movements in these rates. The importance of these swaps is derived from their impact on activity at the shortest end of the yield curve - the overnight (O/N) rate. This allows market participants to manage overnight interest rate risk, promoting better leverage and liquidity, mitigating credit risk and lowering transaction costs and capital charges. This tutorial looks at overnight indexed swaps in detail, examining their features, markets, and characteristics, and showing how to price these structures.
For more information visit http://www.researchandmarkets.com/reports/c26885
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|Date:||Mar 10, 2006|
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