Course Code: 815

Duration: 1 day

Level: Basic/Intermediate

Fee: $795.00

Instructor: Douglas Carroll

CPE Credits: 7

Prerequisite: Participants should have a basic familiarity with terms and definitions of futures and swaps.

Interest Rate Futures and Swaps is a deeper examination and analysis of the most actively traded interest rate related forward commitment contracts. This one-day program will focus on interest rate swaps (IRS), Eurodollar futures, treasury bond and treasury note futures.

Interest Rate Futures and Swaps is designed as a basic to intermediate level program that will touch only briefly on the general principals of futures and swaps to permit a more in-depth treatment of these interest rate derivatives.

The presentation will begin with a review of the features and characteristics of futures contracts using Treasury bond and note contracts to illustrate. The discussion will then turn to the unique features of these contracts, in particular basket delivery, conversion factors, cheapest-to-deliver and the implied put option. The ensuing Eurodollar futures discussion will include LIBOR, index pricing (how Eurodollar futures value are expressed and computed) and cash settlement only contacts. The presentation will include an overview of futures pricing and risk management/hedging applications.

The final segment will deal with interest rate swaps focusing on contract terms, cash flows and risk management applications of basic fixed for floating structures. There will be some discussion of alternative contract structures (amortizing, accreting and basis swaps) as well as a review of pricing and valuation concepts.

This seminar would be useful for anyone whose duties entail some exposure to interest rate derivatives and the program would be especially helpful to those working in areas supporting futures/swaps trading or sales as well as middle and back office areas such as clearance and settlement, compliance, financial control, information technology, portfolio administration or marketing.

Introduction to Interest Rate Futures

• Futures terminology and definitions
• General characteristics of interest rate futures
• Futures contracts compared to securities
• Risk management applications

Treasury Bond and Note Futures Contracts

• Underlying/deliverable instrument
• Basket delivery and conversion factors
• Cheapest to deliver and the implied repo rate
• Implied put option
• Trading and risk management applications

Eurodollar Futures

• Underlying instrument - Eurodollar time deposits
• Libor (London Inter Bank Offered Rate)
• Index/discount pricing, point values and basis points
• Cash settlement only contracts
• Cash market basis of final settlement price

Swaps

• Terminology and definitions
• Swap contract characteristics
• Interest rate swap contract cash flows and risks
• Other types of interest rate swaps - amortizing, accreting and basis swaps
• Risk management applications