Short Term Interest Rate Derivatives


Objective

 

This course is designed to provide delegates with a detailed knowledge of how money market (STIRS) futures are priced and calculated and how they relate to other derivatives and underlying cash market instruments.

 

 

Aim

 

Define a 3 month IR futures contract, EONIA index future and FRA

Calculate a forward interest rate

Examine the arbitrage boundaries

Study the behaviour of basis on hedges and spread trades

Compare STIR futures with Swaps and FRAS.

 

Delegates

 

                  Brokers

                  Dealers

                  Fund Managers

                  Accountants & Auditors

                  Back Office Executives

                  Institutional Salesmen

                  Lawyers (CPD credit)

                  IT executives involved with systems handling these

                products

 

A reasonable securities knowledge is assumed but not of products to be covered in the course.

 

 

Money Market Instruments

This section provides a review of the underlying money market instruments, focusing on key participants and the methods of trading.

 

-Coupon bearing instruments


-commercial paper, certificates of deposit


-forward rate agreements, forward rate notes

 

-repos and swaps
 

-Discount instruments

-treasury bills

-bills of exchange, bankers acceptance
 

-Euro commercial paper 

 

Calculating the Futures Price

 

This section explains how forward interest rates are calculated and how the IR futures "price" is kept in check by arbitrage activities.

 

-Three month interest rate futures

-contract specification

-forward/forward calculation

-pricing a STIR future

-pricing an EONIA one month indexed future

-calculating the arbitrage channel

 

-Forward rate agreements FRAS terms and specifications valuing a FRA extrapolation and interpolation 

 

Hedging and Trading with STIR Futures

 

This section covers the issues of basis risk when hedging and trading with STIR futures contracts.

 

-Hedging for a futures delivery day

-Non-delivery day futures hedges

-identifying basis risk

-refining the hedge ratio
 

 

-Basis and hedging

-calculating the basis point value of an exposure

-basis trading techniques

-spread trading applications using 3m IR futures and EONIA futures
 

-Interest rate swap overview fixed v floating swaps pricing a swap from STIR futures

 

 

 

 




Todays Date:


Duration 1 day
Available as an in-house course







Investment Education PLC
45 Old Hall Road, Manchester M7 4JF, United Kingdom
Tel:+44 (0)161 832 3800
Email: mail@investmentEducation.net
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