Swaps Overview


Background

The financial crisis and the ensuing avalanche of regulation has changed swap valuation almost beyond recognition over the last few years and has greatly increased its complexity. One result is that dealing and settlement arrangements are often different and importantly the same swap can have different valuations depending on which bank is the counterparty.

This course explains the new world of Swaps : what has resulted, how the new methodology works and its many significant consequences. It includes the key regulations affecting the swap market in Europe and the US. It is a key course for anyone seriously involved with Swaps whether as Dealer, Investor, Lawyer  or Auditor.

 

Target audience

Any staff dealing with swaps at entities that use or are contemplating using swaps:

        Swaps and Fixed Income Brokers and Dealers

        Bankers, Treasury and ALM managers

        Back Office support staff

        Fund Managers

        Institutional Salesmen

        Lawyers and Accountants involved in Swaps (CPD credit)

        Compliance Officers

        Pension Fund Managers  and Actuaries using Swaps

        Real Estate Investors

Existing knowledge

Delegates should preferably have an understanding of the key features of swaps.

 

 

Content

Review of Swap Basics

        Market structure and users

        Quotation convention.

        Types of Swaps: Interest Rate, Currency, Asset, Diff, Circus, Credit Default etc

         Pricing method, dealing and old valuation.

 

Before the crisis

        How discount and forward rates came from the same curve LIBOR curve

        The credit issues that were always there

After the crisis

        Illiquidity in the IBOR market, the move to overnight lending between banks and the consequent emergence of Overnight Index Swaps (OIS) as the new benchmark swap rate

        Bootstrapping forward ONIA rates (Exercise)

        The continued demand for IBOR swaps and the consequent importance of ONIA-IBOR interest basis swap spreads

        Deriving forward IBORs using basis swap spreads and pricing an IBOR swap (Exercise)

 

Collateralised Swaps

        Counterparty credit risk management with cash collateral via Credit Support Annexes (CSAs)

        Non-cash collateral, haircuts and wrong-way risk

        Residual counterparty risk

        The regulatory requirement to use Central Counter-Parties (CCPs)

        Additional requirements re initial margin

        The various CCPs LCH, etc and their impact.

        Swap execution Organised Trading Facilities (OTFs) and Swap Execution Facilities (SEFs)

 

Uncollateralised Swaps

        Why corporates resist collateralisation and their exemption from using CCPs

        Why uncollateralised swaps require a Funding Valuation Adjustment (FVA): incorporating the banks term funding spreads and how changes to the spreads affect swap valuation (Exercise)

        The limited availability of swap counterparty credit risk hedging instruments

        Credit Valuation Adjustment (CVA) charge: modelling the expected counterparty credit risk exposure from a swap, incorporating the expected credit-riskiness of the counterparty and the risk that it might rise in a CVA fee (Exercise)

        Debt Valuation Adjustment (DVA): IFRS 13 and how a banks credit-riskiness can affect its valuation of a swap (Exercise)

        How FVA, CVA and DVA interact and may offset each other; hedging approaches




Todays Date:


Duration 1 day
London
Fee GBP 480 + VAT







Investment Education PLC
45 Old Hall Road, Manchester M7 4JF, United Kingdom
Tel:+44 (0)161 832 3800
Email: mail@investmentEducation.net
Registered in England Number 2129160
VAT Registered Number GB 480 2112 85



site designed by:WEBSCIENCES