Financial Market Mathematics 1: Zero-Coupon Valuation

Interest Rate Conventions and Discounting
  • Interest rate conventions
  • Simple and compound interest rates
  • Discounted rates/libor-in-arrears
  • Interest rate references: EONIA, SONIA, Euribor, Libors
  • Bond and swap curves
  • Date conventions: preceding/following/modified following, adjusted/non-adjusted
  • Principles of discounting: less than 1Y, more than 1Y
  • Using forward and FRA rates
  • Discounting principles as used in forward FX/FX swaps
  • Practical workshop
  • Calculate in EXCEL™: forward rates and FRA differentials
  • Analysis of yield curve dynamics via STIR futures
  • Calculate forward FX rates in EXCEL™
  • Study of FX swaps
Bond pricing
  • Strips and zero-coupon rates
  • Duration, sensitivity and convexity of a bond
  • Pricing a bond’s forward price: arbitrage with bond futures (cash & carry, reverse cash & carry)
  • Practical workshop
  • Construction of a bond pricer in EXCEL™
  • Calculate the duration, sensitivity and convexity of a bond
  • Examples of hedging or arbitrage strategies
Zero-Coupon Valuation
  • Principles
  • Calculation of Discount Factors: standard dates/broken dates, from swap rates/from futures contracts
  • Practical workshop
  • Calculate Discount Factors and plot a zero-coupon yield curve
Pricing IRS and calculating PVBP
  • Modeling of the Libor leg of a swap
  • Pricing and valuation of swaps
  • Calculation of sensitivities (global and per maturity)
  • Practical workshop
  • Construction in EXCEL™ of an IRS pricer from a preformatted spreadsheet
  • Price and revalue various swaps
  • Hedging a swap with futures
  • MARKET SIMULATION (FIRST TRADING ROOM®) :
  • Hedge swaps with futures and bonds
Pricing of IRS and CIRS
  • Mechanics and uses of basis swaps
  • Structuring and pricing of CIRS
  • Practical workshop
  • Price fixed/fixed currency swap
Pricing of asset swaps
  • Structuring of an asset swap
  • Calculation of the spread over Libor of an asset swap
  • Practical workshop
  • Price a corporate bond asset swap

  • Know when to apply appropriate market conventions
  • Know how the use the actuarial method to value bonds
  • Master the principles of zero-coupon valuation
  • Understand the differences between actuarial and zero-coupon methods
  • Apply zero-coupon valuation in a swap pricing spreadsheet in EXCEL™
  • Value standard bonds in EXCEL™
  • Know how to calculate a forward FX rate and an FX swap
  • Understand how short-term interest rate futures and bond futures work
  • Illustrated analysis of bond, swap and zero-coupon yield curve dynamics
  • In-depth study of cash-flow schedules, discounting, mark-to-market and sensitivity
  • Build a pricing spreadsheet in EXCEL™ to value interest rates and FX derivative products
  • Use of the First Trading Room®, our virtual trading room, to apply acquired knowledge and visualise the market behaviour of financial products
  • Risk managers
  • Financial divisions
  • Support staff: IT, middle office, internal controls, audit, back office, accounting
  • Traders, fund managers
  • Salespeople
  • Analysts and strategists
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