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Revision of foward rate concepts (FRAs and short-term interest rate futures)
Bonds and long-term interest rate futures
Yield curve dynamics
Characteristics and mechanisms of different option types
Elements of option pricing
Future options;
Swaptions and caps / floors (vanilla and exotic)
Practical workshop
Using options as hedging tools
Key-players and uses
Interest rate options portfolio management
Analysis of sensitivities (Greeks: delta, gamma, vega/kappa, theta)
Option dynamics: interactions between the Greeks
Practical workshop
Pricing and analysis of the sensitivities of future options in EXCEL™
Delta- and gamma-neutral management, positive vs negative gamma management
Arbitrage gamma, vega/kappa, theta
Volatility (implicit, calculated, flat, forward)
Variability, bp vol
Volatility smile and skew
Introduction to SABR (matrices and volatility surface)
Practical workshop
Volatility computation and vol smile analysis
Hedging caps / floors and swaptions
Delta and gamma hedge
Hedging vega/kappa (including smiles)
Analysis of hidden risks
Practical workshop
Use of cap/floor and swaptions pricers to manage an interest rate options portfolio
MARKET SIMULATION (FIRST TRADING ROOM®)
Trade the yield curve and volatility using all interest rate otions (caps&floors, swaptions, options on STIR and bund futures) under the constraints of limits in P&L and Greeks. Be confronted to several historical scenarios replicating real-life market conditions
Exotic options strategies
Practical workshop
Break exotic options down into elementary products
Use interest rate options (principles and sensitivities) and various underlying financial instruments
Understand the calculation of an option’s Mark-to-Market
Explain P&L using sensitivities
Master the options inherent risks and know how to analyse the variations of Mark-to-Market
Understand interest rates option portfolio management practices using the Greeks (delta, gamma, vega/kappa and theta)
Apprehend the problems associated to volatility
Use interest rates option pricers to analyse results and risks
Compare the different strategies for clients and banks
Analyse the strategies based on classic options and structures based on exotic options
Step by step and comprehensive analysis of the dynamic behavior of a hedged / unhedged interest rate option portfolio
Hands-on approach to fully master the use of pricing spreadsheets
Simulation on option portfolio management using our own virtual trading room, the First Trading Room®
