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Interest Rate Derivatives - Option Pricing, Hedging & Managing Risk
Overview
Interest Rate Options are an essential part of the derivatives marketplace. This 3-Day programme will equip you to use, price, manage and evaluate interest rate options and related instruments.
The course starts with a detailed review of option theory, from a practitioner’s viewpoint. Then we cover the key products in the rates world (caps/floors, swaptions, Bermudans) and their applications, plus the related products (such as CMS) that contain significant ’hidden’ optionality. We finish with a detailed look at the volatility surface in rates, and how we model vol dynamics (including a detailed examination of SABR).
The programme includes extensive practical exercises using Excel spreadsheets for valuation and risk-management, which participants can take away for immediate implementation
Learning Objectives
Learn how to use, price, manage, and evaluate interest rate options in this comprehensive, hands-on three-day programme.
Gain familiarity with option products traded in the rates world
Understand how (and why) to delta-hedge an option position
Know the classic option combinations and strategies employed by practitioners and customers
Understand the vol surface and how to trade it
Appreciate the reasons behind the choice of Normal vs Lognormal vol
Understand the significance of stochastic vol
Understand how SABR works
Understand the mechanics of Constant Maturity swaps, and the origin of the convexity adjustment
Know how to price and hedge a CMS with a replicating swaption portfolio
Who the course is for
This course is designed for anyone who wishes to be able to price, use, market, manage or evaluate interest rate derivatives.
Interest-rate sales / traders / structurers / quants
IT
Bank Treasury
ALM
Central Bank and Government Treasury
Funding managers
Insurance Investment managers
Fixed Income portfolio managers
