About this Course

Organisations now are very concerned about their exposures to market risks namely foreign exchange, interest rate and commodity price movements since the financial crisis.  Hedging interest rate risk has become an important risk management objective in any organisation. 

This course is designed to provide the latest practical and theoretical developments in the structuring, pricing and hedging interest rate risk using OTC interest rate derivatives such as swaps and options plus a variety of embedded combinations. Understanding how interest rate derivative can mitigate risk in corporate asset and liability management will strengthen participant’s knowledge of the economic markets and the implications of using derivatives to mitigate interest rate risk.

This course also illustrates how interest rate risk hedging can be integrated into organisations’ daily decision-making processes to enhance stakeholders understanding and awareness of interest rate risk inherent within any form of operations in the organisations. It should be especially useful for those in corporate finance, treasury and risk management.

Objectives

Upon completion of this workshop, participants will be able to;

• Have an overview of Global financial markets and Corporate Risk Management
  
• Learn the Interest Rate Derivative Prima
  
• Understand Pricing and valuing swaps, Pricing and valuing options and the various Structure Products
  
• Strengthen their knowledge of the economic markets and the implications and uses of derivatives to mitigate interest rate risk.
  
• Learn the considerations and application using case study on how to develop an interest rate hedging policy for a  corporate
  

Target Audience

This workshop is beneficial for anyone who have keen interest and wishes to gain an insight into risk management.

Duration

Two days

Curriculum

Overview of Global Financial Markets:

• How global financial markets structures have evolved since Lehman crisis;
  
• Government/ central bank’s policy role and how are they reshaping the financial markets;
  
• Overview of foreign exchange market, interest rate market and commodity market: before and after the Lehman crisis, the development of global currencies (e.g. USD, JPY, EUR etc.) vs. Asian Emerging Markets currencies (SGD, CNY, CNH, HKD, IDR etc.
  

Overview of Corporate Risk Management (Enterprise Risk Management- ERM):

• Basic ERM infrastructure: Concept and evolution of ERM;
  
• Risk management at Corporate, Strategic Business and Project levels: Sources of Risks/Type of Risks, Creating value from Risk Taking/ Risk Hedging and Risk Management Process;
  
• Common approaches to ERM by organisations: CAS Framework, AIRMIC framework and COSO framework of Identification of Risk and Enterprise Management Objectives, Assessing Risk, Managing Risks: Principal Strategies and Methods, and finally Monitoring Risks.
  
• Risk Management and Corporate Governance: Concept and theoretical perspective of Corporate Governance (Agency Theory, Transaction Cost Theory etc.) and Concept / Components of Risk Governance (Roles and Responsibilities, Organisational Structure and Policies/ Procedures).
  

Interest Rate Derivative Prima:

• Types of Swaps and quoting conventions: Exchange-traded products (futures and options on futures contracts) vs. OTC products (FRAs, Interest rate swaps / currency swap, caps / floors / swaptions)
  
• Market structure: Interbank vs. customer market,  credit considerations, why the market exists (to reduce funding costs)
  

Pricing and Valuing Swaps

• Building a discount curve, what instruments to use, bootstrapping the swap curve
  
• Recent development in swap pricing: incorporating funding risk (non-libor funding), CSA, CVA, DVA
  
• Interest Rate Swap pricing, Valuation and hedging: OIS, fixed-fixed swap, basis swap, asset swap
  
• Cross currency swap pricing, valuation and hedging: Generic and non-generic cross currency swaps, conversion factors, cross currency basis
  

Pricing and Valuing Options

• Basic option terminology and pricing models
  
• Interpreting the Greeks (Delta, Vega, Theta, Gamma and Rho) and what do they tell us about value and hedging effectiveness
  
• Interest rate caps, floors and collars: structure, pricing parameters and application
  
• Swaptions structure, pricing parameters and applications
  
• More complex structures: Extendable and callable swaps (European, Bermudan styles), constant maturity swap, in-arrear swap, inflation swap, quanto swap
  
• Advanced interest rate modelling: stochastic term structure models, single factor models (BDT, HW), multi-factor models
  

Structure Products

• Yield Enhancement structured note / deposit features: Principal protection, guaranteed minimum returns, risk and reward, underlying embedded options
  
• Structured interest rate linked products: European / Bermudan callable bonds, Range Accrual, CMS-linked, Capped / Floored floating rate notes, inverse floater, target redemption notes.
  

Interest Rate Risk Measures

• Delta (DV01), Gamma and Vega, Yield curve risk analysis with parallel and non-parallel shifts in interest rate
  
• How to Develop an Interest Rate Hedging Policy  for a Corporate: Considerations and Case Studies
  

Methodologies

This course is learner-centred and active participation by attendees are highly encouraged.  Case studies are used to ensure understanding and reinforce concepts.

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