Fundamental of Interest Rate Market

Course Overview

This training course aims to introduce the fundamental mechanisms and the main instruments of the interest rate market: monetary market, bond market, cash and derivatives. Practical applications and tests will illustrate the tackled notions. 

Course Objectives

To equip capital market operators with a general skill required for success in this volatile market

Course Outline

Interest rates - calculation rules and methods

- Interest rate types: proportional, discounted, continuous
- Interest rate calculation conventions: monetary basis, discounted basis, bond basis
- Introduction to the yield curve: zero coupon, forward

Cash and derivatives products market

- Role of the Central Bank and monetary policy instruments
- Organization of the monetary market: players, instruments, contracts
- Monetary cash products: treasury bonds, TCN, commercial paper
- Repo Market (Repurchase Agreement)

Cash and derivatives bond products

- Primary bond market and secondary bond market
- Bond characteristics: nominal rate, discounted rate, maturity, convexity, duration, sensitivity
- Valuation of a bond with accrued interest
- Interest rate swap: plain vanilla swap, basis swap, exotic swaps
- Bond spread and reference swap rate

Hedging the interest rate risk and managing positions

- Hedging the interest rate risk through various types of interest rate derivatives (fixed/optional): swaps and FRAs, caps/floors/collars, swaptions
- Managing interest rate positions according to the yield curve : flattening, steepening, barbell, butterfly