Course outline: Understanding Swaps

In-house Training

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Objective: This course sets out to provide delegates with a comprehensive understanding of how the swap market works, exploring the different types of swaps together with a look at related markets.
Course aims:
  • Explain how swaps work
  • Examine the different types of swaps
  • Explore the interaction with other markets
  • Study the main uses and applications of swaps

Interest Rate Swaps

This section explains the different types of interest rate swaps that exist and the market practises.

  • Types of swaps
    • basis, asset, term, money market swaps
    • non vanilla swaps
    • fixed and floating
  • Swap uses
    • arbitrage using swaps
    • gaining access to markets
    • increasing lending and reducing borrowing rates

Currency Swaps

The following section explains how currency swaps are designed and used by market users.

  • Definition of a currency swap
    • types of currency swaps
    • quoting a price
    • asset, diff, circus, cocktail swaps

Equity Swaps

The next section explains how equity swaps are constructed and used.

  • Definition of an equity swap
    • types of equity swaps
    • creating a synthetic exposure to the market
    • hedging with equity swaps

Pricing and Valuing Swaps

This section explains the complexities behind pricing interest rate swaps.

  • Review of time value of money
    • discount functions
    • npv of fixed versus floating cash flows
    • amortising, accreting, roller coaster swaps
  • Valuing a swap set by futures prices and FRA's
    • zero coupon swap curve

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