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.

Learning Objectives:

At the end of this session, participants will be able to:

• Define the Interest Rate Market;
• Identify instruments traded in the market; 
• Demonstrate the process for creating an instrument in the market;
• List market participants in an Interest Rate Market;
• Explain Repo and Interest Rate Swap;
• Identify risks prevalent in several products and hedging methods;
• Demonstrate trading, delivery and settlement system.

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