Livestreamed
Live sessions: 3, 4, 10 and 11 October 2022
10.00-13.30 CET | Time Zone Converter



OVERVIEW
COURSE SYLLABUS
COURSE DETAILS
TEST YOUR KNOWLEDGE
Over the years, a significant proportion of bank and investor losses have been caused by the extension of credit to entities who are subsequently either unwilling or unable to repay.  This credit risk can often be hedged or could prove to be beneficial for investors who wish to seek an enhanced return.  
The ICMA’s credit derivative course captures different perspectives from the credit asset class.  The main product building blocks are analysed and inevitably, the credit default swap market features prominently.  
Having understood the dynamics of default swaps, their trading applications are outlined as well as how they could be used within investment structures such as credit – linked notes (CLNs).  Despite a somewhat unfavourable perception, structured credit solutions have begun to re-emerge.  The course considers one such variation - index tranches which offer investors an enhanced return albeit with some degree of risk.  
Fixed income remains one of the dominant asset classes for issuers and investors.  This course focuses on the main concepts of optionality within the asset class.  
Although the course will cover the definitions of the key building blocks, it is not designed as a general introduction to options.  It will assume some basic understanding of option terminology such as calls, puts, ITM/OTM/ATM, European & American.  It is also useful if the participant was also conversant with the fundamentals of interest rate swaps.  

Course Outcomes


By completing this course you will be able to: 
  • Outline the characteristics of the key fixed income option product suite
  • Explain the intuition of how interest rate options are valued
  • Distinguish between historical, implied, and forward volatility
  • Define and apply the main measures of option risk management  
  • Identify how, empirically, implied volatility deviates from the pricing model assumptions
  • Explain the main ways in which yield curves move
  • Identify how the options could be used to hedge fixed income exposures
  • Construct a series of strategies that could be used to express views on how yield curves are expected to move
  • Construct strategies that will benefit from movements in implied and forward volatility
  • Explain the mechanics of structured products with embedded interest rate options

Who should attend?


The course has been designed to cover a wide variety of topics and so may attract different types of attendees.  Some examples are:
  • Junior fixed income traders looking to deepen their understanding of fixed income options
  • Middle office and settlement staff seeking to understand the structure and risks of the various structures
  • Compliance staff looking to understand the mechanics and applications of the different products
  • Investment managers who are looking to understand the risks and returns of the different elements of the product suite
  • Quantitative analysts who are less interested in the maths of options but seeking to understand the ways in which the instruments are applied.  

Certification and Programme Recognition


This course has been approved by the Securities & Futures Commission of Hong Kong for Continuous Professional Training (CPT).
ICMA is also a member of the CPD® Certification Service which helps organisations formalise knowledge into a structured and recognised approach to meet professional development expectations.

ICMA recommends that 20 learning hours can be associated with this course, based on attended/undertaken hours of study required to successfully complete the learning outcomes.

The course is certified by ICMA and the ICMA Centre, Henley Business School, University of Reading. A Certificate of Completion will be awarded to those who meet minimum attendance requirements. Please note that while course recordings will be made available to delegates, it is a course requirement that delegates meet the minimum attendance requirements to be eligible for a certificate. Please contact education@icmagroup.org if you have any questions regarding certification.

Please note that your course certificate of attendance or completion should be sufficient to satisfy any professional development requirements – if you require further evidence, please contact us at education@icmagroup.org.

Pricing


Members: EUR 1,650 + VAT (if applicable)
Non-members: EUR 2,050 + VAT (if applicable)


Course Trainer

Neil Schofield
The syllabus is divided into several topic areas, which are then broken down into multiple subtopics:

Credit derivative building blocks
Total return swap cash flows and motivations
Single name default swaps
Quoting conventions – par spreads vs. fixed coupons
Features of single name structures: reference entity, reference obligations, events of default, settlement in the event of default.  
Index default swaps – index construction, rolling of contracts, what happens in the event of default.  
Credit swaptions – features and common applications
Applications
Trading applications – curve structures, forward trades, spread trades
Hedging a bond portfolio using index default swaps
Embedding single name and index default swaps into credit-linked notes 
Valuation
Relative value approach to valuation: default swaps vs. FRNs vs. bonds vs. asset swaps vs. loans
Key valuation issues: why present value of a 01 and dollar value of a 01 are not the same thing  
Structured credit
Intuitive approach to credit correlation
First and ‘Nth’ to default basket swaps
Tranching of indices – combining index default swaps, tranching and credit correlation
Yield-enhanced credit-linked notes referencing index tranches
  • Fixed income options – a review of the building blocks
    • Review of interest rate swaps (spot and forward starting swaps)
    • Caps and floors
    • Swaptions (European, American, and Bermudan structures)
    • Mid-curve swaptions (options on forward starting swaps)
    • Callable bonds

  • Valuation and risk management
    • Valuing interest rate options – the intuition 
      • Black 1976
      • Put call parity
        • Cap floor parity
        • Swaption parity
    • Interest rate volatility
      • Realised volatility
      • Implied volatility
        • Lognormal
        • Normalised
    • Option risk management
      • Delta
      • Gamma
      • Vega
      • Theta
    • Characteristics of implied volatility
      • Skews, smiles, smirks
      • Term structures

  • Applications
    • How do yield curves move?  The empirical evidence
    • Using options to hedge a fixed income exposure
      • Extendible / Cancellable swaps
      • Swaptions and mortgage-backed securities
    • Expressing views on the yield curve
      • Directional strategies
      • Slope trades
        • Cap spreads
        • Conditional curve trades
        • Spread options
      • Curvature trades
        • ‘Vertical’ ‘flies
    • Expressing views on volatility
      • Swaption straddles
      • Volatility triangles (swaptions; caps and floors)
    • Expressing views on forward volatility
      • Defining forward volatility
      • Forward volatility agreements
    • Embedding options into structured solutions
      • Range accruals
      • Inverse floaters

Livestreamed Course


ICMA courses are delivered via video conferencing accessed on our digital learning platform, using the most effective pedagogical approaches and incorporating interactive functions like virtual breakout rooms.

The Fixed Income Options live sessions are delivered in four 3.5 hour sessions over the course of two weeks. You will be given access to the course materials before the live sessions, and will have access to those for a total of four weeks from the first live session. During these four weeks you will have the option to keep working through the course materials at your own pace.

Live sessions: 3, 4, 10, 11 October 2022
10.00-13.30 CET | Time Zone Converter




Livestreamed course fees

Members: EUR 1,650 + VAT (if applicable)
Non-members: EUR 2,050 + VAT (if applicable)

For security reasons, delegates who have not registered in advance will not be admitted to the live sessions.

Please note:
  • All payments must be made in Euro.
  • Invoices for single registrations are subject to an additional Euro 50 to cover administration costs*. No administration fee applies for invoices covering two or more registrations
*Administration costs cover the provision of supporting documents, which are often requested along with the invoice, to become an approved supplier.




Contact

Should you have any queries, please contact education@icmagroup.or





Test your knowledge

Lower cap strike
Shorter maturity
Lower forward volatility
Less than 1%
1%
More than 1%
A one-year option to pay fixed in a five-year swap that starts now
A one-year option to pay fixed in a five-year swap that starts one year from now
A one-year option to pay fixed in a four-year swap that starts one year from now
The payer swaption will typically be cheaper
The payer swaption will typically be more expensive
The payer swaption should cost the same amount as the cap
Long payer
Short receiver
Long receiver and short payer

Please complete the fields below to get your quiz results


*mandatory fields



Mailing List*

Yes
No

Terms and conditions*


I agree that ICMA may retain the information supplied on this form on a database and use it for the purpose of administration only when applicable. 

Privacy, data and cookiesSubscribe/Update your preferences

Please tick here to agree to the terms and conditions
I agree to the above terms and conditions
Follow ICMA Education:

linkedin
ICMA Zurich

T: +41 44 363 4222
Dreikönigstrasse 8
8002 Zurich
ICMA London

T: +44 20 7213 0310
110 Cannon Street
London EC4N 6EU
ICMA Paris

T: +33 1 70 17 64 72
62 rue la Boétie
75008 Paris
ICMA Brussels

T: +32 2 801 13 88
Avenue des Arts 56
1000 Brussels
ICMA Hong Kong

T: +852 2531 6592
Unit 3603, Tower 2
Lippo Centre
89 Queensway, Admiralty
Hong Kong
 
Copyright © 2021 International Capital Market Association.