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OVERVIEW
COURSE SYLLABUS
COURSE DETAILS
Swaps are the most actively traded derivative product. This course covers those swap products with an interest rate component including interest rate swaps, overnight index swaps, asset swaps and currency swaps.
Learning Outcomes
By the end of the course the participant will be able to:
- Identify the main features of interest rate and overnight index swaps
- Calculate swap cash flow settlement amounts
- Interpret the main characteristics of the swap market
- Interpret a swap quotation and explain the relevance of a swap spread
- Calculate the value of an interest rate swap
- Calculate the market risk of an interest rate swap
- Understand the intuition of swap credit risk
- Explain how swaps could be used to manage a firm’s liquidity and the interest rate risk arising from a bond portfolio.
Describe the types of market participants and appreciate why these firms engage in SLB, and their impact on capital markets and retail investors
Understand the operational, legal and regulatory risks and issues involved
Comprehend the advantages/disadvantages of using different types of collateral
Appreciate the impact that corporate actions have on the lent security and on securities collateral
Discover some relevant anecdotes and SLB case studies
Who should attend?
This course will be of interest to people whose responsibilities include the swaps market. Amongst others this could include junior traders, research analysts, trading assistants, middle office staff, risk managers and compliance.
Certification and Programme Recognition
This course is certified by ICMA and the ICMA Centre, Henley Business School, University of Reading.
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.
A Certificate of Attendance will be awarded to those who meet the minimum attendance requirements for this course.
ICMA is a member of the CPD® Certification Service and approved by the Securities & Futures Commission of Hong Kong as provider of Continuous Professional Training (CPT).
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.
Course Trainer
Neil Schofield
Review of fixed income principles
- Price/ yield relationship
- Bond market risk
o Macauley Duration
o Modified Duration
o DV01 - The repurchase agreement market
Definitions and features
- Main features of interest rate swaps
o Notional amount
o Classic fixed vs. floating structures
o Cash flow settlement - What is an overnight index rate?
o The fixing process for SONIA, ESTER and SOFR
o Overnight Index Swaps
o Cash flow settlement - Understanding the transition from LIBOR
- The movement to ‘risk free rates’ (RFR)
o RFR term structures
o RFR futures - ISDA ‘fallback’ language
- ‘RFR’ swaps – what has been traded so far?
- Variations on the classic structure
o Asset swaps
o Currency swaps
Swap quote interpretation
- Quotation conventions
- Interest Rate Swap quotation construction
o Treasury yield + swap spread
o What are swap spreads?
o What factors influence swap spreads? - What factors drive OIS rates?
- How do swap curve move? – the empirical evidence
o Interest rate swaps
o OIS
Principles of Valuation
- Swap yield curves
o Par
o Forward
o Zero / spot - What is meant by swap ‘fair value’?
- Calculating the fair value of an existing swap
- Calculating the market risk of an interest rate swap
Overview of market and credit risk
- Calculating the market risk of a swap
o Basis Point Value / DV01 - Early termination of swaps
- Overview of swap credit risk
o Potential Future Exposure - Overview of the “XVAs”
o Example: Credit valuation adjustment
Securities Lending & Borrowing (SLB) – The Fundamentals
What is Securities Lending?
The Purpose: Why Do Lenders Lend & Borrowers Borrow?
Participants & Structure
Trading Strategies
Examples
SLB Trade Lifecycle - An Overview
Short Selling, Naked Short Selling
Locates, Trade Execution & Fails
Margin
Corporate Events
Billing
The Marketplace – Participants & Stakeholders
Lenders, Borrowers and Intermediaries
Examples
The Lender’s Perspective: Motivations and Considerations
The Borrower’s Perspective: Motivations and Considerations
Global custodians
Third-party lending agents
Central counterparties
Anecdotes
SLB Trade Lifecycle
Pre-trading, Locates
Trade execution
Pre-settlement
Settlement
Buy-ins
Mark to Market
Margin calls
Recall/return of lent settlements
Fees & Billing
Assets & Collateral
Equity vs Fixed Income
Fundamental collateral concepts
Margin: Purpose & use
Types of collateral
Rehypothecation
Legal Documentation
GMSLA
Securities lending agency agreement
GMRA
Updating Books & Records
Securities bookkeeping: Definition & purpose
Importance of updating books & records
Updating books and records for lent/borrowed securities, cash and non-cash collateral, fees and rebates
SLB and Corporate Actions
Corporate actions: Overview
Income
*Cash dividends
*Lent securities
*Short sale proceeds
*Lent/borrowed equity
Voting
Withholding tax
Risks in Securities Lending & Borrowing
Market Risk
Credit Risk
Operational Risk
Legal Risk
Reputational Risk
Regulation
Introduction
EU short selling & financial transactions tax
CSDR
Reporting to a central trade repository
Recent SLB Scandals & Controversies
The Lehman saga uncover
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 Understanding Swaps 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 three months from the first live session. During these three months you will have the option to keep working through the course materials at your own pace.
Livestreamed course fees
Members: EUR 2,100 (VAT not applicable)
Non-members: EUR 2,700 (VAT not applicable)
For security reasons, delegates who have not registered in advance will not be admitted to the live sessions.
Please note:
Contact
Should you have any queries, please contact education@icmagroup.org.
- All payments must be made in Euro.
Contact
Should you have any queries, please contact education@icmagroup.org.
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