Trading & Hedging Short-Term Interest Rate Risk

The course looks at over-the-counter and exchange-traded instruments related to short-term interest rates. These instruments are compared and contrasted in terms of interest rate exposure and credit risk and their relative value is assessed as tools for hedging and expressing views about changes in the yield curve.

This course is provided through a partnership between ICE Education and the International Capital Markets Association (ICMA) Executive Education.

Course Information

Price £1,850 + VAT
Duration 2 days
Location London
Available Dates

Who Should Attend

Although no prior knowledge of interest rate derivatives is assumed, familiarity with the basic types of derivative security (forwards and futures, swaps and options) is recommended. Participants should have a basic understanding of fundamental financial market concepts such as present value, risk and return.

Booking Information

Tel: +44 (0) 20 7065 7706

Course Content

The course content is divided into several topic areas, which are then broken down into multiple subtopics:

1. Money Market Rates and Instruments

  • Interbank deposits (LIBOR, Euribor) and certificates of deposit
  • Treasury bills, bank bills and commercial paper
  • Repurchase agreements

2. Short-Term Interest Rate (STIR) Futures

  • Eurodollar STIR futures
  • Margining, clearing and settlement

3. Forward Rate Agreements (FRAs)

  • FRA settlement
  • Convexity in FRAs

4. Hedging with STIR Futures

  • Basis point value (BPV) of money market instruments
  • Hedging and basis risk with STIR futures
  • Implementing Eurodollar STIR futures hedges with packs and bundles

5. Central Banks, Monetary Policy and Yield Curve

  • Targets and instruments of monetary policy
  • Expectations and the impact of monetary policy
  • Interest rates and exchange rates in an open economy

6. Market Directional Trades

  • Outright trades with cash instruments
  • Outright trades with STIR futures

7. Curve Trade

  • Calendar spreads (path of forward rates)
  • Other curve trades

8. Relative Value Trades

  • Treasury-Eurodollar (TED) spread, term TED spreads and credit risk
  • LIBOR-OIS spread and counterparty credit risk

9. Interest Rate Swaps and STIR Futures

  • Hedging and pricing swaps with STIR futures
  • Convexity adjustment for implied forward rates

10. Basis Swaps

  • Basis swaps and cross-currency basis swaps
  • Overnight index swaps (OIS)

11. Carry Trades

  • Covered and uncovered interest rate parity
  • Risks in carry trades

12. Caps and Floors

  • OTC interest rate caps, floors and collars
  • Simple interest rate risk management with caps and floors

13. Options on Eurodollar Futures

  • Constructing caps and floors with options on Eurodollar futures
  • Curve trades

14. Options on other STIR Futures or Short-Term Rates

  • Treasury bills
  • Federal funds
  • OIS