Interest Rate Derivatives: A Practical Guide to Applications, Pricing and Modelling

Interest Rate Derivatives: A Practical Guide to Applications, Pricing and Modelling

By: James Todd (author)Hardback

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"Interest Rate Derivatives" describes: Pricing methods; Application, structuring and valuation of interest rate and Cross currency Swap and interest Options; Methods of managing interest rate exposure; and, Trading and hedging strategies and their application in portfolio management. Basic interest rate mathematics are explored and built upon to delve into a more complex development of interest rate derivatives in general. This work is accompanied by a CD and gives you a unique stand-alone product which serves as a major reference guide on interest rate derivatives. The book itself is developed around a user-friendly excel based pricing system helping you to better understand the content by applying the theory to real life pricing. This allows you to use the book as an initial reference or learning tool to see how the maths work and leaves you with a practical calculation tool. Recommended for all financial and corporate treasury staff, MBA students, graduates and anyone looking for a mathematical guide to the practical pricing and modelling of interest rate derivatives.

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About Author

Todd James has over 12 years of experience in derivatives and debt capital markets including trading, marketing and structuring derivative transactions. He holds a BBA in business and economics from WLU, Waterloo, Canada and an MBA in finance from the University of Toronto. Having worked in Toronto and London, Todd is currently based in Hong Kong where he structures and develops structured products. He has also been providing regular workshops and seminars for corporate and financial institutions on derivatives, risk management and structured products. His past experience covers debt capital markets, interest rates, cross currency swaps trading and structuring, and structured products marketing and structuring.


Chapter 1 Financial Mathematics 1.0 Time Value of Money 1.1 Continuous Interest Rates 1.2 Effective and Nominal Interest Rates 1.3 Money Market Yields 1.4 Day Count Basis Conventions 1.5 Roll Convention Chapter 2 Short term Interest Rates and Futures 2.1 Forward-Forward 2.2 Forward Rates (FRAs) 2.3 Short-Term Interest Rate Futures 2.4 Convexity with Futures 2.5 Calculating "strip" yields from Futures 2.5 Futures versus FRAs Chapter 3 Bonds: Pricing risk and hedging 3.1 Bond Price 3.2 Bond Yields 3.3 Bond Proceeds: Clean vs. Dirty Price 3.4 Odd Coupon Bonds 3.5 Bond PV01 3.6 Bond Duration and Modified Duration 3.7 Bond Convexity 3.8 Bond Portfolio: Modified Duration and Convexity 3.9 Hedging a Bond Portfolio 3.10 Hedging and partial Hedging with Bond Futures 3.11 Basis Risk 3.12 Repos Chapter 4 Interest Rate Swaps: Overview and application 4.1 What is an Interest Rate Swap? 4.2 How Interest Rate swaps are Quoted 4.3 What is a Swap Spread? 4.4 Quotation Basis 4.5 Interest Rate Swap Applications 4.6 The Non-standard (Non-generic) Interest Rate Swaps 4.7 Case studies Chapter 5 Deriving a Zero Coupon Curve Boostrapping a Zero Curve from market instruments: Deposits Futures Par Swap Rates Chapter 6 Asset and Liability Swaps: Cashflows and pricing 6.01 Asset Swaps: Par and Market Value Asset swaps 6.02 Calculating the Bond price from a target asset swap level 6.03 Curvebuilder explained: How to use and price swaps 6.04 Liability Swaps 6.05 Forward Starting Swaps: calculating the cost of Delay 6.06 Amortizing Swaps 6.07 MTM of Swaps 6.08 Spreadlocks 6.09 Treasury Locks Chapter 7 Hedging Interest rate Swaps IRS Risk: PV01 Hedging swaps with Eurodollar Futures Hedging Swaps with Treasuries Managing a Portfolio of Swaps Chapter 8 Cross Currency Interest Rate Swaps Basis Swaps Calculating the Basis point conversion Cashflows Pricing Fixed Fixed Swap Asset Swap: Example Liability Swap: Example Case Study: Relative Borrowing Chapter 9 Interest Rate Options Pricing and application Caps/Floors Swaptions European Bermudan Callable securities Volatility Stripping Digitals Hedging Options More Exotic Structures Range Accrual Swap KO/KI Caps/Floors KO Swaps Chapter 10 More exotic swaps/options Libor in arrears CMS Quantos Chapter 11 FAA 133 and IAS 39 Swaps and options Chapter 12 Documentation and Credit ISDA Credit Credit Midigation Appendix: Glossary Curvebuilder Xl functions explained Conventions (diff currencies) Interpolation FX forwards Data Sources

Product Details

  • publication date: 15/06/2006
  • ISBN13: 9781904339946
  • Format: Hardback
  • Number Of Pages: 250
  • ID: 9781904339946
  • ISBN10: 1904339948

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