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Training Courses > Treasury Valuation & Risk
Treasury Valuation & Risk Workshop, (Two Days)
This practical workshop addresses the valuation and risk management issues associated with wholesale financial products. Increasingly regulatory standards and accounting practices require appropriate independent validation of price and risk data for dealing rooms. This workshop is designed for finance, middle office and administration staff and provides an introduction to the techniques associated with product valuation and risk management.
The course will cover:
- Zero curve methodology
- Why correct valuation is important
- Problems with valuation
- The main risks in treasury
- How risk can be measured
Below is a summary of the workshop content. The content of each day has been placed in a logical sequence and emphasis will be placed on practical case study examples.
Day One
Introduction
- Short review of financial products
Review of financial mathematics
- Discount factors, present / future value / internal rate of return
- zero coupon discount factors
Accounting techniques
- Accrual
- Mark-to-market
- Similarities & differences
Product valuation
- Why accurate valuation is important
- P&L
- Market risk
- Credit exposures
- Collateralisation
- Importance of segregation of duties
Valuation methodologies
- How we value derivatives
- Market price/derived price
Problems with valuation
- Validation of data
- Market liquidity
- Credit differentials
- Independence
Product Valuation case studies:
1. Interest rate swaps
- cash flows
- present value
- treatment of floating side
2. Currency swaps
- cash flows
- present value
- problems with basis swaps
3. Interest rate futures
- variation margin
4. Fixed income securities
- Market price
- Price derived from asset swap spread
- Comparison with credit derivatives
5. Floating rate notes
- Discount margin
6. Interest rate options
- Using a Black model
- Implied volatility
7. Complex products
- Pricing models
- Validation & testing
- Problems associated with valuing risks embedded in bonds
8. Where valuation has gone wrong
- case studies where incorrect valuation has led to financial loss
Day Two
Main risks
- FX risk
- Interest rate risk
- Credit risk
- Liquidity risk
Risk reporting
- Timeliness/availability
- Understanding
- Validity of data
- Accuracy
- Reporting of excesses and action
Measuring interest rate risk
- Forward interest rates
- Basis point value
- Effect on cash flow valuation
- Interest rate risk of bonds
- Short dates/long dates
- Low coupon/high coupon
- Non-parallel shifts in yield curve
- Duration
- Simple Hedge ratios
Value at Risk
- What it is
- Why it is used
- Examples
- Strengths & weaknesses
- Importance of validation & testing
- Importance of stress testing
End of workshop and review
Related Documents
Product Valuation 
Market Guides > Interest rate swaps 
20th September 2009
When two parties agree to enter an interest rate swap (IRS) one party pays a fixed rate of interest and the other a variable rate. The variable rate is often referenced to Libor or Euribor. The interest payments are based on a notional amount, (with IRS no principal amount changes hands). In the market there are conventions for calculating the interest payments. For example USD IRS use an annual actual 360 interest rate calculation for the fixed payment and a quarterly or semi annual actual 360 calculation for the floating payment. Maturities are normally between 2 and 20 years but it is possible to trade swaps that have maturities exceeding 50 years. Customers using swaps to hedge can expect a dealer to quote a dealing spread. The dealer will want to receive a higher fixed rate than the one they pay. It's one way the dealer makes money from trading. Dealers will insist before trading that the appropriate documentation is signed. For swaps standard documentation is provided by the International Swaps and Derivatives Association (ISDA). This document is called a master agreement. It covers all swaps between the two parties. Individual transactions are then agreed by confirmation which refers to the master agreement.
Treasury Consulting > Treasury risk
This retail bank used its treasury to manage interest rate and liquidity risk. The bank's management requested a detailed assessment of the structure, risk and strategy of the treasury together with recommendations for improvements.
Training Courses > Financial Products, Markets & Risk
Training Courses > An Introduction to Treasury 2010
10th June 2010