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Short courses>Interest rate options

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Interest rate options - 2.5 hours

A foundation course that explains the over-the-counter interest rate option market. This includes the main products, how they work and how they are used.

It is suitable for those working in or around financial markets who need to know more.

There are simple examples with time for questions and answers.

This course is only available in-house and is suitable for up to 12 people.

This is what is covered:

  • Option terminology
  • Underlying, expiry, premium, exercise and strike
  • The four basic option trades
  • Payoff profiles
  • Forward interest rates
  • Caplets and floorlets – options on forward rates
  • How caps work
  • How floors work
  • How these options can be used to hedge borrowing costs
  • How these options can be used to hedge asset returns
  • Buying one option to pay for another – collars
  • Caps embedded in bonds
  • Payer’s swaptions – how they work
  • Receiver’s swaptions – how they work
  • Using swaptions – hedging examples
  • Option risks in bank balance sheets

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