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elearning > Interest rate swaps

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Learn about the following:

What interest rate swaps are and how they work. How dealers make (and lose) money with swaps. How swaps can be used to manage risk. The key risks with swaps. How these risks can be controlled.

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Course Summary

IRS menuIRS cash flowsIRS Value

IRS useIRS hedging useIRS risk

  • 45 minutes
  • 11 question multiple choice
  • What interest rate swaps are & how they work
  • How dealers make (and lose) money with swaps
  • How swaps can be used to manage risk
  • The key risks with swaps
  • How these risks can be controlled

Interest Rate Swaps

1. How interest rate swaps work

  • What dealers agree
  • Fixed and floating payments, example
  • Interest conventions
  • The swap rate, bid and offer, dealer’s screen
  • How much profit on a swap?
  • What affects the profit
  • How swap rates change
  • Making and losing money on swaps

2. Practical uses for swaps

  • Hedging a loan, advantages, disadvantages
  • Amortising swaps
  • Hedging a bond issue
  • All-in-cost, balance sheet management, advantages
  • Mortgage hedging, amortisation, pre-payments

3. Swaps and risk

  • Credit exposures, mark-to-market values
  • What affects the credit exposure, practical implication
  • Mitigation using collateral

4. Summary

5. Test 

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