Duration: 3 days
 Introduction to Swaps and Swap Pricing
 Swaps Valuation Methods
 Bootstrapping and Smoothing the Swap Curve
 Currency and Cross Currency Swaps
 Analysis of NonGeneric Swaps
 Managing Interest Rate and FX Risk with Swaps
The objective of this seminar is to give you a good and practical understanding of the pricing and
applications of generic and simple nongeneric swaps.
We start with a thorough introduction to swaps. We explain how swaps have evolved from
“backtoback” and “parallel” loans to a modern, financial instrument. We give an overview of
different swap structures, and we explain the mechanics of a “plain vanilla” interest rate swaps,
basis swaps, and cross currency swaps. We also show the “time profile” of a swap and give a
practical explanation of how swap transactions are agreed, settled and terminated.
Further, we explain how swaps are priced and valued. We give an overview of different valuation
techniques, and we explain and demonstrate in detail how swaps are correctly priced using zero
coupon analysis. We show how swap curves can be “bootstrapped” and how swaps can be valued using
the resulting discount factors. We explain how the instruments are valued for marktomarket and
risk management purposes, illustrated by lots of examples. We also give an overview of currency
swap structures and explain the pricing of currency swaps.
Having gained a good understanding of fundamental swap pricing, we then turn to examine a number of
more advanced swap structures and their related option instruments. We analyze and discuss the
application of structures such as “Amortizing”, “Accreting”, ”Forward Starting”, “Arrears Reset”,
“Constant Maturity” and “Differential” swaps.
Finally we explain and demonstrate, using very practical examples, how swaps can be used to hedge
interest rate and currency exposures of bonds and bond portfolios, loans and other types of
financial instruments and transactions.
Day One
09.00  09.15 Welcome and Introduction
09.15  12.00 General Introduction to Swaps
 What is a “Swap”?
 Background and Historical Development
 Swaps and Swap Markets
 Types of Swaps
 Fundamental building blocks
 Overview of Applications

Risks of Swaps
 Market Risks
 Counterparty Risk
 Legal and Operational Risks
Introduction to Swaps and Swap Pricing

Fundamental building blocks
 IRS, currency swaps, nongeneric swaps
 Hedging Structure
 Asset Swap
 Relative Rating
12.00  13.00 Lunch
13.00  16.30 Pricing Generic Interest Rate Swaps (continued)
 Pricing Swap as LiborFinanced Bond
 What Drives the Swap Spread?
 Comparison Swap Approach

Zero Coupon Approach
 Yield curve construction using deposits, futures and par swaps
 Convexity adjustment
 Recursive “bootstrapping” of par curves

Blending and smoothing techniques
 Forecasting variable cash flows

Pricing Examples
 Determining fair value and fair swap rates
 Moving spreads from fixed to floating side
 Exercises
Day Two
09.00  09.15 Recap
09.15  12.00 Pricing Currency and Cross Currency Swaps
 Decomposing Currency Swap Structures into Building Blocks
 Pricing Libor Basis Swaps
 Where does the spread come from?
 Pricing Currency Swaps as Series of Longdated Forward Contracts
 Zero Coupon Approach to Pricing Currency Swaps
 Exercises
Analysis of NonGeneric Swaps
 Zero Coupon Swaps
 Amortizing Swaps
 Accreting Swaps
 Rollercoaster Swaps
 Forward Starting Swaps
 Cases and Exercises
12.00  13.00 Lunch
13.00  16.30 Analysis of NonGeneric Swaps (Continued)
 Arrears Reset Swaps
 Constant Maturity Swaps
 Yield Curve Swaps/Basis Swaps
 Differential Swaps
 Overnight Index Swaps
 Deferred Coupon Swaps
 Stepped Coupon/Ratchet Swaps
 Cases and Exercises
Day Three
09.00  09.15 Recap
09.15  12.00 Managing Interest Rate and FX Risk with Swaps

Steps in Managing Interest Rate and FX Risk
 Exposure and Risk Measurement
 Choice of Instrument and Calculation of Hedge Ratio
 Cash Flow Hedges vs. Fair Value Hedges

Hedging Interest Rate Risk of Single Assets and Liabilities
 Hedging the Interest Level exposure
 Hedging the Slope of the Yield Curve
 Calculating ValueatRisk on a Swap
12.00  13.00 Lunch
13.00  16.00 Managing Interest Rate and FX Risk with Swaps (Continued)

Managing Interest Rate Risk at the Portfolio Level
 Using swaps in Duration Management of a Bond Portfolio
 Using “Macro Swaps” to Hedge Loans and Deposits
 Managing ”ValueatRisk” with Swaps

Hedging FX Risk with Swaps
 Types of FX Exposure
 Hedging FX Exposure at the Cash Flow Level
 Hedging FX Exposure at the NPV level
 Swap Overlay Strategies
 Exercises
Evaluation and Termination of the Seminar