Session 1: Introduction to Futures

The session introduces futures and explores the features and characteristics of futures contracts. By the end of the session the course participant will be able to:

• Define futures specifically the eurodollar and T-note futures contracts
• Understand the features and characteristics of futures including:

• Standardization

• Margin requirements

Session 2: Eurodollar Futures

This session examines the calculation of the strip and the correlation between strips and interest rate swaps are discussed.  By the end of the session the course participant will be able to:

• Price a strip
• Apply a strip in terms of interest rate swap pricing
• Apply eurodollar futures for speculative purposes
• Explain importance of strips and their use in pricing other derivative instruments such as swaps and interest rate options
• Examine Bloomberg pages to assist in seeing how the strip is calculated as well as how short term forward rates are derived

Session 3: Fixed Income Futures

Discuss fixed income futures and their features and characteristics. Explore the differences between the short-term interest rates and note/bond futures. Examine applications including speculation and hedging. Modified duration and DV01 will be introduced to develop hedge ratios. By the end of the session the course participant will be able to:

• Discuss terminology including cheapest to deliver, net and gross basis and implied repo rate
• Examine applications including:

• Hedging using the appropriate hedge ratio i.e. DV01 or duration

• Speculating with note futures

• Identify the main components of pricing

Session 4  Introduction to Interest Rate Swaps

Introduce interest rate swaps and their features and characteristics. Examine how a swap is broken down into a fixed rate note and floating rate note. Examine fundamental pricing. Show elementary strategies and adjustments to pricing given different day count conventions and payment frequencies. By the end of the session the course participant will be able to:

• Define an interest rate swap
• Understand the features and characteristics  
• Apply swaps to change the debt structure of a corporation
• Identify how swaps are priced off the treasury curve
• Identify the risks associated with swaps
• Examine swaps price from Bloomberg

Session 5 - Other Types of Swaps

There are many variants of the plain vanilla swap structure and this section briefly highlights these structures.  By the end of the session the course participant will be able to:

• Understand the features and characteristics of other types of interest rate swaps

• Step up and amortizing swaps

• Asset swaps

• Indexed swaps

• Basis swaps

• Currency swaps

Session 6: Options

Options are introduced and their features and characteristics are examined. Particular emphasis is on terminology. By the end of the session the course participant will be able to:

• Define calls and puts
• Discuss in, at and out of the money
• Show intrinsic value + time value = premium
• View payoff profiles of the respective options
• Introduce the main pricing components of an option
• Apply fundamental option trading strategies
• Discuss the risks associated with options