This eCourse consists of three modules. Module 1 outlines the process of bootstrapping a zero-coupon yield curve from par coupon rates and explains how forward rates can be derived from the spot yield curve.
Module 2 illustrates how, based on the concept of swap as a series of forward contracts, it is possible to generate swap rates using futures prices. The module assumes that we are dealing with even periods (an exact number of months). For example, we assume exactly three months between a spot date and a nearby futures contract date.
Module 3 extends the concepts described in Module 2 and will enable you to confidently generate interest rate swap rates using a strip of futures, whether for even periods or actual dates.
On completion of this course, you will be able to:
- Differentiate between a par-coupon yield curve and a zero-coupon yield curve
- Bootstrap a zero-coupon yield curve using deposit and swap rates
- Plot par-coupon and zero-coupon forward yield curves
- Generate interest rate swap rates for actual dates using a strip of short-term futures prices
- Explain the concept of convexity bias
- Identify the differences between forward and futures contracts and the limitations that are associated with using futures contracts to generate swap rates
- Generate interest rate swap rates for even periods using a strip of short-term futures prices
Module 1: Building a Yield Curve
Topic 1: Types of Yield Curve
Topic 2: Bootstrapping Zero-Coupon Rates
Topic 3: Forward Yield Curve
Module 2: Futures - Building A Yield Curve (Even Periods)
Topic 1: Forwards, Futures and Swaps
Topic 2: Even Periods
Module 3: Futures - Building a Yield Curve (Actual Dates)
Topic 1: Actual Dates
Topic 2: Convexity Adjustment