Commodities, Derivatives and Structured Products

Interest Rate & FX Options - Part 2


This eCourse consists of three modules. Module 1 describes the fundamentals of Bermudan swaptions, outlines some applications of these instruments and explains in detail how they are valued using trinomial trees.

Module 2 describes how market participants can determine the expected level of future interest rate volatility from derivative instruments. It covers flat volatilities and base volatilities. This module also introduces to volatility smiles and smirks, and their significance in the market.

Module 3 explains the structure and features of swaptions and explains how these instruments are priced.


On completion of this course, you will be able to:
- Recognize the structure of Bermudan swaptions and distinguish them from other types of swaptions
- Identify the uses of Bermudan swaptions
- Analyze the various pricing and valuation approaches for Bermudan swaptions
- Measure historical interest rate volatility
- Distinguish between flat and base volatilities
- Identify how the phenomena of volatility smiles and smirks are caused
- Describe the features and characteristics of swaptions
- Differentiate between the types of settlement available for swaptions
- Price a swaption based on the Black option pricing model
- Identify the sources of pricing sensitivity


Module 1: Bermudan Swaptions
Topic 1: Bermudan Swaption Basics
Topic 2: Bermudan Swaption Applications
Topic 3: Bermudan Swaption Valuation

Module 2: Interest Rate Volatility
Topic 1: Measuring Historical Interest Rate Volatility
Topic 2: Flat & Vase Volatilities
Topic 3: Smiles & Smirks in Interest Rate Volatilities

Module 3: Swaptions
Topic 1: Features pf Swaptions
Topic 2: Swaption Settlement
Topic 3: Pricing Swaptions
Topic 4: Sources of Pricing Sensitivities


SFC:3.00, PWMA:3.00
Staff of Corporate Member: HK$975
Non-Member: HK$1470
All Member: HK$975