Commodities, Derivatives and Structured Products
Interest Rate & Currency Swap Structures - Part 1 (2019)
This eCourse consists of three modules. Module 1 looks at the key types of basis swap – cross-currency basis swaps, cross-index basis swaps, and tenor basis swaps – and their main uses. A basis swap is a swap where both parties make floating rate payments referenced to different bases.
Module 2 looks at the main structures used with currency swaps and provides realistic examples of the uses of these instruments. A currency swap is a transaction that involves the exchange of principal and interest payments based on two different currencies.
Module 3 looks at the structure of both single-currency and cross-currency asset swaps, the opportunities these instruments offer investors and the risks involved, and how an asset swap can be priced, using a worked example in Excel. An asset swap is an instrument that converts a fixed rate bond into a synthetic FRN.
On completion of this tutorial, you will be able to:
- Identify the main types of basis swap, namely, cross-currency basis swaps, cross-index basis swaps, and tenor basis swaps
- Recognize the key applications of basis swaps
- Identify the main structures used with currency swaps, including the initial exchange of principal amount in different currencies and their re-exchange at maturity
- Recognize how swap principal is market to marked as FX rates change
- Identify the key applications of currency swaps, including the conversion of borrowing amounts, foreign currency revenues, and returns on synthetic assets to the desired currency
- Identify the key features of asset swaps
- Recognize the main motivations for investors to engage in asset swaps and the risks involved
- Recall how to price an asset swap in Excel
Module 1: Basis Swap
Topic 1: Basis Swap Structures
Module 2: Swaps - Currency Swaps
Topic 1: Currency Swap Structures
Topic 2: Currency Swap Pricing
Topic 3: Currency Swap Applications
Module 3: Swaps - Asset Swaps
Topic 1: Features of Asset Swaps
Topic 2: Investor Motivations & Risks
Topic 2: Pricing an Asset Swap