Overview

This eCourse consists of two modules. Module 1 outlines the fundamentals of callable bonds, examine some variations on the regular call structure and explain in detail how callable structures are priced. The concept of option-adjusted spread (OAS), which allows issuers to incorporate the optionality of a callable bond into the quoted spread, is described in detail within the pricing topic.

Module 2 explains the structure of standard caps and floors and discusses some of the variants that have been developed.

Objective

On completion of this course, you will be able to:
- Describe the fundamental structure of callable bonds
- Price callable bonds from the perspective of both issuers and investors
- Identify variations on the regular callable bond structure
- Explain how caps and floors work and how they are used to hedge interest rate risk
- Describe the different types of caps and floors that have been developed due to market demand
- Describe how to combine caps and floors

Content

Module 1: Callable Bonds
Topic 1: Overview of Callable Bonds
Topic 2: Pricing of Callable Bonds
Topic 3: Other Callable Structures

Module 2: Caps & Floors - An Introduction
Topic 1: Types of Caps & Floors
Topic 2: Combination of Caps & Floors
Topic 3: Basics of Caps & Floors