Commodities, Derivatives and Structured Products

Interest Rate & Currency Swap Fundamentals - Part 5


This eCourse consists of three modules. Module 1 examines the changes to the swaps market that resulted from the financial crisis of 2007-8, in particular, the changes to the way swaps are cleared and collateralized like other derivatives and the current state of play in the LIBOR interbank market.

Central clearing of swaps transactions is designed to standardize certain swaps, promote transparency, and allow market participants to mitigate their counterparty credit risk to dealers. Module 2 looks at the role of the central clearing counterparties (CCP) and the techniques used to reduce address the default risk of clearing members such as margining and the default waterfall.

Module 3 looks at the importance of the ISDA Master Agreement and other documentation relevant to cleared and noncleared swaps as documentation is crucial to maintaining the efficiency of the swaps market and reducing counterparty credit risk.


On completion of this course, you will be able to:
- Recognize how counterparty credit risk became a major issue during the financial crisis and led to a shutdown in the interbank market
- Identify the post-crisis regulatory changes that have impacted the risks and economics of swaps
- Recall how swaps are cleared and collateralized
- Recognize the move away from LIBOR discounting and changes to LIBOR
- Recognize the key role played by central clearing counterparties (CCPs) in clearing swap trades
- Identify the techniques used to reduce the risk of clearing member shortfalls, including margining and the default waterfall
- Recognize the main methods of reducing counterparty credit risk such as trade netting and compression and position limits
- Recognize the importance of the ISDA Master agreement in standardizing swaps (and other derivatives) transactions
- Identify the key elements of the ISDA Schedule, confirmations, and definitions
- Recall how credit support annexes (CSAs) are used to mitigate or eliminate the mutual potential for counterparty risk in derivatives transactions
- Identify the key documentation required for cleared swaps


Module 1: Swaps – Impact of the Financial Crisis
Topic 1: Swaps Market Pre-Crisis
Topic 2: Swaps Market Post-Crisis

Module 2: Swaps – Clearing
Topic 1: Central Clearing Counterparties (CCPs)
Topic 2: Margining & The Default Waterfall
Topic 3: Reducing Credit Risks With Clearing

Module 3: Swaps Documentation
Topic 1: ISDA Master Agreement
Topic 2: ISDA Schedule, Confirmations, & Definitions
Topic 3: Credit Support Documentation
Topic 4: Documentation of Cleared Swaps


SFC:2.50, PWMA:2.50
All Member: HK$815
Staff of Corporate Member: HK$815
Non-Member: HK$1225