## Yield Curve Building to Price Swaps

In this learning unit the swap curve is built using Excel. The principle is the same as the bootstrapping approach used with bond yield...

## Yield Curve Building to Price Swaps

In this learning unit the swap curve is built using Excel. The principle is the same as the bootstrapping approach used with bond yield curve structures, but the source of market information gives instant forward rates that are actually traded by the market at any moment in time. Swap yield curves an important benchmark because they provide a liquid pricing

More DetailsDig Deeper## Yield Curve Building to Price Swaps

In this learning unit the swap curve is built using Excel. The principle is the same as the bootstrapping approach used with bond yield curve structures, but the source of market information gives instant forward rates that are actually traded by the market at any moment in time. Swap yield curves an important benchmark because they provide a liquid pricing

More DetailsDig Deeper## Yield Curve Building Blocks

This unit examines the factors required to build accurate yield curves to help traders, investment advisors and salespeople to price up, sell and revalue...

## Yield Curve Building Blocks

This unit examines the factors required to build accurate yield curves to help traders, investment advisors and salespeople to price up, sell and revalue various interest rate derivatives. It will discuss not only the reasons for different yield curves but also will show that although very different in structure and use, they are all based on the same foundation. Accurate

More DetailsDig Deeper## Yield Curve Building Blocks

This unit examines the factors required to build accurate yield curves to help traders, investment advisors and salespeople to price up, sell and revalue various interest rate derivatives. It will discuss not only the reasons for different yield curves but also will show that although very different in structure and use, they are all based on the same foundation. Accurate

More DetailsDig Deeper## Value at Risk Calculations using Matrices and Monte Carlo Simulations

When assessing the value at risk of groups of assets in a portfolio, complex correlations and variances are calculated, which must then be interpreted...

## Value at Risk Calculations using Matrices and Monte Carlo Simulations

When assessing the value at risk of groups of assets in a portfolio, complex correlations and variances are calculated, which must then be interpreted into a VAR number that makes sense. Variance/covariance matrixes are useful in multi-asset portfolios, so it is important to understand the matrices and their uses. An advantage of the covariance/matrix approach is that the calculation captures

More DetailsDig Deeper## Value at Risk Calculations using Matrices and Monte Carlo Simulations

When assessing the value at risk of groups of assets in a portfolio, complex correlations and variances are calculated, which must then be interpreted into a VAR number that makes sense. Variance/covariance matrixes are useful in multi-asset portfolios, so it is important to understand the matrices and their uses. An advantage of the covariance/matrix approach is that the calculation captures

More DetailsDig Deeper## Value at Risk Calculations using the Mean Variance/Covariance Method

The three standard approaches to calculating Value at Risk (VaR) are the mean variance/covariance method, the historical simulation method, and the Monte Carlo simulation...

## Value at Risk Calculations using the Mean Variance/Covariance Method

The three standard approaches to calculating Value at Risk (VaR) are the mean variance/covariance method, the historical simulation method, and the Monte Carlo simulation method. This learning unit focuses on the mechanics and application of the mean variance/covariance method and makes comparisons to the historical and Monte Carlo simulations methods. The mean variance/covariance approach uses three steps: analyze potential volatility,

More DetailsDig Deeper## Value at Risk Calculations using the Mean Variance/Covariance Method

The three standard approaches to calculating Value at Risk (VaR) are the mean variance/covariance method, the historical simulation method, and the Monte Carlo simulation method. This learning unit focuses on the mechanics and application of the mean variance/covariance method and makes comparisons to the historical and Monte Carlo simulations methods. The mean variance/covariance approach uses three steps: analyze potential volatility,

More DetailsDig Deeper## Value at Risk Principles & Building Blocks

Value at Risk (VaR) is a statistical method for managing risk that is an important component of any institution’s risk management program. VaR programs...

## Value at Risk Principles & Building Blocks

Value at Risk (VaR) is a statistical method for managing risk that is an important component of any institution's risk management program. VaR programs are typically structured with four parts: understanding the risks taken; measuring the risks; controlling and hedging the risks; and communicating the risks to the appropriate parties. VaR has two main advantages over previous risk management techniques.

More DetailsDig Deeper## Value at Risk Principles & Building Blocks

Value at Risk (VaR) is a statistical method for managing risk that is an important component of any institution's risk management program. VaR programs are typically structured with four parts: understanding the risks taken; measuring the risks; controlling and hedging the risks; and communicating the risks to the appropriate parties. VaR has two main advantages over previous risk management techniques.

More DetailsDig Deeper## Trigger Swaps

Trigger swaps allow bank clients to hedge two types of exposures in a single transaction – most often interest and exchange rates, exchange rates...

## Trigger Swaps

Trigger swaps allow bank clients to hedge two types of exposures in a single transaction - most often interest and exchange rates, exchange rates and commodity prices, or commodity prices and interest rates. Consolidating multiple hedges allows clients to reduce documentation requirements, counterparty risks, and transaction costs, while accomplishing the primary goal of smoothing overall cash flow volatility. From the

More DetailsDig Deeper## Trigger Swaps

Trigger swaps allow bank clients to hedge two types of exposures in a single transaction - most often interest and exchange rates, exchange rates and commodity prices, or commodity prices and interest rates. Consolidating multiple hedges allows clients to reduce documentation requirements, counterparty risks, and transaction costs, while accomplishing the primary goal of smoothing overall cash flow volatility. From the

More DetailsDig Deeper## Value at Risk Applications

Bankers who would not normally encounter this level of complexity can see how the Value at Risk process works and understand, by applying the...

## Value at Risk Applications

Bankers who would not normally encounter this level of complexity can see how the Value at Risk process works and understand, by applying the results of the VaR calculations, why their bank might decide to modify its portfolios. The three main techniques for calculating VaR are the covariance, historical simulation, and Monte Carlo simulation methods. This unit describes calculations for

More DetailsDig Deeper## Value at Risk Applications

Bankers who would not normally encounter this level of complexity can see how the Value at Risk process works and understand, by applying the results of the VaR calculations, why their bank might decide to modify its portfolios. The three main techniques for calculating VaR are the covariance, historical simulation, and Monte Carlo simulation methods. This unit describes calculations for

More DetailsDig Deeper## Structured Note Features

Intermediaries can generate substantial revenues by tailoring bonds to match investor’s interest rate and risk requirements. Financial engineering and investor demand have created numerous...

## Structured Note Features

Intermediaries can generate substantial revenues by tailoring bonds to match investor's interest rate and risk requirements. Financial engineering and investor demand have created numerous varieties of structured notes. A structured note is a bond with an embedded derivative. It is extremely flexible. The coupons and/or principal payments can be linked to equity prices, market indexes, foreign exchange rates, commodity prices,

More DetailsDig Deeper## Structured Note Features

Intermediaries can generate substantial revenues by tailoring bonds to match investor's interest rate and risk requirements. Financial engineering and investor demand have created numerous varieties of structured notes. A structured note is a bond with an embedded derivative. It is extremely flexible. The coupons and/or principal payments can be linked to equity prices, market indexes, foreign exchange rates, commodity prices,

More DetailsDig Deeper## Swap Market Values

The mark-to-market value of swaps is based on the present value of the cash flows embedded in the swap, which can be calculated using...

## Swap Market Values

The mark-to-market value of swaps is based on the present value of the cash flows embedded in the swap, which can be calculated using zero-coupon rates and forward rates. The mark-to-market value is the difference between the present values of the fixed cash flows and the floating cash flows. The mark-to-market value is used when terminating swaps through negotiation between

More DetailsDig Deeper## Swap Market Values

The mark-to-market value of swaps is based on the present value of the cash flows embedded in the swap, which can be calculated using zero-coupon rates and forward rates. The mark-to-market value is the difference between the present values of the fixed cash flows and the floating cash flows. The mark-to-market value is used when terminating swaps through negotiation between

More DetailsDig Deeper## Swaption Pricing

Swaptions bring an option element into a forward starting swap by allowing buyers of the swaption to decide, on the forward date, whether or...

## Swaption Pricing

Swaptions bring an option element into a forward starting swap by allowing buyers of the swaption to decide, on the forward date, whether or not they still want to enter into the forward swap. A swaption gives the buyer the right but not the obligation to enter into a swap on a pre-determined day in the future at an agreed

More DetailsDig Deeper## Swaption Pricing

Swaptions bring an option element into a forward starting swap by allowing buyers of the swaption to decide, on the forward date, whether or not they still want to enter into the forward swap. A swaption gives the buyer the right but not the obligation to enter into a swap on a pre-determined day in the future at an agreed

More DetailsDig Deeper## Systemic Risk Factors

Risk is a fact of life in financial transactions: from the decision to buy or sell any financial instrument, to the choice of one’s...

## Systemic Risk Factors

Risk is a fact of life in financial transactions: from the decision to buy or sell any financial instrument, to the choice of one's intermediary, to the clearance and settlement process, every decision must be made with attention to and management of risk. All participants, procedures, systems, rules, and procedures create, bear, manage, and assume risk. Risk management is vital

More DetailsDig Deeper## Systemic Risk Factors

Risk is a fact of life in financial transactions: from the decision to buy or sell any financial instrument, to the choice of one's intermediary, to the clearance and settlement process, every decision must be made with attention to and management of risk. All participants, procedures, systems, rules, and procedures create, bear, manage, and assume risk. Risk management is vital

More DetailsDig Deeper## Term Structure Yield Curves and Interest Rate Risk Management

The critical step is to apply measures of interest rate risk to current and expected yield curve environments, to develop correct interest rate risk...

## Term Structure Yield Curves and Interest Rate Risk Management

The critical step is to apply measures of interest rate risk to current and expected yield curve environments, to develop correct interest rate risk management strategies. As discussed in other units, the foundational fixed income risk and return metrics make simplified, unrealistic assumptions, to establish a common, unambiguous analytical framework. But effective interest rate risk management requires a more realistic

More DetailsDig Deeper## Term Structure Yield Curves and Interest Rate Risk Management

The critical step is to apply measures of interest rate risk to current and expected yield curve environments, to develop correct interest rate risk management strategies. As discussed in other units, the foundational fixed income risk and return metrics make simplified, unrealistic assumptions, to establish a common, unambiguous analytical framework. But effective interest rate risk management requires a more realistic

More DetailsDig Deeper## Yield Curve Building to Price Swaps

In this learning unit the swap curve is built using Excel. The principle is the same as the bootstrapping approach used with bond yield curve structures, but the source of market information gives instant forward rates that are actually traded by the market at any moment in time. Swap yield curves an important benchmark because they provide a liquid pricing

More DetailsDig Deeper## Yield Curve Building Blocks

This unit examines the factors required to build accurate yield curves to help traders, investment advisors and salespeople to price up, sell and revalue various interest rate derivatives. It will discuss not only the reasons for different yield curves but also will show that although very different in structure and use, they are all based on the same foundation. Accurate

More DetailsDig Deeper## Value at Risk Calculations using Matrices and Monte Carlo Simulations

When assessing the value at risk of groups of assets in a portfolio, complex correlations and variances are calculated, which must then be interpreted into a VAR number that makes sense. Variance/covariance matrixes are useful in multi-asset portfolios, so it is important to understand the matrices and their uses. An advantage of the covariance/matrix approach is that the calculation captures

More DetailsDig Deeper## Value at Risk Calculations using the Mean Variance/Covariance Method

The three standard approaches to calculating Value at Risk (VaR) are the mean variance/covariance method, the historical simulation method, and the Monte Carlo simulation method. This learning unit focuses on the mechanics and application of the mean variance/covariance method and makes comparisons to the historical and Monte Carlo simulations methods. The mean variance/covariance approach uses three steps: analyze potential volatility,

More DetailsDig Deeper## Value at Risk Principles & Building Blocks

Value at Risk (VaR) is a statistical method for managing risk that is an important component of any institution's risk management program. VaR programs are typically structured with four parts: understanding the risks taken; measuring the risks; controlling and hedging the risks; and communicating the risks to the appropriate parties. VaR has two main advantages over previous risk management techniques.

More DetailsDig Deeper## Trigger Swaps

Trigger swaps allow bank clients to hedge two types of exposures in a single transaction - most often interest and exchange rates, exchange rates and commodity prices, or commodity prices and interest rates. Consolidating multiple hedges allows clients to reduce documentation requirements, counterparty risks, and transaction costs, while accomplishing the primary goal of smoothing overall cash flow volatility. From the

More DetailsDig Deeper## Value at Risk Applications

Bankers who would not normally encounter this level of complexity can see how the Value at Risk process works and understand, by applying the results of the VaR calculations, why their bank might decide to modify its portfolios. The three main techniques for calculating VaR are the covariance, historical simulation, and Monte Carlo simulation methods. This unit describes calculations for

More DetailsDig Deeper## Structured Note Features

Intermediaries can generate substantial revenues by tailoring bonds to match investor's interest rate and risk requirements. Financial engineering and investor demand have created numerous varieties of structured notes. A structured note is a bond with an embedded derivative. It is extremely flexible. The coupons and/or principal payments can be linked to equity prices, market indexes, foreign exchange rates, commodity prices,

More DetailsDig Deeper## Swap Market Values

The mark-to-market value of swaps is based on the present value of the cash flows embedded in the swap, which can be calculated using zero-coupon rates and forward rates. The mark-to-market value is the difference between the present values of the fixed cash flows and the floating cash flows. The mark-to-market value is used when terminating swaps through negotiation between

More DetailsDig Deeper## Swaption Pricing

Swaptions bring an option element into a forward starting swap by allowing buyers of the swaption to decide, on the forward date, whether or not they still want to enter into the forward swap. A swaption gives the buyer the right but not the obligation to enter into a swap on a pre-determined day in the future at an agreed

More DetailsDig Deeper## Systemic Risk Factors

Risk is a fact of life in financial transactions: from the decision to buy or sell any financial instrument, to the choice of one's intermediary, to the clearance and settlement process, every decision must be made with attention to and management of risk. All participants, procedures, systems, rules, and procedures create, bear, manage, and assume risk. Risk management is vital

More DetailsDig Deeper## Term Structure Yield Curves and Interest Rate Risk Management

The critical step is to apply measures of interest rate risk to current and expected yield curve environments, to develop correct interest rate risk management strategies. As discussed in other units, the foundational fixed income risk and return metrics make simplified, unrealistic assumptions, to establish a common, unambiguous analytical framework. But effective interest rate risk management requires a more realistic

More DetailsDig Deeper