What you'll learn

Learn about the workings of Interest Rate Derivatives in Capital Markets based on real-world, practical and rigorous information.
Understand Interest Rate Derivatives: Grasp the functional details of interest rate derivatives and applications of interest rate swap use cases.
Master IR Swap Pricing: Learn the end-to-end workflow to price interest rate swaps and understand their valuation.
Build Interest Rate Curves: Develop skills in constructing and utilizing interest rate curves for financial analysis and decision-making.
Cap and Floor Valuation: Gain expertise in pricing interest rate caps and floors, essential for risk management strategies.
Understand Interest Rate Parity theory in foreign exchange markets
Understand Main and Money currency terminology in foreign exchange markets
Value at Risk: Understand the algorithms for Parametric VaR, Monte Carlo VaR, Historical VaR and be able to compare the methods and its pros and cons
Understand Central Bank Policy Implementation: Understand how the Federal Reserve acts in the market to influence the Fed Funds rate to achieve its goals..
Navigate Capital Markets: Understand the functional areas of capital markets and their roles in the financial ecosystem.

Course content

15 sections • 15 lectures • 6h 19m total length

Introduction and Overview8:06
At the end of this lecture, students will be able to:

1. Understand the course structure and duration.
2. Identify the topics covered in each of the 10 lectures.
3. Recognize the sequence and prerequisites for course topics.
4. Assess the depth of material relative to MBA-level courses.
5. Prepare for subsequent sessions by reviewing terms and definitions.

Interest Rate Fundamentals26:01
At the end of this lecture, students will be able to:

1. Explain the relationship between bond prices and interest rates.
2. Calculate spot rates from given bond prices.
3. Define and apply different compounding conventions.
4. Compute future value using quarterly compounding.
5. Generalize the compound interest formula for any number of periods.
6. Distinguish between various day count conventions (basis).
7. Calculate cash flows for financial instruments using different bases.
8. Understand and calculate discount factors using zero rates.
9. Describe the concept of instantaneous short rates in interest rate models.
10. Define forward rates and understand their application in financial contracts.

These outcomes provide a clear understanding of key concepts in finance related to interest rates, bonds, and compounding, which are essential for professionals working in banking or finance-related fields.
5 Multiple Choice Questions on Interest Rate Fundamentals

Interest Rate Financial Instruments and Derivatives18:43
At the end of this lecture, students will be able to:

1. Define money market instruments and their purposes.
2. Explain the role of interbank loans in financial markets.
3. Describe discount notes and how they differ from Fed Funds loans and deposits.
4. Understand Forward Rate Agreements (FRAs) and their cashflows.
5. Calculate netted discounted cashflow payments in FRAs.
6. Compare Eurodollar futures with FRAs.
7. Identify the characteristics of Interest Rate Swaps (IRS).
8. Recognize different types of swaps and their conventions.
9. Interpret terms specific to interbank loans such as Overnight, Spot Next, etc.
5 Multiple Choice Questions on IR Financial Instrument and Derivativatives

Valuation of Swaps and Swap Use Cases42:06
At the end of this lecture, students will be able to:

1. Understand interest rate swaps and their objectives.
2. Explain the purpose of interest rate swaps.
3. Describe how interest rate swaps manage exposures.
4. Analyze cashflows in interest rate swaps.
5. Calculate fixed and floating rates in swaps.
6. Value swaps using discounted cashflow methods.
7. Account for collateral in swap valuations.
8. Apply swaps for comparative advantage in borrowing.
9. Hedge bond issuance interest rate risk with swaps.
10. Create synthetic Treasury bond returns with funding.
5 Multiple Choice Questions on Valuation of Swaps and Swap Use Cases

End-to-End Workflow to Price an Interest Rate Swap9:13
At the end of this lecture, students will be able to:

Students will be able to understand each step for pricing a swap and the dependencies among the steps.
1. Identify key economic inputs for swap pricing.
2. Detail a swap's static data and its implications.
3. Specify counterparties and their roles in swaps.
4. Input clearing house and broker information.
5. Organize portfolio and booking hierarchy data.
6. Load and interpret floating rate index market data.
7. Understand that collateral support agreements (CSAs) to price a swap
8. Derive discount indices for swap legs.
9. Calculate fees/spreads for CVA, DVA, FVA.
10. Compute initial margin requirements for swaps.
11. Build zero rate curves and derive forward rates/discount factors.
12. Generate cashflows and accruals for each leg of the swap.
13. Calculate NPV for individual cashflows using correct discount factors.
14. Determine the overall NPV of an interest rate swap.

These competencies will equip students with a comprehensive understanding of the end-to-end workflow involved in pricing an interest rate swap within a financial or banking context.
5 Multiple Choice Questions on End-to-End Workflow to Price Interest Rate Swaps

Building of Interest Rate Curves41:50
At the end of this section, students will be able to:

1. Understand the purpose and concept of building interest rate curves.
2. Estimate fair interest rates using a rational approach.
3. Calculate zero rates and understand their significance in finance.
4. Utilize financial instruments to build and represent interest rate curves.
5. Calculate zero rates from discount bonds and interpret term structures.
6. Derive zero rates for money market instruments, futures, and swaps.
7. Imply zero rates to calculate par value of derivatives including swaps.
8. Understand the role of swaps in building interest rate curves.
9. Understand the relationship between money market rates, futures prices and swap rates.
10. Perform interpolation of zero rates between known data points.
11. Understand extrapolation in financial models.
12. Discuss liquidity considerations in instruments.
13. Blend money market, futures and swap segments of the curves.
14. Convert futures prices to forward rates and understand their use in curve construction.
15. Understand the structure of LIBOR and SOFR swaps.
16. Build a complete swap curve using market data.
17. Construct a complete yield curve using market data up to 30 years maturity.

Students will learn how to construct a comprehensive zero rate curve using various financial instruments, ensuring no arbitrage opportunities exist, and apply it effectively in financial analysis.
6 Multiple Choice Questions on Building of Interest Rate Curves

FX Concepts: Main/Money and Interest Rate Parity17:40
At the end of this lecture, students will be able to:

1. Define Interest Rate Parity (IRP) and its significance.
2. Calculate forward exchange rates using IRP.
3. Illustrate the concept of IRP with a numerical example.
4. Differentiate between spot and forward FX rates.
5. Compute today's FX rate using zero rates and interest rate parity.
6. Identify Main and Money currencies in currency pairs.
7. Apply correct multiplication or division for FX conversions.
8. Understand exchange rate quoting conventions.
10. Recognize common currency pair conventions in capital markets.
5 Multiple Choice Questions on FX Concepts Lecture

Caps and Floors Pricing26:57
At the end of this lecture, students will be able to:

1. Define caps and floors in interest rate markets.
2. Calculate payoffs for caplets and floorlets.
3. Understand the shift from Black-Scholes to Bachelier models.
4. Price caplets using forward rates and normal volatilities
Understand volatility adjustments to take into account smile/skew.
Be aware of stochastic volatility as one contributor to volatility and skew.
5. Interpret market data for cap volatilities.
6. Calibrate caplet volatilities from market cap vols.
7. Validate calibration of a volatility surface.
8. Identify practical greeks for risk management of caps and floors.
9. Apply knowledge to real-world trade entry screens for caps/floors.
5 Multiple Choice Questions on Caps and Floors Pricing Lecture

Swaptions and Callable Swaps1:02:25
At the end of this lecture, students will be able to:

1. Define and explain the structure and purpose of interest rate swaptions and callable swaps.
2. Identify different naming conventions and types of swaptions (payer vs. receiver, European, Bermudan, American, 2into5, 7nc2) and their applications.
3. Know the fields and layout of a swaption trade screen.
4. Utilize callable swaps for managing prepayment risks in mortgage portfolios or callable debt instruments.
5. Understand how callable swaps hedge callable fixed-rate debt.
6. Compare callable swaps with swaptions in terms of flexibility, cost, and user profiles.
7. Analyze the pros and cons of swaptions over swaps when hedging refinancing risk.
8. Understand pricing models for European swaptions, including Bachelier and Hull & White models.
9. Use Bachelier's formula to price swaptions under normal volatility assumptions.
10. Calculate closed-form Greeks (Delta, Gamma, Vega) using Bachelier's model.
11. Recognize key inputs required for pricing European swaptions, such as interest rate curves, volatilities, and smiles.
12. Define Bermudan swaptions and their valuation complexities compared to European versions.
13. Apply the numerical method of a trinomial tree for pricing Bermudan swaptions using Hull & White.
14. Understand backward induction on the tree to compute Bermudan swaption prices.
15. Understand how European swaptions are used as calibration instruments for Bermudan swaptions.
16. Compute risk measures like Delta, Gamma, and Vega using both closed-form and practical approaches for Bachelier pricing models.
17. Identify key post-trade operational requirements for swaptions.

This lecture provides a deep analytical and practical understanding of swaptions and callable swaps.

Value at Risk (VaR)25:34
At the end of this lecture, students will be able to:

1. Explain the purpose and use of Value at Risk (VaR) as a statistical market risk measure.
2. Understand Parametric VaR aka Variance-Covariance Approach.
3. Understand Monte Carlo VaR.
4. Understand Historical VaR.
5. Ability to assess which method is most applicable to a portfolio or trading activity.
6. Describe the pros and cons of each method.

This lecture provide an overview of the key concepts of Value at Risk in finance related to fixed income, interest rate derivatives and FX products.

Requirements

Knowledge of the English language
Basic Understanding of Financial Markets
Solid foundation in high school-level mathematics
No programming experience required
Some basic Excel skills are helpful to replicate examples

Description

Welcome to "Mastering Interest Rate Derivatives," the definitive online course designed for finance and interested engineering professionals, undergraduate and graduate students, consultants and analysts eager to deepen their understanding of the complex world of interest rate derivatives. This comprehensive course demystifies the intricate mechanisms of interest rate markets, offering learners a robust foundation in the theories, practical applications, and strategic insights needed to navigate this dynamic sector successfully.

What You Will Learn:

Interest Rate Fundamentals: Grasp the core concepts behind interest rates, including the theories and economic factors that influence their movement.
Interest Rate Financial Instruments and Derivatives: Gain a deep understanding of various interest rate financial instruments and derivatives, including their structures, purposes, and how they are used in the market.
Valuation of Swaps & Swap Use Cases: Dive into the valuation techniques of swaps and explore their diverse applications in hedging and speculating.
End-to-End Workflow to Price an Interest Rate Swap: Put theory into practice with a detailed walkthrough of pricing an interest rate swap, from entering economic information, generating curves with proper assumptions and calculating the value and greeks of the swap.
Building Interest Rate Curves: Learn the art and science of constructing interest rate curves, a critical tool for pricing and risk management in the fixed income markets.
Cap and Floor Pricing: Master the valuation and application of caps and floors, essential for managing interest rate exposure.
Swaptions: In depth lecture covering types of swaptions, use cases of callable swaps and swaptions and an in depth discussion of the Bachelier and Hull&White model to price and risk manage these products.
Swap Real-World Use Cases: Explore practical examples of how swaps are used in the real world for various purposes, including hedging, speculation, and arbitrage.
FX Concepts and IR Parity: Understand the interrelationship between foreign exchange and interest rates, and how it affects international finance.
Collateral Management: Learn collateral workflows, margin calculations, optimization strategies, and regulatory frameworks for the main capital market asset classes, bi-lateral and cleared swaps, exchange traded derivatives, repos/securities lending and TBAs. Collateralized loans, as there are not strictly Capital Markets and very broad, (except TBAs) are not covered in this lecture.
The Federal Reserve System & FHLBs: Gain insights into the role of major financial institutions like the Federal Reserve System and the Federal Home Loan Banks in the interest rate derivatives market.
Capital Markets Functional Areas: Explore the broader capital markets landscape, including the functional areas and their connection to interest rate derivatives.

Why Enroll in This Course:

Expert Instruction: Learn from seasoned professionals with years of experience on FICC trading floors and treasury departments in New York.
Comprehensive Curriculum: This course covers everything from basic concepts to advanced strategies in interest rate derivatives.
Practical Skills: Gain hands-on experience with real-world case studies, exercises, and an end-to-end workflow to apply what you've learned.
Flexible Learning: Study at your own pace, with lifetime access to course materials on Udemy's user-friendly platform.

Enroll Now and unlock the skills to master interest rate derivatives, leveraging this knowledge to advance your career, make informed investment decisions, and contribute to your organization's success in the financial markets.

Who this course is for:

Professional Junior Analyst: Ideal for junior analysts in finance, particularly in roles related to capital markets, risk management, or derivatives trading, who have a basic understanding of the field and seek to deepen their knowledge.
College with Major in Finance: Perfectly suited. The course content is directly relevant to finance majors, covering essential topics that would significantly enhance their understanding of interest rate derivatives, financial markets, and instruments. It's likely to complement and deepen the knowledge gained from their other finance courses, providing practical insights into complex financial instruments and market dynamics. This could serve as an advanced elective or part of a specialized track within the finance major.
College with Minor in Finance: Also very well-suited, though the level of detail and the advanced nature of some topics might be challenging for students who have a more limited background in finance. However, for those minoring in finance with a keen interest in capital markets and derivatives, this course could offer a valuable deep dive into areas not fully explored in more general finance courses. It would provide a solid foundation for those considering a career in finance or related fields, even if their major is in another discipline.
Engineering College: Potentially suitable for upper-level undergraduates or postgraduates specializing in financial engineering, but the focus is not primarily on engineering aspects.
Senior Analyst: Highly relevant. Senior analysts, especially those specializing in interest rate derivatives, capital markets, or related areas, would find the course content directly applicable to their work.
Graduate School: Well-suited for graduate students in finance, economics, or related fields, especially those focusing on financial markets, instruments, and derivatives.
Executive: Suitable for executives who need a comprehensive understanding of interest rate derivatives for decision-making, strategy, or oversight, especially within financial institutions or investment firms.
College General: Likely too advanced for general college courses, except possibly for upper-level elective courses in finance or economics majors.
High School: Not suitable or only for gifted students in specialized course. The content is too advanced and specialized for high school curricula.

What you'll learn

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Course content

Introduction1 lecture • 8min

Interest Rate Fundamentals1 lecture • 26min

Interest Rate Financial Instruments and Derivatives1 lecture • 19min

Valuation of Swaps and Swap Use Cases1 lecture • 42min

End-to-End Workflow to Price an Interest Rate Swap1 lecture • 9min

Building of Interest Rate Curves1 lecture • 42min

FX Concepts: Main/Money and Interest Rate Parity1 lecture • 18min

Cap and Floor Pricing1 lecture • 27min

Swaptions and Callable Swaps1 lecture • 1hr 2min

Value at Risk (VaR)1 lecture • 26min

Requirements

Description

Who this course is for: