SWAPTIONS

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SUMMARY

This module enables participants to identify the components of a swap and its variations. The focus is on the options available to clients to customize their swap structure to meet their exposure management goals. Structure and pricing are covered in detail.

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OBJECTIVES

Upon completion of this module, participants will be able to:

1. Identify the structure of a plain vanilla swap and live–quote adjustments to US Prime and commercial paper.

2. Diagram borrowers and investors positions in a swap.

3. Describe the structure of a basis swap.

4. List the uses of a basis swap.

5. Describe the structure, pricing and use of a deferred swap.

6. Calculate the adjustment to a deferred swap rate.

7. Describe the structure, pricing and use of an amortizing swap.

8. Calculate a blended and weighted average amortizing swap rate.

9. Describe the structure, pricing and use of a drawdown swap.

10. Calculate the adjustments and blended pricing of a drawdown swap.

11. Discuss innovative structures and combinations.

12. Link and compare structures in the interest rate and foreign currency swap markets.

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