Managing Interest Rate Risk – Using Financial Derivatives

PREFACE
<br />
<br /> Modern Risk Management and the Non–Financial Sector
<br />
<br /> The Scope and Purpose of the Book
<br />
<br /> The Methodology
<br />
<br /> Risk Management and Risk Quantification
<br />
<br /> The Role of Pricing Derivatives
<br />
<br /> Structure of the Book
<br />
<br /> CHAPTER 1 INTEREST RATE RISK, INTEREST RATE DERIVATIVES AND THE MANAGEMENT FUNCTION
<br />
<br /> Introduction
<br />
<br /> Fundamentals of Interest Rate Risk
<br />
<br /> Financial Derivatives
<br />
<br /> Interest Rate Derivatives
<br />
<br /> The Interest rate Risk Management Function
<br />
<br /> CHAPTER 2 INTEREST RATE RISK MANAGEMENT IN THE NON–FINANCIAL SECTOR
<br />
<br /> Introduction
<br />
<br /> The Critique of Corporate Risk Management
<br />
<br /> In Defence of Corporate Risk Management
<br />
<br /> Conclusion on Corporate Risk Management
<br />
<br /> Maintaining a Sound System of Control
<br />
<br /> Diversification
<br />
<br /> Hedging With Financial Derivatives
<br />
<br /> CHAPTER 3 INTEREST SPOT AND FRA MARKETS
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<br /> The Spot Interest Rate Market
<br />
<br /> Forward Rate Agreements
<br />
<br /> Case Study 1 Using a FRA to Lock in Future Borrowing Rates
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<br /> CHAPTER 4 INTEREST RATE FUTURES CONTRACTS
<br />
<br /> Introduction to Interest Rate Futures
<br />
<br /> An Exchange Traded Forward Rate Agreement
<br />
<br /> A Standardised Contract – the Minimum Conditions
<br />
<br /> Major Interest Rate Futures Contracts
<br />
<br /> Futures Market Terminology
<br />
<br /> The Role of Basis in Interest rate futures
<br />
<br /> The Futures Hedge Ratio
<br />
<br /> Case Study 2 Hedging a Borrowing Rate with Eurodollar Futures
<br />
<br /> Case Study 3 Hedging an Investment Rate with Eurodollar Futures
<br />
<br /> Discussion of the Case Studies
<br />
<br /> CHAPTER 5 INTEREST RATE SWAPS
<br />
<br /> Introduction to Interest Rate Swaps
<br />
<br /> Principles of Interest Rate Swaps
<br />
<br /> Uses of interest rate swaps
<br />
<br /> Structuring Interest Rate Swaps
<br />
<br /> The Swap Rate
<br />
<br /> Practical Interest Rate Swaps
<br />
<br /> Case Study 4 Hedging a term loan with an interest rate swap.
<br />
<br /> Asset Swaps
<br />
<br /> Interest Rate Basis Swaps
<br />
<br /> Case Study 5 Managing Interest Rate Risk with a Basis Swap
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<br /> CHAPTER 6 INTEREST RATE OPTIONS
<br />
<br /> Introduction
<br />
<br /> The Fundamental Principles of Options
<br />
<br /> Option Pricing
<br />
<br /> The Intrinsic Value of an Option
<br />
<br /> The Time value of an Option
<br />
<br /> The Greeks
<br />
<br /> Exercising Options
<br />
<br /> The Risk of the Parties to an Option
<br />
<br /> OTC Interest Rate Guarantees
<br />
<br /> Case Study 6 Locking in a borrowing rate with an IRG
<br />
<br /> OTC Option Variants
<br />
<br /> Options on Interest rate futures
<br />
<br /> Option Standardisation
<br />
<br /> Option Classification
<br />
<br /> Selling Options on Futures
<br />
<br /> Case Study 7 Hedging an interest bearing investment using options on futures
<br />
<br /> CHAPTER 7 STRATEGIES WITH INTEREST RATE SWAPS, SWAPS BASED DERIVATIVES AND SWAPS MIMICS
<br />
<br /> Introduction
<br />
<br /> Strategies with Standard Interest Rate Swaps
<br />
<br /> Case Study 8 A Debt Market Arbitrage
<br />
<br /> Case Study 9 Arranging an Off–Market Swap
<br />
<br /> Swaps Strategies with special terms
<br />
<br /> Case Study 10 Structuring a Callable Fixed Rate Swap
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<br /> Case Study 11 Hedging a borrowing rate with an adjustable fixed rate swap
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<br /> Swaps as the Underlying Asset of Other Derivatives
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<br /> Futures on Swaps
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<br /> Options on Swaps
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<br /> Case Study 12 Hedging the swap rate on future borrowings using a swaption
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<br /> Strategies Mimicking Swaps
<br />
<br /> Case Study 13 Hedging a borrowing rate with a futures strip
<br />
<br /> CHAPTER 8 STRATEGIES WITH INTEREST RATE OPTIONS AND EXOTIC INTEREST RATE OPTIONS
<br />
<br /> Introduction
<br />
<br /> Cost Reduction Strategies
<br />
<br /> Case Study 14 Locking in a borrowing rate with OTM options on futures
<br />
<br /> Case Study 15 Hedging borrowing rates with an interest rate collar
<br />
<br /> Zero Cost Strategies
<br />
<br /> Case Study 16 Hedging future borrowing rates using a borrower′s interest rate lock
<br />
<br /> Case Study 17 Hedging a borrowing rate with a Participating Interest Rate Cap
<br />
<br /> Exotic Options