Fixed Income Options
E-mail education@icmagroup.org to register your interest
This course is available on request. Contact us as at education@icmagroup.org to find out how we can deliver this training.
Course Outcomes
By completing this course you will be able to:
- Outline the characteristics of the key fixed income option product suite
- Explain the intuition of how interest rate options are valued
- Distinguish between historical, implied, and forward volatility
- Define and apply the main measures of option risk management
- Identify how, empirically, implied volatility deviates from the pricing model assumptions
- Explain the main ways in which yield curves move
- Identify how the options could be used to hedge fixed income exposures
- Construct a series of strategies that could be used to express views on how yield curves are expected to move
- Construct strategies that will benefit from movements in implied and forward volatility
- Explain the mechanics of structured products with embedded interest rate options
Who should attend?
- Junior fixed income traders looking to deepen their understanding of fixed income options
- Middle office and settlement staff seeking to understand the structure and risks of the various structures
- Compliance staff looking to understand the mechanics and applications of the different products
- Investment managers who are looking to understand the risks and returns of the different elements of the product suite
- Quantitative analysts who are less interested in the maths of options but seeking to understand the ways in which the instruments are applied.
Certification and Programme Recognition
This course is certified by ICMA and the ICMA Centre, Henley Business School, University of Reading.
ICMA recommends that 20 learning hours can be associated with this course, based on attended/undertaken hours of study required to successfully complete the learning outcomes.
A Certificate of Attendance will be awarded to those who meet the minimum attendance requirements for this course.
ICMA is a member of the CPD® Certification Service and approved by the Securities & Futures Commission of Hong Kong as provider of Continuous Professional Training (CPT).
Please note that your course certificate of attendance or completion should be sufficient to satisfy any professional development requirements – if you require further evidence, please contact us at education@icmagroup.org.
The syllabus is divided into several topic areas, which are then broken down into multiple subtopics:
- Fixed income options – a review of the building blocks
- Review of interest rate swaps (spot and forward starting swaps)
- Caps and floors
- Swaptions (European, American, and Bermudan structures)
- Mid-curve swaptions (options on forward starting swaps)
- Callable bonds
- Valuation and risk management
- Valuing interest rate options – the intuition
- Black 1976
- Put call parity
- Cap floor parity
- Swaption parity
- Interest rate volatility
- Realised volatility
- Implied volatility
- Lognormal
- Normalised
- Option risk management
- Delta
- Gamma
- Vega
- Theta
- Characteristics of implied volatility
- Skews, smiles, smirks
- Term structures
- Valuing interest rate options – the intuition
- Applications
- How do yield curves move? The empirical evidence
- Using options to hedge a fixed income exposure
- Extendible / Cancellable swaps
- Swaptions and mortgage-backed securities
- Expressing views on the yield curve
- Directional strategies
- Slope trades
- Cap spreads
- Conditional curve trades
- Spread options
- Curvature trades
- ‘Vertical’ ‘flies
- Expressing views on volatility
- Swaption straddles
- Volatility triangles (swaptions; caps and floors)
- Expressing views on forward volatility
- Defining forward volatility
- Forward volatility agreements
- Embedding options into structured solutions
- Range accruals
- Inverse floaters
At ICMA Education & Training you can choose from a variety of ways to improve your knowledge and bring your career forward, choosing the option that best adapts to your needs and lifestyle.
Classroom
Participating in courses in a physical classroom setting is a great opportunity to network with peers and spend some time with the trainer as well as colleagues and counterparties, not to mention engage with the content and learn in a truly interactive fashion. Traditionally our most popular delivery format, classroom-based training offers a truly unique experience and will continue to be one of the foundations of ICMA training.
Liverstreamed
Learning in a digital environment has several advantages and is growing in popularity as a medium of instruction. ICMA courses are delivered via video conferencing accessed on our digital learning platform, using the most effective educational approaches and incorporating interactive functions like virtual breakout rooms.
Self-Study Online
ICMA Education & Training provides content, including videos and presentations, on our learning platform, which also features online assessments, digital certification, and fully downloadable course materials. Choose to study at your own pace in an environment that suits you best. Our self-study courses cater to a variety of learning styles, and we regularly add new courses to our portfolio.
Whether you need us to develop fully customised training programmes to help your staff meet regulatory compliance standards or support your graduate programme or you are simply interested in running one of our accredited off-the-shelf courses for your team, we can help you bring your team up to speed.
To find out more about how to arrange training for your firm, please email education@icmagroup.org.
