Introduction

• The concept of market risk
• Hedging treasury risk
• Speculating for profit

The Money Market

• The money market defined - a short term market for wholesale funds
• Establishing the cost of liquidity - LIBOR
• Money market instruments
• Bank of England open market operations

Spot Foreign Exchange

• The spot market and its uses
• The two way price
• Cross Rates

Forward Foreign Exchange

• Forward foreign exchange defined
• Uses
• Two way quote
• Derivation of forward points

Bonds

• Bonds defined
• Fixed v floating
• Pricing - clean/dirty price
• Yields - simple and gross redemption
• Term structure of interest rates - the yield curve
• Constructing yield curves
• Types - government, corporate and eurobond
• Credit ratings

Forward rates

• Forward rates agreements (FRAs) defined
• Calculating forward rates
• Settlement
• Uses

Financial Futures

• Futures defined
• How do they work
• Calculating the fair value
• Centralised counterparties and margining
• Short term interest rate futures (STIRs)
• Compared to FRA’s

Interest Rate Swaps

• Swaps defined
• Uses
• Pricing
• Valuation
• Variations