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Bond Derivatives

Learn about Bond Derivatives, Their Applications, Who Uses Them and Why

Bond Derivatives Online Training

A one-day course

This bond derivatives course is a 'must-know' for:
  • Asset Managers
  • Junior Traders
  • Sales
  • Middle office
  • Risk
  • Compliance
  • Anyone wanting to understand the Bond Derivative Markets

  • Takes complicated bond issues such as bond and swaps pricing and makes them easy to understand.
  • Exercises, case studies and simulations are used to make complicated maths easy to appreciate. The use of a simple calculator or basic excel knowledge is all that’s required
  • You will gain an understanding of how bond and derivative markets work in practice
  • Interactive style makes it easy to ask questions
  • Practical approach means participants see how the market works in the “real world”
  • A “learning by doing” approach ensures that more knowledge is retained after the course.

  • Gain a thorough knowledge of why bond derivatives are essential to the efficient running of modern capital markets
  • Understand the different risks of bond and how they can be synthetically recreated through derivatives
  • Understand how derivatives can be used to alter the risk profile of a bond or hedge against its risks
  • Be able to create these structures or hedges in “real-life scenarios”
  • Be able to use Government bond derivatives to create caps, floors and collars and therefore control interest rate risk
  • Use interest rate swaps to alter the fixed or floating nature of a bond, allowing the issuer to source cheaper funding
  • Use cross-currency swaps to be able to issue in various currencies to gain cheaper funding or to increase/decrease Foreign Exchange (FX) exposure
  • Use Credit Derivatives to manage credit risk when buying/investing in bonds

Risk and the need for bond derivatives

  • Bonds and risk profile bond issues
    • Interest Rate Risk Fixed v Floating
    • Currency Risk
    • Default and Spread Risk
    • Making Bonds more attractive to investors (Embedded Options)
  • Measuring Risk
    • Duration and PV01
    • Steepener / Flattener Yield Curve Shifts

Types of Bond Derivatives and Their Uses

  • Exchange-Traded Interest rate derivatives
    • Government bond futures
    • Government bond options
    • Calls and puts on yields and prices
    • Case Study: Using bond futures and options to create synthetic structures
    • Case study: Using Options to Hedge Risk
    • Yield and price caps, floors and collars
    • Exercise: Course participants are asked to create a collar using bond futures contracts
  • Interest rate swaps
    • Basic pricing of an IRS
    • Hedging bonds with IRSs
    • The hedge ratio
    • Dynamic hedging
    • Asset swap bonds
    • Basis swaps
  • Options on interest rate swaps
    • Swaptions
    • Payers and receivers swaptions
  • Currency derivatives
    • Cross-currency swaps
  • Credit risk derivatives
    • Credit default swaps
    • Bond Total return swaps

Who uses the markets and why? - This module explores the market participants and their objectives

  • Bond Issuers of Convertible Bond Derivative
    • Issuing fixed coupon bonds and swapping into floating as they wish to raise floating rate debt – a traditional bond and swap
    • Debt in a currency that they do not need but swap into a currency they do need using either a currency swap – a traditional bond and currency swap
    • Issuing and Valuing Convertible Bonds as Derivatives. Allowing the issuer to borrow money at cheaper rates
  • Case studies: Participants create structures to solve various client bond issues, such as:
    • Creating a bond issue cheaper than cash markets
    • Swapping a bond already issued into another currency to take advantage of cheaper rates and a weakening currency
    • Using cds to manage risk in corporate bond investments
    • And more….

The bond derivatives course trainer worked in Investment Banks including HSBC and Bank of Montreal for nearly 20 years. During this time, he worked in Operations and then as a trader, running books in FX, Equities bonds and derivatives.

The trainer has run courses all over the world including Amsterdam, Dublin, London, New York, Hong Kong, Singapore, Jakarta, Johannesburg, Delhi, Accra, Johannesburg etc.

The trainer delivers courses which focus on providing a practical and in-depth understanding of the markets from a Trading, Operations and Risk viewpoint. His courses are interactive and stimulating, offering delegates the opportunity to participate in an environment which encourages free discussion of the real bond issues faced in the workplace.

In addition to his training activities, he has undertaken various consultancy projects, such as an in-depth collateral risk assessment at a major European Investment bank.

The trainer held the position of Non-Executive Director of Cazenove’s Derivative Oversight Committee for many years. Acting as a member of the committee in a general consultative capacity to assess the firm’s derivative capabilities and risks.

The trainer has also presented at JPMorgan Forums in London, speaking on topics such as the Benefits and Risks of Derivatives. He along with representatives from the FSA, law firms, hedge funds etc. were asked to give their views on the risks of derivatives to 150 / 200 Directors and senior managers from the top investment firms in the UK.

The aim of this bond derivatives course is to provide participants with an understanding of bond derivatives, their applications, who uses them and why. It addresses products that hedge interest rate risk, currency risk and credit default and credit spread risk.

By the end of this course, participants will be able to understand the key concepts of interest rate, currency, credit default and spread risk.

They will also gain an appreciation of which derivative bond forward contract is used to hedge which risk and under which circumstances it is used. Additionally, participants will learn about the issuer and/or investor motivations and risk profiles of a variety of structures.


Have this course presented In-House

  • On a date, time and in a location of your choice
  • Topics expanded or deleted to your bespoke requirements

Have this course pre-recorded

  • Full course recording edited exclusively for your company
  • Files converted to enable housing on your LMS

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