Swaps are derivatives transactions that involve an exchange of one set of cash flows for another. These derivatives mitigate price risk by reversing a natural long or short position and offer the user the choice of fixed or floating rate.

The benefits of swaps trading have allowed the business to evolve into global and robust over-the-counter (OTC) markets. Today under the Dodd-Frank Act, OTC swaps are being transitioned from a multi-lateral trading model to a Central Counter Party (CCP) model which requires that swaps be cleared and traded on either a designated contract market (DCM) or a swap execution facility (SEF), a new regulated transaction platform.

This one-day course is designed to introduce swaps and the key features and characteristics of these contracts. The educational program explores the world of swaps by taking a closer look at two of the most popular swaps— interest rate swaps (IRS) and credit default swaps (CDS) — and how financial institutions and corporates use swaps in their portfolio management strategies. In addition, the program looks at how swaps differ from listed derivatives and the changing landscape with a migration to the CCP model.

Learning Objectives:

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• Describe the nomenclature used in the swaps marketplace
• Understand the motivation to use swaps
• Conceptualize how much would you pay for a swap
• Define the margin requirements for swaps
• Understand the unique characteristics of CDS
• Comprehend how most swaps are portfolios of Forward Rate Agreements (FRAs) or futures bundled together
• Recognize listed alternatives for IRS
• Explain the settlement process
• Understand how credit events are handled
• Comprehend the differences between multilateral and CCP models and understand regulator and market participant concerns

Who Should Attend?

Anyone who works with the implementation of Dodd-Frank and needs to understand how swaps differ from listed futures. Attendees include the core users of these products such as traders, cash/money managers, asset managers, hedge fund managers, CTA's/CPO's, and portfolio managers as well as sales and back office professionals, financial analysts, auditors, compliance and regulatory staff.

Level:

Intermediate. A prior understanding of the bond market would be helpful, although not required.