Interest Rate Risk Management

For the 3 decades before 2022 interest rate movements were predominantly one-way – DOWN. That period also saw historically low interest rates resulting in many corporations suspending interest rate risk management activities and thereby losing the knowledge, skills and expertise to manage interest rate risk efficiently and effectively.

The Interest Rate Risk Management course is focussed on explaining how corporations identify, quantify, manage and report interest rate risk and addresses the issues involved and how corporations can, through prudent hedging programs, help mitigate losses associated with movements in interest rates. 

It also provides an introduction to “value-at-risk” and how it can be used to quantify and manage interest rate risk in a corporate treasury. Interest rate risk management policies and procedures and credit risk management are also addressed including examples.

Content:

• Session 1
• Market Risk Management
• the risk/return trade-off and risk appetiteM
• emotive influences
• the concepts of value-at-risk
• Financial Mathematics
• Present value v future value
• Simple v compound interest
• Zero coupon bonds
• Session 2
• Yield Curves
• Constructing a yield curve
• The important forward curve
• Are yield curves accurate predictors?
• Interest Rate Swaps
• Fixed for floating interest rate swaps
• Cross-currency interest rate swaps
• How to use swaps
• Session 3
• How Corporations Manage Interest Rate Risk
• How much to hedge
• How long to hedge
• Which approach works best?
• Session 4
• Policies, Procedures and Key Controls
• What makes a good policy (examples)
• Examples of procedures manuals
• Key controls and checklists
• Managing Credit Risk
• The meaning of credit ratings
• Types of credit exposures
• Credit concentration risk