First approach to products and yield curve

  2 days
Course objectives

  • Understand the yield curve formation and its uses
  • Understand the drivers behinf structured products
  • Understand option risk management
  • Master the first generation exotics
  • Learn how to structure hedging and investments products
Course content

Review of Fixed income basic concepts

  • Zero rates and discount factors
  • Money markets and Forward rates
  • Bond pricing and YTM
  • Deriving the zero curve from par rates
  • Relationship between par, zero and forward rates

Case Study (Excel): Bootstrapping of bond curve, forwards, price/ytm Objective: to ensure a sound knowledge of the different types of rates (par/zero/forwards), spreads (corporate, asset swap spread, z-spread, OAS) and methods for computing them.

Yield Curves

  • Typology of Yield curves
  • Yield Curve theories
  • Implications for structuring FI products
  • Yield curve view formation
  • Trading the yield curve: spreads and butterflies

Case Study: Yield-curve strategic research notes

Objective: to provide the link between technical knowledge acquired throughout the day and macro-economics as expressed in BNPP Research strategic notes.

Swaps : mechanics and use

  • Interest Rate Swaps (IRS)

Case Study: Hedging swaps with bond futures

Objective: to understand the risks resulting from hedging swaps with futures (a common occurrence)

  • Tenor basis swaps
    • Pre-2007 vs. post-2007 levels
    • Implication for pricing: multiple projection curves
  • Cross-currency swaps

Introduction to Equity, FX and commodities markets and no-arbitrage Forwards

  • Equity forwards
  • FX forwards
  • The carry trade: economics common-sense vs. no-arbitrage finance
  • Central banks: Inflation-targeting vs. FX peg
  • Panorama of commodities markets

Case study: Cost-of-carry pricing of a wide variety of commodities forwards

Objective: to see how the cost-of-carry arbitrage is applied to commodities, to understand the benefits associated with physical ownership (e.g. oil, cobalt) and to see when the relationship breaks down.

Introduction to Inflation markets (optional - possible as a 1-day complementary module)

  • Fisher parity
  • Breakeven inflation and components
  • Index-linked bonds: mechanics, drivers, market participants
  • Inflation swaps: mechanics, drivers, market participants

Case study: Quantitative Easing and real yields

Objective: to get used to thinking in ‘real' rather than nominal terms as well as to understand the current low levels of real yieds.




Patrice Robin

Patrice is an independent consultant on derivatives. Previously, Patrice spent 10 years in trading on interest rate derivatives, then structured products, swaps and vanilla options and became head of interest rate and inflation options in Santander Global Markets in London.

Patrice Robin also teaches :