Interest Rate Derivatives, Fall 2018

Department of Statistics and Quantitative Methods, Università Milano-Bicocca

Course page: https://elearning.unimib.it/course/view.php?id=19623

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Learning objectives

The course has a practitioner approach, presenting the current market best practices, often not yet documented in textbooks. Lecturers from the street are invited: traders, risk-managers, quants, consultants. The course aims to provide the students with the background usually tested when applying for investment banks in the interest rate derivatives area.

Contents

Interest Rate and Credit models and derivative products (linear products, plain vanillas, and exotics), with special emphasis on rate/credit curve construction and collateralization issues.

  • Interest Rate FRA, Futures, and Swaps
  • Rate curve bootstrapping in multi-curve regimes
  • Black Model
  • Interest rate volatility: par, forward, no-arbitrage, and SABR
  • Term structure models: equilibrium, no-arbitrage, short rate, and market models
  • Caps and Floors, Swaptions, and Bermudan Swaptions
  • Credit Default Swaps
  • Credit curve bootstrap
  • Counterparty risk: clearing, collateralization, and valuation adjustments
  • Market risk management: greeks and static replica of products

Prerequisites

Derivatives, stochastic processes, risk measures

Teaching method

Assessment method

Oral examination based on the lessons’ material and the included references.

Textbooks and Reading Materials

  • John Hull, Options, Futures and Other Derivatives, 8th edition
  • Paul Wilmott, on Quantitative Finance

Teaching language

Usually Italian, English if foreign students are present.

Lessons’ calendar and material

Workshops are with Paolo Mazzocchi (material)

  1. 2018-10-11 11:30-14:30 U7 Lab 719
    Interest Rate Basics (slides)
  2. 2018-10-18 11:30-14:30 U7 Lab 719
    Rate Curves Calibration (slides)
  3. 2018-10-25 11:30-14:30 U7 Lab 719
    Workshop on Interest Rate Basics
  4. 2018-11-08 11:30-14:30 U7 Lab 719
    Credit Derivatives (slides)
    XVAs with Andrea Prampolini (slides)
  5. 2018-11-15 11:30-14:30 U7 Lab 719
    Black Model (slides)
    Volatility with Nicola Moreni (slides)
  6. 2018-11-29 11:30-14:30 U7 Lab 716
    Workshop on Rate and Credit Curve Bootstrapping
  7. 2018-12-06 11:30-14:30 U7 Lab 718
    Caps and Floors with Carlo Clerici (slides)
    Workshop on Caps and Floors
  8. 2018-12-13 11:30-14:30 U6-37
    Swaptions (slides)
    Workshop on Credit
  9. 2018-12-20 11:30-14:30 U7 Lab 718
    Interest Rate Models (slides)
    Workshop on Greeks and Hedging
  10. 2019-01-10 12:30-14:30 U6 26
    Workshop on Bermudan Swaptions and Final Assignment
    Anonymous course evaluation forms will be collected