_Liquidity Transformation and Managing Basis Risk
_The Deposit Market is dead – long live the Repo Market!_Story
In a 4-day market simulation teams of participants run a money market book as traders. Taking into account market movements, legal requirements and risk limits they develop better trading strategies day by day and their decisions become ever cleverer and better founded. In the end, the share price determines the winning team.
_Learning for the real world
Spotting the correlation between FX swaps and interest forwards and using it for one‘s trading strategy
- Forward Rate Agreements and Money Market Futures: valuation of micro and macro hedges, trading and closed trading positions, influence of the yield curve on trading possibilities, yield curve trading with forward rate agreements, arbitrage of FRAs and outrights
- FX Swaps: pricing of FX swaps, valuation of micro and macro hedges, computing and hedging the liquidity and/or foreign exchange tail risk of FX swaps, forward forward swaps and their use in interest risk management
Understanding and using repos
- Markets and market conventions for repos, use of repos and their potential
for the money market desk (equity requirements, credit risk and partner
limits), comparison of repo strategies with FRA, OIS, EONIA and interest rate
swap strategies, arbitrage opportunities
Understanding and using different varieties of swaps
- Interest Rate Swaps (IRS) and Cross Currency Swaps: using swaps to reduce financing
costs; coupon swaps, EONIA swaps, basis swaps, cross currency interest
rate swaps, opportunities for arbitrage between IRS and FRA, counterparty and
liquidity risk, partner limits for swaps, valuation of swaps
Using options strategies in the money market book
- Interest Options, Caps and Floors: pricing, volatility and time value, covered and uncovered caps and floors, options strategies; opportunities for arbitrage between interest options and FRAs/futures
Increasing profitability by properly managing liquidity and basic risk in money market trading
- Liquidity management and the influence of liquidity risk contribution on the result of strategies in the money market
- Measuring, managing and trading basic risks in the money market book
- Consequences of OIS for money-market dealing strategies
_Target Group
- Traders in the money and foreign exchange markets and from other Treasury areas
- Bankers from controlling, risk management, corporate desk and auditing departments with experience in trading of deposits, spots and outrights as well as derivatives