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Swaps and basic risk-management applications

Derivatives / derivatives and risk management · Lesson 4 of 4

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Lesson 4 of 4 · Derivatives / derivatives and risk management

Swaps and basic risk-management applications

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By the end you’ll be able to

describe the basic characteristics of swaps and explain how swap cash flows are determined for the counterparties
calculate and interpret the net cash flows of a plain vanilla fixed-for-floating interest rate swap
describe the basic structure and uses of currency swaps and compare them with interest rate swaps

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apply forwards, futures, options, and swaps to basic risk-management problems involving equity, interest rate, commodity, and foreign exchange exposures

evaluate the advantages and limitations of using derivatives for hedging, including basis risk, counterparty risk, and the trade-off between cost and protection

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