Quick Find:
Trading and Hedging Short-Term Interest Rate Risk
Attending the course will help you:
  • Look at hedging with STIR futures
  • Find out about market directional, relative and curve trades
  • Understand monetary policy and the yield curve

Course background

The course looks at over-the-counter and exchange-traded instruments related to short-term interest rates.  These instruments are compared and contrasted in terms of interest rate exposure and credit risk and their relative value is assessed as tools for hedging and expressing views about changes in the yield curve.

Who should attend?

Participants should have a basic understanding of fundamental financial market concepts such as present value, risk and return.  Although no prior knowledge of interest rate derivatives is assumed, familiarity with the basic types of derivative security (forwards and futures, swaps and options) is recommended.

Course Tutor

David Oakes

David trained as an economist at the London School of Economics and was lecturer in finance at the University of Exeter and Warwick Business School before joining the ICMA Centre at the University of Reading as Director of Academic and Professional Education in 1998. He co-ordinated ICMA Executive Education programmes from 1994-2004. David left the Centre in 2004 to set up Dauphin Financial Training Inc., which delivers advanced financial markets training to investment banking clients in New York and around the world.

Course Outline
Session 1 Contents
Money market rates and instruments • Interbank deposits (LIBOR, Euribor) and Certificates of Deposit
• Treasury Bills, Bank Bills and Commercial Paper
• Repurchase agreements
Session 2 Contents
Short-term interest rate (STIR) futures • Eurodollar STIR futures
• Margining, clearing and settlement
Forward rate agreements (FRAs) • FRA settlement
• Convexity in FRAs
Hedging with STIR futures • Basis point value (BPV) of money-market
• Hedging and basis risk with STIR futures
• Implementing Eurodollar STIR futures hedges
with packs and bundles
Session 3 Contents
Central Banks and Monetary Policy and the Yield Curve • Targets and instruments of monetary policy
Monetary Policy and the Yield Curve • Expectations and the impact of monetary policy
• Interest rates and exchange rates in an open
Session 4 Contents
Market directional trades • Outright trades with cash instruments
• Outright trades with STIR futures
Curve trade • Calendar spreads (path of forward rates)
• Other curve trades
Relative value trades • Treasury-Eurodollar (TED) spread, term TED
spreads and credit risk
• LIBOR-OIS spread and counterparty credit risk
Session 5 Contents
Interest rate swaps and STIR futures • Hedging and pricing swaps with STIR futures
• Convexity adjustment for implied forward rates
Session 6 Contents
Basis swaps • Basis swaps and cross-currency basis swaps
• Overnight index swaps (OIS)
Carry trades • Covered and uncovered interest rate parity
• Risks in carry trades
Session 7 Contents
Caps and Floors • OTC interest rate caps, floors and collars
• Simple interest rate risk management with caps and floors
Session 8 Contents
Options on Eurodollar futures • Constructing caps and floors with options on Eurodollar futures
• Curve trades
Options on other STIR futures or short-term rates • Treasury bills
• Federal funds

Details of the next seminar


6-7 May 2014

ICMA Office
23 College Hill
London EC4R 2RP
United Kingdom

Google map

Please email education@icmagroup.org to register your interest to attend our next publicly scheduled course.

Based at ICE Education London offices: IntercontinentalExchange® (NYSE: ICE), is a leading operator of regulated global futures exchanges, clearing houses and over-the-counter (OTC) markets.


The publicly scheduled course cost will be £1,250.00 for ICMA Members and £1,650.00 for non-members.

The following discount scale is offered:
2-4 candidates – 5% discount each*
5+ candidates – 10% discount each*

*Please note that discounts are applied by way of a refund to the organisation when registration has closed and the final number of candidates from the firm has been determined.

Course materials will be provided to candidates in electronic format prior to the start of programme. Please ensure that you have access to this document during the course by either printing off a copy or by downloading it on your laptop, iPad or Tablet.

Should you require a hard copy of the course materials, there is a charge for printing off and sending the course materials to the training venue.  Please contact education@icmagroup.org a minimum of two weeks before the course start date for further details on this.

Payment can be made by secure online credit card or by invoice. Please note that the BACS invoice method has an additional £50 admin fee.

Note that anyone requiring accommodation to take the course will be required to arrange this on their own; it is a class-based but non-residential course.

For more information

This course is also available on a group booking basis.

Should you have any queries about this seminar please contact David Senior on +44 20 7213 0329 or at education@icmagroup.org


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