Introduction to Interest Rates
Slideshow
Edit
Preliminaries in Finance
Preliminaries in Finance
1. Introduction to Interest Rates
Loading equations
Preliminaries in Finance
2. Exploring Compounding Interest
Loading equations
Preliminaries in Finance
3. Practical Example with Compounding
Loading equations
Preliminaries in Finance
4. Zero Coupon Bonds (ZCB)
Loading equations
Preliminaries in Finance
5. Example of Zero Coupon Bond Pricing
Loading equations
Forwards in Finance
Forwards in Finance
6. Introduction to Forward Contracts
A forward contract is a derivative based on an asset's future value. The value is \( g(S_T) \) at maturity, often linked to financial assets like stocks.
Forwards in Finance
7. Derivative Context
Derivatives can help manage risk by providing price certainty or exposure to different asset classes. Forward contracts are directly linked to the future performance of their underlying assets.
Forwards in Finance
8. Valuing Forward Contracts
Loading equations
Interest Rates and Libor
Interest Rates and Libor
9. Understanding Libor and Forward Rate Agreements
Loading equations
Swaps and Derivatives
Swaps and Derivatives
10. Basics of Swaps and Swaptions
Swaps involve exchanging cashflows. A swaption is an option on a swap. The value depends on the fixed and floating legs, and swaption payouts are based on the difference. In swaps, the fixed leg has constant payments, while the floating leg's payments vary based on market interest rates. Swaptions often pay out based on their differences.
Swaps and Derivatives
11. Example of a Swap
Consider an interest rate swap with a company paying 5% fixed and receiving LIBOR. If LIBOR is 3%, the fixed payer benefits from the lower rate. The value of swaps and swaptions is highly sensitive to changes in interest rates, affecting the fixed and floating legs differently.
Options and Strategies
Options and Strategies
12. Options: Calls, Puts, and Parity
Loading equations
Introduction to Interest Rates