Swaps Overview

Course details

17 October 2013




Full venue address 
London, Radisson Blu Edwardian,
Mercer Street,
Covent Garden,
CPD Hours 


Delegate Rate 


 incl. VAT
Event Reference 
Event type 

Training Session

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Course description


Lawyers can expect a fruitful harvest from Swaps. Not only was LIBOR allegedly fixed by major banks- so mispricing Swaps (Swaps are usually priced off LIBOR) but many companies were reputedly mis-sold  Swaps so opening an avenue for damages.


Further, changes  in Swaps regulation and trading mean that counterparty agreements as well as standard trade agreements need reviewing in the light of what can go wrong and the new regulations.


Finally Swaps are now a key tool for pension funds trying to effect their new risk minimisation technique of Liability Driven Investment (LDI). Pension Investment mandates and all the associated documentation may need reviewing.


This course covers both the old and new world of Swaps : what has resulted, how the new methodology works and its many significant consequences. It includes the key regulations affecting the swap market in Europe and the US. It is a key course for anyone seriously involved with Swaps whether as Lawyer, Investor, Lawyer  or Auditor.




Review of Swap Basics

  • Market structure and users
  • Quotation convention.
  • Types of Swaps: Interest Rate, Currency, Asset, Diff, Circus, Credit Default etc
  •  Pricing method, dealing and old valuation.


Before the crisis

  • How discount and forward rates came from the same curve LIBOR curve
  • The credit issues that were always there

After the crisis

  • Illiquidity in the IBOR market, the move to overnight lending between banks and the consequent emergence of Overnight Index Swaps (OIS) as the new benchmark swap rate
  • Bootstrapping forward ONIA rates (Exercise)
  • The continued demand for IBOR swaps and the consequent importance of ONIA-IBOR interest basis swap spreads
  • Deriving forward IBORs using basis swap spreads and pricing an IBOR swap (Exercise)


Collateralised Swaps

  • Counterparty credit risk management with cash collateral via Credit Support Annexes (CSAs)
  • Non-cash collateral, haircuts and wrong-way risk
  • Residual counterparty risk
  • The regulatory requirement to use Central Counter-Parties (CCPs)
  • Additional requirements re initial margin
  • The various CCPs – LCH, etc and their impact.
  • Swap execution – Organised Trading Facilities (OTFs) and Swap Execution Facilities (SEFs)


Uncollateralised Swaps

  • Why corporates resist collateralisation and their exemption from using CCPs
  • Why uncollateralised swaps require a Funding Valuation Adjustment (FVA): incorporating the bank’s term funding spreads and how changes to the spreads affect swap valuation (Exercise)
  • The limited availability of swap counterparty credit risk hedging instruments
  • Credit Valuation Adjustment (CVA) charge: modelling the expected counterparty credit risk exposure from a swap, incorporating the expected credit-riskiness of the counterparty and the risk that it might rise in a CVA fee (Exercise)
  • Debt Valuation Adjustment (DVA): IFRS 13 and how a bank’s credit-riskiness can affect its valuation of a swap (Exercise)
  • How FVA, CVA and DVA interact and may offset each other; hedging approaches


Duration 1 day 0930 – 1700

CPD  6.5 hours


London 19 June 2013

17 October 2013


Venue Radisson Blu Edwardian, Mercer Street,  Covent Garden, London, WC2H 9HD


Fee £ 650 VAT


The financial crisis and the ensuing avalanche of regulation has changed swap valuation almost beyond recognition over the last few years and has greatly increased its complexity. One result is that dealing and settlement arrangements are often different and importantly the same swap can have different valuations depending on which bank is the counterparty.