A Masterclass in Treasury Risk Management

Day 1

Currency Risk Management Policies

• The role of the treasurer
• The role of the CFO
• The functions of a treasury
• Profit centres and cost centres
• Centralised and decentralised treasuries
• Netting and in-house banks
• The importance of policies, procedures and risk management controls

The Users of Treasury Products

• Borrowers and issuers
• Investors: Asset managers, wealth managers, hedge funds and private equity
• Banks: Central banks, commercial banks, investment banks and private bank

Currency Risk Management Solutions

• Spot foreign exchange
  • base and variable currencies
  • appreciation, depreciation, strengthening and weakening of currency positions
  • calculating cross rates
• Forward foreign exchange
  • forward pricing
  • forward points
  • discounts and premiums
• Foreign exchange swaps
  • origin of the product
  • comparison with repos
  • efficiency of the product
  • FX swaps turnover
• Currency swaps
  • exchanges of principal
  • gross and net settlement of differentials
  • relationship to forward outrights and FX swaps
  • advantages over the forward market
• Currency options
  • asymmetric risks
  • reconciling options with our pricing principles
  • comparison with the forward market
• Natural hedging

Day 2

Hedging

• Identifying and analysing risk
  • types of risk
  • long and short positions
• Hedging
  • physical delivery
  • contracts for differences
  • the importance of carry
  • put/call parity
  • the role of leverage in derivatives hedges
• OTC and exchange traded products
  • initial and variation margins work
  • Herstatt risk
  • DVP, PVP & CLS Bank
  • symmetrical and asymmetrical risk management
  • equal and opposite positions
  • IAS 39 and IFRS 9

Measuring Treasury Performance

• Defining objectives
• Challenges in performance measurement
• ROE, modified duration, PV01, DV01 and VaR
• Banks and corporations: approaches to performance measurement

Day 3

Money Markets and Interest Rate Risk

• T-Bills, CDs, CP, ABCP
• IBORs, IBIDs, IMEANs and the interbank money markets
• Replacing LIBOR
• SONIA, EONIA, ESTR, SARON, TONAR & SOFR
• Repos, securities lending and sell/buy backs
• Day count conventions: act/360, 30/360 and act/act
• Discounts and yields
• Present values, future values, IRRs, YTMs and AICs
• ICMA 803.1 & 803.2

Understanding Money Market and Swap Market Yield Curves

• Liquidity preferences
• Preferred habitats
• Market expectations
• Market segmentation
• Efficient markets?

Interest Rate Hedging Tools

• FRAs and futures
• Using interest rate swaps
  • generic, ‘plain vanilla’ swaps
  • swap structures
  • par/par structures
  • forward starting swaps
  • amortising, accreting and roller-coaster swaps
• Caps, floors and collars
  • option pricing
  • importance of delta and gamma in hedging
• Swaptions

Multi-Currency Debt Management

• Using forward foreign exchange outrights
  • forward pricing
  • covered interest arbitrage
  • forward points
  • discounts and premia
  • hedging currency debt
  • arbitraging the credit spread
• Using FX swaps
  • hedging currency debt
  • arbitraging the credit spread
  • the carry trade
• Using currency swaps
  • paying and receiving the basis
  • exchanges of principal
• Using currency options

Day 4

Swap Driven Bond Issues

• Sources of floating rate finance
• Sources of fixed rate finance
• Contracts for differences and physical delivery

Asset Liability Management

• Gaps
• Structural interest rate risk
• Borrowing short and lending long
• Leverage and structured products
• The role of ALCOs
• Hedging strategies in practice
• Market cycles
• Lessons from the crisis
• Perspectives of banks and companies

Day 5

Equity Capital Markets: Medium and Long-Term Financing Strategies

• ADRs and GDRs
• Shares and preference shares
• Pricing
• Multiples
• Origination
• Underwriting
• Distribution

Debt Capital Markets

• Government, corporate and international bond issues
• Fixed rate issues
  • pricing
  • benchmarks
  • AIC, YTM, IRR
  • origination
  • underwriting
  • distribution
• Floating rate notes
  • pricing
  • distribution
• The term structure of interest rates
  • using zero coupon rates
  • calculating the Z-spread

Liquidity Risk Management

• Lessons from the crisis
  • stress testing
  • contingency funding plans and asset market liquidity
  • off-balance sheet activity and contingent commitments
  • capital
  • supervision and market information
  • central bank facilities
• Measurement and management of liquidity risk
  • identifying, measuring and controlling liquidity risk
  • managing liquidity across business divisions
  • funding strategies
  • managing intraday liquidity
  • stress testing
  • contingency funding plans
• The Liquidity Coverage Ratio and the Net Stable Funding