Managing Interest Rate & Inflation Risk with Treasury Futures

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Click to Register Online or call 202.223.1528.
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Course: Treasury futures are an effective tool for interest rate benchmarking and price risk management. During the one-day educational course you will learn the mechanics and application of this futures product for hedging, and speculation.

During the first half of the program, IFM will discuss the differences between cash and futures on Treasury products and the implicit cost of trading each. We will explain the positive convexity built into the cash fixed income products; negative convexity embedded in Treasury futures: how the shape of the yield curve impacts which issue is Cheapest-to-Deliver; how to quantifying the interest rate risk of various term products; and the carry model for fixed income and intra/inter-market spreads.

In the second half of the course, the IFM illuminates the important, yet subtle, nuances of the fixed income future contracts. You will learn how to define and calculate gross basis, net basis, implied repo-rates, and the synthetic duration of a hedged position. You also will learn how high or low interest rates must move to precipitate a cross-over in the CTD bond/note — which alters both hedge-ratio's and/or spread-ratio's.

After the course you will be able to:

Demonstrate how the cash and futures markets are connected, and how to guard against interest rate volatility.

Understand why futures are robust substitutes for the cash market, yet they are cheaper to trade and thus a cheaper source for adding or subtracting duration.

Quantify the interest rate risk inherent in Treasury securities by applying duration and Basis Point Value (BPV or DV01) statistics to a particular bond or portfolio of bonds

Distinguish among the basket of deliverable securities which is Cheapest-to-Deliver

Recognize how the shape of the yield curve impacts serial futures spreads

Master the implications of the conversion factor (CFi) invoicing process

Recognize the systematic favoritism that exists and the implied by from the "6% nominal yield" assumption

Calculate for a given bond or note its: gross basis, net basis, and implied repo rate

Construct proper hedge ratios and be able to differentiate among the un-weighted hedge ratio, the conversion factor weighted hedge ratio, and the basis point value (BPV) weighted hedge ratio

Clarify the implicit strategy of portfolio hedging techniques and understand why one might want to hedge their portfolio with just the 2-year note, or just the 10-year note; rather than "bucketing" their portfolio across the range of available futures contracts

Quantify the value of the options embedded in the Treasury futures basis

Understand the cost of acquiring the options embedded in the Treasury futures basis

Class Size: Registration is limited to approximately 15 participants to promote student participation and interaction.

Who Should Attend: This course is suited to anyone who holds, handles, or trades debt instruments. Attendees include new entrants to fixed income markets, risk managers, finance analysts, junior research analysts, cash/money managers, auditors, and traders, compliance managers, regulators, operations and systems staff, or those with differing backgrounds such as equity professionals.

Level: Intermediate

Credits: The IFM is recognized by Global Association of Risk Professionals (GARP) as an Approved Provider of continuing professional education (CPE) credits for FRMs and ERPs. This course is valid for 6 credits.

Cost: $495 Early-bird | $550 Standard registration
UK $595 Early-bird | $650 Standard registration
Complimentary morning and afternoon
refreshment breaks are provided. Lunch on own.

To Register: Online click here, contact
the Institute at 202.223.1528
or via e-mail at info@theIFM.org

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