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MOOC# Interest Rate Models

Description

This course gives you an easy introduction to interest rates and related contracts. These include the LIBOR, bonds, forward rate agreements, swaps, interest rate futures, caps, floors, and swaptions.

Official source

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Instructor

Related concepts (62)

Related courses (16)

Related publications (5)

Lectures in this MOOC (18)

Interest rate swap

In finance, an interest rate swap (IRS) is an interest rate derivative (IRD). It involves exchange of interest rates between two parties. In particular it is a "linear" IRD and one of the most liquid, benchmark products. It has associations with forward rate agreements (FRAs), and with zero coupon swaps (ZCSs). In its December 2014 statistics release, the Bank for International Settlements reported that interest rate swaps were the largest component of the global OTC derivative market, representing 60%, with the notional amount outstanding in OTC interest rate swaps of $381 trillion, and the gross market value of$14 trillion.

Interest rate

An interest rate is the amount of interest due per period, as a proportion of the amount lent, deposited, or borrowed (called the principal sum). The total interest on an amount lent or borrowed depends on the principal sum, the interest rate, the compounding frequency, and the length of time over which it is lent, deposited, or borrowed. The annual interest rate is the rate over a period of one year. Other interest rates apply over different periods, such as a month or a day, but they are usually annualized.

Short-rate model

A short-rate model, in the context of interest rate derivatives, is a mathematical model that describes the future evolution of interest rates by describing the future evolution of the short rate, usually written . Under a short rate model, the stochastic state variable is taken to be the instantaneous spot rate. The short rate, , then, is the (continuously compounded, annualized) interest rate at which an entity can borrow money for an infinitesimally short period of time from time .

MGT-482: Principles of finance

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FIN-416: Interest rate and credit risk models

This course gives an introduction to the modeling of interest rates and credit risk. Such models are used for the valuation of interest rate securities with and without credit risk, the management and

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Short Rate Models: Vasiček and CIRMOOC: Interest Rate Models

Explores short rate models, including Vasiček and CIR, affine bond prices, and time-inhomogeneous models.

Coupon Bonds and SwapsMOOC: Interest Rate Models

Explores fixed coupon bonds, floating rate notes, interest rate swaps, pricing models, and market structures.

Interest Rate Futures and Convexity AdjustmentMOOC: Interest Rate Models

Covers interest rate futures, marking to market, convexity adjustment, and Vasiček model.

Swaptions: Interest Rate ModelsMOOC: Interest Rate Models

Covers swaptions, moneyness, callable bonds, pricing formulas, and implied volatilities.

Interest Rate Derivatives: Calibration ExampleMOOC: Interest Rate Models

Covers the calibration of interest rate models using a two-factor Gaussian HJM model and the computation of Black and Bachelier cap vegas.

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