Interest Rate Futures | What is FRM? | Financial Risk Management Video Tutorials Video Lecture | Risk Management: An Essential Training

simply learn your pace your place
financial risk manager frm part one of
the frm exam covers the fundamental
tools and techniques used in risk
management and the theories that
underlie their use in chess rates
futures
welcome to the 29th session in your
preparation for the frm Parwan exam
before proceeding for this session we
recommend that you have a strong
understanding of futures concepts and is
pricing as discussed in previous
sessions until now we have discussed
stock currency and commodity futures in
this session we will introduce you to
the concept of interest rate futures or
the bond futures before we proceed to
the bond futures we will first give some
important insights into bonds its cash
price and accrued interest the topic is
important from an examination point of
view and a few questions can be expected
from this section mostly the questions
will test your grasp of the concepts and
will require simple calculations
agenda the Prime agenda of our
discussion will be interest rate futures
or bond futures we will begin our
session by learning some basic concepts
of bond and t-bill prices and the day
counts conventions used for calculations
we will then introduce the concept of
cheapest to deliver bonds that is the
bonds which are most profitable to
deliver for the short seller of futures
we will also learn how to calculate the
cash price of futures contract from the
time value of money concept from the
previous session we will then learn
about Eurodollar futures which are
basically futures on the rate earned by
dollar deposits outside the USA and how
they are used to lock into the
short-term 90-day LIBOR or the London
interbank rate that is the rate at which
banks lend money we will briefly see the
convexity adjustment that is applied to
Eurodollar futures and see how they can
be used to extend the LIBOR zero curve
we will end the session by discussing
duration based hedging t bonds t-bills
let us begin our session first let us
learn more about the bonds we introduced
earlier we know that bonds pay a fixed
amount of interest on your investment
the fixed return is either in the form
of a lower price of bond while
purchasing and getting a par value at
maturity that is zero coupon bonds or