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Interest Rate Derivatives 2: Options

Interest Rate Options are an essential part of the derivatives marketplace. This course will equip you to use, price, manage and evaluate interest rate options and related instruments.

The course starts with a detailed review of option theory, from a practitioner’s viewpoint. Then we cover the key products in the rates world (caps/floors, swaptions, Bermudans) and their applications, plus the related products (such as CMS) that contain significant ’hidden’ optionality. We finish with a detailed look at the volatility surface in rates, and how we model vol dynamics (including a detailed examination of SABR).

The course includes extensive practical exercises using Excel spreadsheets for valuation and risk-management, which participants can take away for immediate implementation.

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  • Date:
  • Venue:
  • This course is only available via LFS LiveLFS Live
  • Fee:
  • US$1560 per day
    US$4680 total

This course is also available in London Time Zone and New York Time Zone

This course is FTS-Eligible* and also eligible for 24 CPD hours. GARP & CFA Institute members are eligible for 24 CE/CPD credits. See details

Who The Course is For

This course is designed for anyone who wishes to be able to price, use, market, manage or evaluate interest rate derivatives.

  • Interest-rate sales / traders / structurers / quants and relevant IT personnel
  • Bank Treasury and other Asset Liability Management executives
  • Central Bank and Government Treasury / Funding managers
  • Insurance Company investment managers
  • Fixed Income portfolio managers
  • Company finance executives and Investment Bankers
Learning Objectives
  • Gain familiarity with option products traded in the rates world
  • Understand how (and why) to delta-hedge an option position
  • Know the classic option combinations and strategies employed by practitioners and customers
  • Understand the vol surface and how to trade it
  • Appreciate the reasons behind the choice of Normal vs Lognormal vol
  • Understand the significance of stochastic vol
  • Understand how SABR works
  • Understand the mechanics of Constant Maturity swaps, and the origin of the convexity adjustment
  • Know how to price and hedge a CMS with a replicating swaption portfolio
Prior Knowledge

Basic knowledge of Microsoft Excel, a broad understanding of fixed-income markets and basic knowledge of Interest Rate Swaps and Futures is assumed.

Comprehensive teaching on fixed income markets and bond maths takes place in the Fixed Income Markets & Analytics course; comprehensive teaching on Interest Rate Swaps and Futures takes place in Interest Rate Derivatives and Swaps.

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*FTS Eligible
This programme is approved for listing on the Financial Training Scheme (FTS) Programme Directory and is eligible for FTS claims subject to all eligibility criteria being met. Please note that in no way does this represent an endorsement of the quality of the training provider and programme. Participants are advised to assess the suitability of the programme and its relevance to participants' business activities or job roles. The FTS is available to eligible entities, at a 50% funding level of programme fees subject to all eligibility criteria being met. FTS claims may only be made for programmes listed on the FTS Programme Directory with the specified validity period. Please refer to for more information.