Loan Pricing & Stucturing Masterclass: M1 - Loan Pricing & Structuring
Loan Pricing & Stucturing Masterclass: M1 - Loan Pricing & Structuring
Starting dates and places
Description
Course Background This comprehensive programme provides delegates
with a full understanding of loan pricing from the perspective of
banks’ balance sheet management and credit risk. Building up from
an understanding of the fundamental role of asset and liability
management, the course covers the Funds Transfer Pricing (FTP)
process and its pivotal role in pricing liquidity risk. It provides
practical, hands-on pricing, revaluation and risk analysis of the
main types of loan structure, teaching delegates the ability to
securitise loan portfolio assets for secondary market investors.
The course also provides a working understanding of interest rate
derivatives in the context of their role in ri…Frequently asked questions
There are no frequently asked questions yet. If you have any more questions or need help, contact our customer service.
Course Background This comprehensive programme provides delegates
with a full understanding of loan pricing from the perspective of
banks’ balance sheet management and credit risk. Building up from
an understanding of the fundamental role of asset and liability
management, the course covers the Funds Transfer Pricing (FTP)
process and its pivotal role in pricing liquidity risk. It provides
practical, hands-on pricing, revaluation and risk analysis of the
main types of loan structure, teaching delegates the ability to
securitise loan portfolio assets for secondary market investors.
The course also provides a working understanding of interest rate
derivatives in the context of their role in risk management and
loan product structuring. Featuring: Bank Asset and Liability
Management (ALM) and the role of Funds Transfer Pricing (FTP)
Interpretation and derivation of spot and forward interest rates
and bond yield curves Credit spreads and Credit Default Swap (CDS)
premia Minimum loan pricing incorporating cost of funds and
required return on equity capital Application of the term structure
of interest rates: Loan asset valuation Forward looking loan asset
valuation models incorporating credit risk Floating and fixed rate
loan structure and bond valuation analysis Duration risk analysis
of principal floating and fixed loan structures Introduction to
standalone interest rate derivatives Cross currency swaps in
corporate funding and risk management Asset and commodity based
lending structures Computer-based exercises Delegates should bring
their own laptops loaded with Microsoft Excel® 2010 or later to
facilitate in-class studies and exercises. Who Should Attend?
Commercial Bankers Loan Product Developers Bank Treasury Management
Analysts Securitisation Structure Analysts Risk Managers Bank
Executive Managers You can attend the comprehensive course which
runs from 6-10 October 2014 or pick from the following modules.
Loan Pricing & Structuring Masterclass (Modular Course) 6-10
October 2014, Hong Kong Module 1: Loan Pricing & Structuring
6-8 October 2014, Hong Kong Module 2: Advanced Loan Pricing &
Structured Debt Products 9-10 October 2014, Hong Kong 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 www.ibf.org.sg for more
information. Please note that this course is only eligible for FTS
Funding when registering for all modules.
Module 1: Loan Pricing and Structuring Day 1 Introduction Refresher on the business of banking Net interest income Asset and liability management (ALM) The fundamental role of funds transfer pricing Understanding interest rate markets Inter-bank rates, e.g. KLIBOR Government benchmark bond yields, e.g. the IGB curve Corporate treasury management primer The key issues and risks faced by corporates in 2013 Risk management Regulatory and accounting requirements Security of financing Understanding financing from a corporate perspective Inventory financing Trade financing Project financing Key elements of loans Fundamental loan types Bullet Amortising Credit risk pricing inputs Internal credit data External credit rating of borrower Market credit spreads Credit default swap data Tenor Terms Collateral type Covenants Use of funds Leverage ratios Interest payment schedule Options Prepayment Other types of options Caps, floors, collars Loans with embedded call options Forward start facility Benefit to client in reducing refinancing risk Interest rate risk to lending bank Introduction to interest rate derivatives Role of derivatives in client financial risk management Key derivative products Fixed for floating interest rate swaps Basis swaps Cross currency swaps Swaptions Discounting loan cash flows to fair value Loan cash flow structures Bullet Principal at maturity and periodic interest payments Amortising Calculation of present value Time value of money Discount factor Present value of loan cash flow Exercise: Valuing default risk free fixed rate loans – Bullet structure – Principal and maturity and periodic interest payments – Amortising loan structures Loan pricing and valuation input data Loan terms Collateral Sinking fund provisioning Covenants Credit quality Discount rates Deriving appropriate rates from the term structure of interest rates Zero coupon interest rates: Derivation and use Incorporating credit risk into pricing models Bank specific loan pricing factors Internal funding rate Cost of funds Credit risk Cost of capital Operating costs Residual interest rate risk from the interest rate gap Floating rate loans Key concepts Structure Reference rate, e.g. relevant inter-bank rate Loan pricing calculation Loan margin calculation Floating rate loan mechanics Reset dates Implication for interest rate risk Exercise: Minimum loan pricing calculation incorporating required return on bank’s equity capital Day 2 Cash flow estimation Forward interest rates as best estimate of prevailing rates in the future Deriving forward rates from the term structure of interest rates Non-par floating rate loans Valuation Modelling expected floating rate loan cash flows Discounting floating rate loan cash flows to fair value Incorporating credit risk into loan valuation models Exercise: Floating rate loan synthesis – Loan pricing calculation, incorporating default risk – Loan margin calculation – Estimating floating rate loan cash flows from the forward curve – Calculating current fair market value by discounting using the zero curve Case study: The development of Asian debt markets since the Asian Financial Crisis 1. Financial structure, development and economic growth 2. Asian debt markets pre-1997 3. Critical events in Asian debt markets 4. Debt market reform: Response of policymakers since 1997 5. Post-crisis development of Asian debt markets Fixed rate loan and bond analysis How interest rates relate to bond yields Fixed rate loans as bond equivalents Characteristics of bonds Floating rate loan vs. Bond pricing methods Bond price vs. Yield Calculating a bond's price given a known Government benchmark yield and credit spread Calculating a bond's yield from a known price Exercise: Calculation of a bond’s price from the Government equivalent yield plus credit spread and comparing it to the pricing of a loan with the same maturity Fixed rate loan pricing from FTP internal funding rate Revaluation of fixed rate loans due to change in internal funding rate input parameters Day 3 Bond risk metrics and their application to fixed rate loan analysis Duration Convexity Risk dynamics for different loan structures Floating rate Fixed rate Bullet Amortising Principal at maturity and periodic interest payments Exercise: Calculation of fixed loan risk metrics for different loan structures Interest rate swaps Introduction: Fixed for floating - "plain vanilla" - swaps Pricing model inputs The zero curve The forward curve Valuation Fixed leg Floating leg Net value Inception During life of swap when rates change Pricing during a swap’s life Exercise: Pricing an interest rate swap during its life given different interest rate scenarios Asset and commodity-based lending structures Rationale Key types Corporate assets Non-current assets Property Plant Current assets Receivables Inventory Commodity Benefit to borrowers Key types Role in Shari’a-compliant lending Commodity based returns Principal protection Managing commodity risk Equity Key types Convertible Exchangeable Total return swap based on index Equity linked notes Structuring equity linked notes Zero coupon bond plus option Asset based loan pricing models Forward start loan products Pricing intrinsic value of forward start loan from the forward curve Forward Rate Agreements (FRAs) FRA pricing calculation Exercise: Pricing forward rate agreements
Module 1: Loan Pricing and Structuring Day 1 Introduction Refresher on the business of banking Net interest income Asset and liability management (ALM) The fundamental role of funds transfer pricing Understanding interest rate markets Inter-bank rates, e.g. KLIBOR Government benchmark bond yields, e.g. the IGB curve Corporate treasury management primer The key issues and risks faced by corporates in 2013 Risk management Regulatory and accounting requirements Security of financing Understanding financing from a corporate perspective Inventory financing Trade financing Project financing Key elements of loans Fundamental loan types Bullet Amortising Credit risk pricing inputs Internal credit data External credit rating of borrower Market credit spreads Credit default swap data Tenor Terms Collateral type Covenants Use of funds Leverage ratios Interest payment schedule Options Prepayment Other types of options Caps, floors, collars Loans with embedded call options Forward start facility Benefit to client in reducing refinancing risk Interest rate risk to lending bank Introduction to interest rate derivatives Role of derivatives in client financial risk management Key derivative products Fixed for floating interest rate swaps Basis swaps Cross currency swaps Swaptions Discounting loan cash flows to fair value Loan cash flow structures Bullet Principal at maturity and periodic interest payments Amortising Calculation of present value Time value of money Discount factor Present value of loan cash flow Exercise: Valuing default risk free fixed rate loans – Bullet structure – Principal and maturity and periodic interest payments – Amortising loan structures Loan pricing and valuation input data Loan terms Collateral Sinking fund provisioning Covenants Credit quality Discount rates Deriving appropriate rates from the term structure of interest rates Zero coupon interest rates: Derivation and use Incorporating credit risk into pricing models Bank specific loan pricing factors Internal funding rate Cost of funds Credit risk Cost of capital Operating costs Residual interest rate risk from the interest rate gap Floating rate loans Key concepts Structure Reference rate, e.g. relevant inter-bank rate Loan pricing calculation Loan margin calculation Floating rate loan mechanics Reset dates Implication for interest rate risk Exercise: Minimum loan pricing calculation incorporating required return on bank’s equity capital Day 2 Cash flow estimation Forward interest rates as best estimate of prevailing rates in the future Deriving forward rates from the term structure of interest rates Non-par floating rate loans Valuation Modelling expected floating rate loan cash flows Discounting floating rate loan cash flows to fair value Incorporating credit risk into loan valuation models Exercise: Floating rate loan synthesis – Loan pricing calculation, incorporating default risk – Loan margin calculation – Estimating floating rate loan cash flows from the forward curve – Calculating current fair market value by discounting using the zero curve Case study: The development of Asian debt markets since the Asian Financial Crisis 1. Financial structure, development and economic growth 2. Asian debt markets pre-1997 3. Critical events in Asian debt markets 4. Debt market reform: Response of policymakers since 1997 5. Post-crisis development of Asian debt markets Fixed rate loan and bond analysis How interest rates relate to bond yields Fixed rate loans as bond equivalents Characteristics of bonds Floating rate loan vs. Bond pricing methods Bond price vs. Yield Calculating a bond's price given a known Government benchmark yield and credit spread Calculating a bond's yield from a known price Exercise: Calculation of a bond’s price from the Government equivalent yield plus credit spread and comparing it to the pricing of a loan with the same maturity Fixed rate loan pricing from FTP internal funding rate Revaluation of fixed rate loans due to change in internal funding rate input parameters Day 3 Bond risk metrics and their application to fixed rate loan analysis Duration Convexity Risk dynamics for different loan structures Floating rate Fixed rate Bullet Amortising Principal at maturity and periodic interest payments Exercise: Calculation of fixed loan risk metrics for different loan structures Interest rate swaps Introduction: Fixed for floating - "plain vanilla" - swaps Pricing model inputs The zero curve The forward curve Valuation Fixed leg Floating leg Net value Inception During life of swap when rates change Pricing during a swap’s life Exercise: Pricing an interest rate swap during its life given different interest rate scenarios Asset and commodity-based lending structures Rationale Key types Corporate assets Non-current assets Property Plant Current assets Receivables Inventory Commodity Benefit to borrowers Key types Role in Shari’a-compliant lending Commodity based returns Principal protection Managing commodity risk Equity Key types Convertible Exchangeable Total return swap based on index Equity linked notes Structuring equity linked notes Zero coupon bond plus option Asset based loan pricing models Forward start loan products Pricing intrinsic value of forward start loan from the forward curve Forward Rate Agreements (FRAs) FRA pricing calculation Exercise: Pricing forward rate agreements
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