Swaps: IRS and credit derivatives - Deep dive

Whoever has watched "The Wolf of Wall Street" has likely struggled to understand the jobs, products, jargon that surround financial markets. Some of us are still trying to get our way out of this financial jungle and clarify the associated strategies. Let's demystify these!

In close collaboration with PwC's subject matter experts, PwC's Academy has developed a comprehensive, multi-layered training curriculum for junior and more experienced financial industries’ employees and managers alike, who seek to gain a solid knowledge of derivative instruments.

With this second module on swaps, participants will refresh the basic feature of the product and the attached valuation principles. Participants will add a second layer on their comprehension through the exploration of the lifecycle, the accouting treatment and finally the impact on the financial statements

By the end of this training, participants will be able to:

• describe the key features of swaps;
• develop a comprehensive understanding of their operational mechanisms;
• identify optimal use cases for these instruments, either independently or in combination with others;
• explain valuation methods and factors influencing the value of swaps;
• recognise major risks and propose controls to mitigate them.

• 1. Introduction
  • Refresher of derivatives foundation modules
    • Overview of derivative instruments (e.g., forwards, futures, options, swaps)
    • Types of derivatives (e.g., equity, commodity, interest rate, foreign exchange)
    • Purpose: risk management (hedging) and speculative trading
  • Recap of valuation principles applicable to the accounting treatment:
    • Methods for determining fair value: market value, mark-to-market, Black-Scholes model
    • Accounting for fair value changes over time
• 2. Lifecycle of the instruments
  • Creation of the contract
    • Fixed leg
    • Floating leg
  • Trade execution and agreement
  • Cashflow exchanges during the life of the instrument
  • Settlement
• 3. Accounting treatments under IFRS
  • Initial recognition
  • Subsequent measurement
  • Closing treatment/settlement
• 4. Impact on financial statements
  • Balance sheet
  • Income statements
  • Cashflows

This training is coordinated by Laurent Dubois, Director and Solimane Bsiss, Senior Manager at PwC Luxembourg.

Laurent is active in our Assurance practice in managing and delivering a diverse range of assurance engagements toward Alternative and Banking actors to local and international clients and PwC offices.

He has exposure to a wide range of valuation methodologies, a practical understanding of the effective strategies delpoyed by its clients
in the context of financial reporting.

Laurent is Réviseur d’entreprises agréé (REA).

Solimane is senior manager within our Valuations Services (VS) practice and leads a high-performance quantitative team specialising in the valuation of derivatives and structured products as well as private debt.

Solimane joined PwC in 2008 and has gained extensive knowledge and experience in the field of valuation of financial assets. He has extensive experience working on various valuation models such as discounted cash flow models, credit spread models, black models, Monte Carlo simulation, among others.