Interest rate Derivatives Certification Examination Overview

An interest-rate derivative is a financial instrument with a value that increases and decreases based on movements in interest rates; among the most common are interest rate swaps, caps, and floors.

What are the course objectives?
  • Know the basics of fixed income securities markets and specifically interest rate derivative markets in India and developed world.
  • Understand the analytical framework required for Bond Futures market in India along with trading and hedging strategies involved
  • Understand the clearing, settlement and risk management as well as the operational mechanism related to interest rate derivatives markets
  • Know the regulatory environment in which the interest rate derivatives markets operate in India.
Course Fees ?

 Fees Details

Name of Module: NISM-Series-IV: Interest Rate Derivatives Certification Examination

Fees (Rs.) Test Duration (in minutes) No. of Questions Maximum Marks Pass Marks* (%) Certificate # Validity (in years)
1500+ 120 100 100 60 3
Benefits from this Course ?
  • Interest rate derivatives opt for adjustments of portfolios
  • They are more liquid compared to the underlying instrument
  • They help in lowering the cost of funding
  • Speculative positions can be taken in context to future movement in interest rates
  • They can provide yield irrespective of the market conditions
  • Market participants use interest rate derivatives either to hedge the risk or take future positions
  • It helps in mitigating the risk from unpredictable interest rate swings (risk diversification instrument)

Interest Rate Derivatives Syllabus 

Chapter -1: Fixed-income or Debt Securities – Introduction

  •  Financial Markets: Overview
  •  Debt/ Fixed-income Securities : Introduction
  •  Debt/ Fixed-income Securities : Classification
  •  Fixed-income Securities vs. Fixed-return Securities
  •  Debt Securities vs. Equity Securities
  •  Relative Size of Debt and Equity Markets: Globally and in India

Chapter –2: Interest Rate – Introduction

  • Concept of Interest Rate
  • Risk-free Interest Rate vs. Risky Rate
  • Term Structure of Rates: Shapes
  • Term Structure of Rates: Shifts
  • Conversion of Rate into Amount
  • Accrued Interest

Chapter – 3: Return and Risk Measures for Debt Securities

  • Return Measure: Spot Rate
  • Coupon, Current Yield and Yield-To-Maturity
  • Spot rate, Bond price and YTM
  • Risk Measures

Chapter – 4: Interest Rate Derivatives

  • Derivatives: Definition and Economic Role
  • Interest Rate Derivatives
  • Over-The-Counter (OTC) vs. Exchange-Traded Derivatives
  • Derivatives Market in India

Chapter – 5: Contract Specification for Interest Rate Derivatives

  • Underlying Assets of Permissible Interest Rate Derivative Contracts in India
  • Market Lot / Contract Amount
  • Contract Months, Expiry Dates and Last Trading Day of Exchange Traded Derivatives
  • Price Quotation and Tick
  • Daily Settlement Price
  • Final Settlement Price
  • Delivery Aspects of Interest Rate Derivatives Contracts

Chapter – 6: Trading, Clearing, Settlement and Risk Management

  • Operational Guidelines of Exchanges
  • Order Types and Execution
  • Spread Orders
  • Margining and Mark-To-Market (MTM)
  • Clearing and Settlement
  • Procedure for Delivery

Chapter – 7: Regulations and compliance

  • Role of Various Regulators in Bond and Interest Rate Derivatives Market
  • Restrictions and Limits Applicable to Resident and Non-resident Investors
  • List the Regulatory Reporting Requirements
  • Accounting Aspects of Interest Rate Derivatives

Chapter – 8: Trading and Hedging

  • Speculative / Trading Strategies
  • Hedging Strategies
  • Basis Risk, Yield Curve Spread Risk and Market Liquidity Risk