Illustrative course outlines

At OTC we believe in tailoring our courses to meet each client’s specific requirements.  The illustrative course outline below gives an indication of the type of course content that we’ve been asked to deliver. For more information call us on +44 20 7700 3330 or email

Strategy & Leadership Finance & Commerce Investment Banking

Bond relative value analysis

What is covered?

This course reviews the key methodologies for bond relative value analysis, how trades are funded and hedged, and basic barbell and butterfly trading strategies.
There will be extensive use of financial calculators (e.g. HP12, HP 17, TI BA2), Excel and also Bloomberg examples, to help bring the class examples alive and make them practical.

Who will benefit?

Those working in credit looking for training in the area of relative value in a highly interactive, market focussed course.  Prior knowledge of bond basics is required.

Course content

Revision of duration and convexity
    • Understanding interest rate price sensitivity
    • Duration is affected by maturity, coupon and yield
    • The analytical approach – a Taylor series expansion of the price formula
    • Non-coupon day valuations - day count conventions
Basic trading strategies
    • Barbell trades
    • Hedging a barbell trade - butterfly trades
    • Understanding hedge ratio
    • Using the BBA butterfly/barbell arbitrage screen on Bloomberg for a butterfly hedge trade
Funding a trade
    • Funding a trade using repo
    • Calculating the cost of carry
    • Sourcing a bond using repo – trading special
Roll down
    • What is roll down
    • Calculating the return when a bond is not held to maturity
Relative value metrics
    • I-spread,
    • D-spread
    • G-spread
    • Z-spread
    • Asset swap spreads
Option adjusted spread
    • Accounting for interest rate changes
    • building the binomial tree
    • Obtaining volatilities
    • Calibrating the model
    • Deriving the OAS
    • Why use OAS in practice
Understanding interest and spread measures


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