The Value at Risk (VaR) & IRS Pricing (MTM) course store

After a number of requests for an offline, easier to use, read and work with electronic version of our courses, Learning Corporate Finance online course inventory store is now live.  Our most popular and visited courses, from ALM to Corporate Finance, from Value at risk to Interest Rate Options are now all available for sale as PDF files with supporting excel examples. The list of current inventory includes

Corporate Finance: First Course
Master Class: Calculating Value at Risk
Master Class: Credit Analysis
Master Class: Credit Process
Master Class: Derivative products
Master Class: Ratio Analysis
Pricing Interest Rate Swaps – The valuation and MTM course
The Derivatives Crash Course for Dummies
Asset Liability Management (ALM) – The ALM Crash course and survival guide
Interest Rate Options – Pricing Caps and Floors

Save a few dollars by picking our secured, non-printable, student pdf editions. Pay a few dollars more for the privilege of printing and sharing.  Taking a peek at our excel files will also set you back by (you guessed it) yet more dollars.  And if you dislike our capitalist initiatives to earn a few cents on the side and would like to have every thing for free, the html editions of the courses are available for free (click on the course images or the html links). The MS Excel files work through the same examples included in the free online courses.

The Corporate Finance and Ratio Analysis courses include a full solved case. The Corporate Finance case is based Electronic Arts (EA), while the Ratio Analysis case works with Office Depot (ODP) and Staples (STPLS). The Value at Risk (VaR) course includes a case on Risk management within the Petrochemical industry. The Interest Rate Swap, Interest Rate Option course includes solved examples for pricing IRS, CCS, Interest Rate Caps, Interest Rate Floors and Range Accrual Notes. The ALM (Asset Liability Management) course includes worked example for calculating Interest Rate Gaps, Market Value of Equity, Cost to Close and Earning at Risk report templates. Additional supporting material for ALM includes a Duration (Macaulay Duration, Modified Duration, Effective Duration), Convexity (Convexity correction, Convexity) excel example

For less than the price of a Starbuck Frap, Mocha or Expresso, here is the opportunity to take our PDF and Excel samples, examples and calculations home with you. Please note in the interest of full disclosure these are academic, illustrative learning tools, not full blown nuclear powered pricing models. Please do your own due diligence and read our waivers and disclosures before you make life and death decisions based on the opinions of random strangers.

Asset Liability Management

Course Title

Buy Print or Non Print Version

Asset Liability Management – Crash Course
Asset Liability Management – Crash Course – EXCEL Examples

Capital Adequacy Assessment

Course Title

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ICAAP Sample Report Template & Executive Summary

Corporate Finance

Course Title

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Corporate Finance – First Course – Includes case study
Ratio Analysis – Includes 2 case studies

Credit Process & Analysis

Course Title

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Credit Analysis – First Course
Credit Process


Course Title

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Derivative Pricing – Binomial Trees

Derivative Pricing – Binomial Trees

EXCEL Example

Derivative Products

Pricing IRS – Module I – Term Structures
Pricing IRS – Module I – Term Structures

EXCEL Example

Pricing IRS – Module II – IRS and CCS
Pricing IRS – Module II – IRS and CCS

EXCEL Example

Pricing Interest Rate Options – Module III
Pricing Interest Rate Options – Module III EXCEL Example
Terminology Crash Course

Value at Risk

Course Title

Buy Print or Non Print Version

Calculating Value at Risk

Includes case study

Calculating Value at Risk

EXCEL Example

Computational Finance – EXCEL Examples

Course Title Buy Print or Non Print Version
Duration Convexity Example
Valuing Options – Black Scholes Example
Valuing Options – Binomial Tree Example

Downloadable Courses Table of Contents for

Asset Liability Management – Crash Course

Corporate Finance – First Course

Ratio Analysis

Credit Analysis – First Course

Credit Process

Pricing Interest Rate Swaps – Module I – Term Structures

Pricing Interest Rate Swaps – Module II – IRS & CCS

Pricing Interest Rate Options – Module III

Value at Risk Table of Content

Asset Liability Management First Course in Corporate Finance
Asset Liability Management


Interest Rate Risk

Liquidity Risk

Duration and Convexity


Macaulay Duration

Modified Duration


Approximate price change

Terminology: Modified and Effective

Value at Risk (VaR)

Variance Covariance Approach

Determining SMA volatility

Determining EWMA Volatility

Determining SMA and EWMA daily VaR

Historical Simulation Method

Determining Historical Simulation daily VaR

Scaling of the daily VaR

ALM Risk Measurement Tools

Fall in Market Value of Equity

Step 1: Determine look back period

Step 2: Data collection

Step 3: Calculated the return series

Step 4: Calculate the days to maturity/ days to reset

Step 5: Calculate individual weights for each asset and liability

Step 6: Obtain return series for each individual asset/ liability

Step 7: Calculate weighted average return series for assets and liabilities separately

Step 8: Compute VaR

Step 9: Compute the MTM weighted average yield to maturity (YTM)

Step 10: Compute Rate Shock

Step 11: Compute the weighted duration of assets and liabilities

Step 12: Fall in MVE

Earnings at Risk

Step 1: Determine look back period

Step 2: Data collection

Step 3: Calculated the return series

Step 4: Identify assets, liabilities & off balance sheet (OBS) instruments to be included in the calculation

Step 5: Calculated expected cash flows and days to maturity (DTM)

Step 6: Slot the cash flows according to DTM

Step 7: Compute weights of each sub bucket with respect to overall bucket

Step 8: Compute correlated return series based on the weights calculated in Step 7 above

Step 9: Compute rate VaR

Step 10: Compute Rate Shift/ Shock

Step 11: Compute the change in rate sensitive assets/ liabilities/ off- balance sheet items

Step 12: Compute the on-balance sheet and cumulative gaps for each defined bucket

Step 13: Compute total EAR for the given confidence level

Cost to Close

Step 1: Define buckets for each period going forward from the revaluation date

Step 2: Calculate instalments due to be paid/ received and slot into relevant bucket

Step 3: Summation of values for each bucket

Step 4: Calculate the difference between assets and liabilities

Step 5: Choose the interest rate basis to be used in the cost to close calculations

Step 6: Compute cost to close

Rate Sensitive Gap

Step 1: Define the time buckets

Step 2: Classification of on- and off- balance sheet items

Step 3: Slot items into relevant time buckets

Step 4: Calculate rate sensitive gap

Step 5: Calculate off-balance sheet gap

Step 6: Calculated interval gap

Step 7: Calculate cumulative gap

Price Sensitive Gap

Liquidity Gap

Net Interest Income (NII) at Risk

Duration Gap Analysis



Duration matching/ immunization

Pension Funds and Insurance

Portfolio dedication

Other Liquidity Risk Measurement Tools

Liquidity Ratios and Analysis

Current Ratio

Quick Ratio

Unused lines of credit

Borrowing/ Debt-to-Equity Ratio

Net Working Capital Ratio

Loan-to-Deposit Ratio

Loan- to- Asset Ratio

Liquidity Management

Setting limits for liquidity risk

Cash flow mismatch or gap limits

Maturity Limits

Target Liquid Reserves

Concentration Limits

Contingent liability limit


Exception handling

Contingency Funding Plan

General requirements for a liquidity contingency plan

Specific requirements for a liquidity contingency plan

Liquidity enhancement tactics

For Systemic crisis

For company specific crisis


Session Zero – Learning Objectives

Session I – Financial Concepts


Operating Cycle



Financial Structure


Forms of Ownership

Sole Proprietor



Chapter S

Limited Liability Companies (LLC’s)

Financial Statements

The Balance Sheet

The Income Statement

Statement of Cash Flows

The Accounting Notes

The Right Way

Accounting Note A – Product Sales

Accounting Note B – Property Plant and Equipment

Session II – Review of Financial Statements


Current assets

a) Cash and cash equivalents

b) Accounts receivable & Inventory

Property Plant & Equipment



Current Liabilities

Lines of credit / overdraft facilities at banks

Short term loans and debt

Accounts payable

Accrued benefits & obligations

Current portion of long-term debt

Long Term Liabilities

Net working capital



Authorized Shares

Issued Shares

Treasury Shares

Preferred Shares

Common Stock

Retained Earning


Income Statement

Session 3 – Risk and Return

Risk & Reward

Important Points to remember


Return on Equity

Return on Invested Capital & ROE

Payback period.

Session IV – Time Value of Money: An Overview

Discount Rate


Time Value of Money


Present Value in Action

Step One – Calculate the Discount Factors for 7 years

Step Two – Calculate the PV of investment stream

Step Three – Calculate the PV of the return stream

Step Four – Calculate Net Present Value

Step Five – Analyze results

Internal Rate of Return (IRR)

Internal Rate of Return (IRR) and comments

Putting it all together


Session V – Opportunity Cost and Cost of Capital

Opportunity Cost & Cost of Capital

Scenario 1 – Understanding Opportunity Cost

Scenario 2 – Understanding Cost of Capital

Weighted Average Cost of Capital (WACC)

Step A – Simple Average Calculation

Step B – Issues affecting interest rate on debt.

1) Government Debt Rate

2) Credit Risk


Step C – Issues affecting required rate of return on equity

Risk free rate of interest

Market rate of return


Risk Premium

Session VI – Case Study: Electronic Arts

Case Study

Step One – Data Gathering

Step Two – Industry Analysis

Step Three – Management Discussion and Analysis

Step Four – Pre Analysis

Step Five – Setting Assumptions

Step Six – Projection of pro-forma statement

Projecting the income statement

Projecting the Balance Sheet


Calculating free cash flows

Step Seven – Cost of capital

What is the right risk free rate of return?

What is the right value for the risk premiums?

Weighted Average Cost of Capital (WACC)

Step Eight – Valuation

Basic Principles

Part I

Part II

Step Nine – Reality checks


Electronic Arts – Basic Information

Appendix A


Ratio Analysis Credit Analysis
Ratio Analysis

Understanding the Language


Fixed & Variable Costs and Cost Functions

Relevant range of production


Net Working Capital

Marketable Securities


Why is leverage important?

Debt: Explanations and Types


Managerial Efficiency (ME)

Fundamental Analysis

Introduction to Ratios

Ratios – Comparative Analysis

Industry Averages

Trend Analysis

The many faces of ratio analysis

Liquidity, Leverage, Profitability and Productivity





Case Study 1 – Office Depot


Financial Condition Review

Ratios – Quick Reviews

Leverage Ratios

Productivity or Turnover Ratios

Profitability Ratios

Industry review and a first look at ratios

Industry Analysis

Liquidity Ratios

Current Ratio

Quick ratio

Leverage Ratios

Debt to Equity Ratio

Debt to Total Assets

Times Interest Earned (Coverage) Ratio

Fixed Charge Coverage Ratio

Productivity Ratios

Inventory Turnover

Asset Turnover

Average Collection period

Accounts Receivable Turnover

Profitability Ratios

Gross Profit Margin

Operating Profit Margin

Net Profit Margin

Return on Assets (ROA)

Return on Equity (ROE)

Case Study 2 – Staples & Office Depot: Comparative Ratio Analysis

Staples – Overview

Financial Condition Review

Liquidity Ratios – Comparison

Current Ratio

Quick Ratio

Leverage Ratios

Debt to Equity Ratio

a) Long-term Debt and Equity

b) Current Liabilities vs. Equity

Debt to Total Assets

Times Interest Earned (Coverage) Ratio

Fixed Charge Coverage Ratio

Productivity Ratios

Inventory Turnover Ratio

Fixed Asset Turnover

Total Asset Turnover

Average Collection Period

Accounts Receivable Turnover

Profitability Ratios

Gross Profit Margin

Operating Profit Margin

Net Profit Margin

Return on Assets (ROA)

Return on Equity (ROE)

Basic Earning Power Ratio



Credit Analysis



Why is leverage important?

Fixed & Variable Costs

Relevant range of production

Fixed and variable costs and their impact on leverage

Breakeven and Leverage

Breakeven Analysis

Margin of Safety

Key Takeaway

Fixed Costs and Operating Leverage

Operating Leverage

Degree of Operating Leverage

The downside of operating leverage

Financial Leverage

Introducing Financial Leverage

Degree of Financial Leverage

The downside of Financial Leverage

Combining Financial and Operating Leverage


Credit Process Pricing Interest Rate Swaps – Term Structure I
Credit Process






Understanding the language

Capital Structure

Debt (Leverage)

Why is leverage important?




Commitment Fees

Credit Culture

Credit risk

Liquidation costs


Work-out and Charge off

Owners’ Equity



Credit Limit


Basis Points


Why do businesses borrow money?

Why does the firm need money, and what is it going to do with it?

Why is the firm borrowing money?

Sources of Repayment

Lending Products

Line of Credit

Revolving Credit

Bills discounting

Term loans

Consumer Loans

Trade credit



Credit Risk & Credit Analysis

Why is credit analysis important?

Credit Risk and Credit Spreads

Credit Analysis Process

Setting Objectives and guidelines

Gathering information

Processing information

Presenting information



Credit Culture and Information Gathering Foundations

Information Gathering – Foundations

Business – Need & Risk

Repayment Sources

Industry Profile

Management & Track Record

Information Gathering and Processing

Information Gathering – Data

Exhibit One – Balance Sheet

Exhibit Two – Income Statement

Exhibit Three – Free Cash Flows

Exhibit Four – Pre Formatted Financial Analysis

Information Processing

Pre Processing

Preparation of Credit Memorandum

The Credit Decision

Accept / Reject

Term Sheets

Loan Pricing

Compliance & Documentation

Credit Decision – Factors

Industry Analysis

Business Analysis – Other Qualitative Factors

Business Factors

Business Risk

Management/ Ownership Quality

Credit Rating Agencies

Importance of Cash Flow Analysis in Credit Analysis

Cash Flow Statements

Operating Activities

Financing activities

Investing activities

Analyzing Cash flow Statements: Examples

Example 1- Office Depot

Example 2 – Will and Can Inc


Seasonality or Cyclicality of Cash Flows




Cash flows

Discounting Cash flows

Spot Rates

Forward Rates

Short rates

Yield to Maturity

Term structure of interest rates

Forward Rate Agreements

Forward Contracts


Interest Rate Swap

Currency Swap

Other Swaps

Fixed for fixed currency swap

Floating for floating currency swap

Cross-currency interest rate swap

Step-up Swaps

Amortizing Swaps

Forward or Deferred Swaps

Compounding Swaps

LIBOR-in- Arrears Swap

Constant Maturity Swap

Constant Maturity Treasury Swap

Differential Swap or Quanto

Variance or Volatility Swap

Equity Swap

Commodity Swap

Asset Swap

Accrual Swap

Cancellable Swap

Extendable Swap

Pricing Interest Rate Swaps – Process Defined

Modelling the Term Structure, Zero Curve and Forward Curve

Defining the Par Term Structure

Step 1: Select an appropriate term structure

Step 2: Extending the term structure

Step 3: Creating a default term structure

Deriving the Zero Curve

Step 4: Develop the cash flows matrix

Step 5: Developing the discounted value of cash flows matrix and the zero curve

Deriving the Forward Curve

Step 6: Deriving forward rates


Pricing IRS, CCS – II Pricing Interest Rate Options – III
Pricing and Valuation

Pricing Interest Rate Swaps (IRS)


Pricing Coupon Swaps or Fixed for Floating Swaps

Term sheet

Step 7: Determine the coupon paying/ receiving periods

Step 8: Determine the zero coupon rates applicable

Step 9: Determine the forward rates applicable

Step 10: Determine the cash flows

Step 11: Discount the cash flows

Step 12: Calculating the price of the IRS

Pricing Basis Swaps or Floating for Floating Swaps

Term Sheet


Pricing Cross Currency Swaps

Fixed for Fixed Currency Swap

Floating for Floating Currency Swap

Amortizing Floating for Floating Currency Swap


Pricing Interest Rate Options


Caps and Floors



Cap-Floor Parity

Accrual Swaps

Method 1

Method 2

Value of regular swap

A second look at Method 1

A second look at Method 2

Range Accrual Note

Commodity Linked Note


Value at Risk Crash Course

VaR Methods

Variance Covariance Approach

Historical Simulation Method

Monte Carlo Simulation

Quick Review

Implementing VaR


Setting the Scene

·      Sample Portfolio

Preliminary steps

VaR Approach Specific Steps

Variance-Covariance (VCV) VaR

·      Determining Historical Simulation daily VaR

Scaling of the daily VaR

Caveats, Qualifications, Limitations and Issues

Case Study – Risk for the Oil and Petrochemical Industry

A Framework for Risk Management

Risk Policy

Good Data and a First Look at Models

Models and Tools

Metrics and Sensitivities

Limits and Control Process

·      Operational (Exception or Management Action) Limits

·      Capital Loss & Stop Loss Limits

·      Inventory Age Limits

·      Concentration Limits

·      Transaction Limits

·      Exposure and Sensitivity Limits

·      Pre Settlement Risk (PSR) and Potential Future Exposure (PFE) Limits

·      Hierarchy of Limits