Financial Derivatives - Instruments, Mechanics and Markets

Day One

09.00 - 09.15 Welcome and Introduction

09.15 - 12.00 Introduction and Overview

• Key Characteristics of Derivative Instruments
• Types and Markets

Futures and Options

• Review of the Mechanics of Futures and Options
  • Time profiles and pay-off profiles
  • Value and P&L diagrams
  • Trading, Settlement and Margining
• Valuation and Risk Assessment of Futures
  • The “Cost-of-Carry” Model
  • Fair Futures Price and Implied Repo Rate
  • The Delivery Option and the CTD Bond
  • Sensitivity and Risk Analysis

12.00 - 13.00 Lunch

13.00 - 16.30 Futures and Options (Continued)

• Valuation and Risk Assessment of Options
  • Put/Call Parity
  • "Intrinsic" and "Time Value"
  • Simple Option Pricing Model
  • The Black-Scholes/Black Models
  • The Cox-Ross-Rubinstein Model
  • Option Price Sensitivities (“Greeks”)
  • Computer Simulations
• Applications of Futures and Options
  • Trading Strategies
  • Hedging Interest Rate Risk, FX Risk and Equity Risk
• Small Exercises

Day Two

09.00 - 09.15 Recap

09.15 - 12.00 Forward Rate Agreements

• Quick Review of Mechanics
• Pricing and Risk Assessment
• Applications
• Small Exercises

Swaps

• Quick Review of Swaps Basics
• Pricing and Risk Assessment of Interest Rate Swaps
• Pricing and Risk Assessment of Currency Swaps
• Non-Generic Swaps
  • Accreting and Amortizing Swaps
  • Forward Starting and Arrears Reset Swaps
  • Constant Maturity Swaps
  • Overnight Index Swaps

12.00 - 13.00 Lunch

13.00 - 16.30 Swaps (Continued)

• Examples of Applications of Interest Rate and Currency Swaps
• Small Exercises

Interest Rate Options

• Interest Rate Guarantees, Caps, Floors and Collars
  • Pay-of profiles
  • Valuation and Risk Assessment
• Swaptions
  • Types, Applications
  • Valuation and Risk Assessment
• Cancellation and Extendable Swaps
• Exercises

Day Three

09.00 - 09.15 Recap

09.15 - 12.00 Credit Derivatives

• Introduction to Credit Derivatives
• Credit Default Swaps
• Total Return Swaps
• Credit Options
• Credit Spread Options
• Structured Credit Products
• Credit-linked Notes
• CDO’s and Synthetic CDO’s
• Pricing and Risk Assessment of Credit Derivatives
• Applications of Credit Derivatives
  • Buying and Selling Credit Risk
  • Hedging Against Spread Changes
• Small Exercises

12.00 - 13.00 Lunch

13.00 - 16.00 Exotic Options

• General Introduction
• Asian (Average Rate) Options
• Lookback and Touch Option
• Digital Options
• Barrier Options
• Basket Options
• Compound Options
• Chooser Options
• Rainbow Options
• Examples of Applications
• Small Exercise

Evaluation and Termination of the Seminar