Hybrid Products - Construction and Applications
Duration:
2 days
2 days
Location:
Prague, Mövenpick Hotel
Prague, Mövenpick Hotel
- Hybrid Equity and Credit Linked Products
- Multi-Underlying Products
- Basket and Rainbow Structures
- Volatility Products
- Hedge Fund Structured Products
- Inflation-Linked Bonds and Inflation-Indexed Derivatives
- CAT Insurance-Linked Products
The purpose of this seminar is to give you a good understanding of “hybrid products” and of the pricing, risks and applications of these instruments.
We start with a general introduction, where we explain what is meant by the term “hybrid products”, and we give an overview of the different types of hybrids. We also give a brief review of some of the concepts (volatility, correlation, options, stochastic process and so forth) that will be used when analyzing the individual products.
We then set out to look at the hybrid debt/equity products. This category includes “traditional” hybrid products, such as preferred shares, convertible bonds, exchangeable bonds, but we shall also present and discuss more innovative structures such as Trust Preferred Securities that enhance the opportunities of issuers as well as investors, and more sophisticated products such as CDS/EDS, nth-to-default baskets and their repackaging into CDOs.
We continue to look at structures with multiple underlying instruments. Examples include basket options, options on min/max of N assets, best of equity / interest rate, interest swaps triggered by equity level, and debt products with FX components.
Further, we introduce and explain volatility products such the CBOE VIX futures, OTC variance swaps and option on realised variance, and thereafter, we take closer look at products that offer hedge-fund exposure, such as the constant-proportion portfolio insurance (CPPI) fund of hedge funds, and products for creating “portable” Alpha, i.e. Excess returns derived from an active fixed income strategy to a benchmark index that is replicated by means of swaps, options, futures, or other derivatives.
Finally, we present and explain the mechanics and uses of inflation-linked bonds and “CAT bonds”.
We start with a general introduction, where we explain what is meant by the term “hybrid products”, and we give an overview of the different types of hybrids. We also give a brief review of some of the concepts (volatility, correlation, options, stochastic process and so forth) that will be used when analyzing the individual products.
We then set out to look at the hybrid debt/equity products. This category includes “traditional” hybrid products, such as preferred shares, convertible bonds, exchangeable bonds, but we shall also present and discuss more innovative structures such as Trust Preferred Securities that enhance the opportunities of issuers as well as investors, and more sophisticated products such as CDS/EDS, nth-to-default baskets and their repackaging into CDOs.
We continue to look at structures with multiple underlying instruments. Examples include basket options, options on min/max of N assets, best of equity / interest rate, interest swaps triggered by equity level, and debt products with FX components.
Further, we introduce and explain volatility products such the CBOE VIX futures, OTC variance swaps and option on realised variance, and thereafter, we take closer look at products that offer hedge-fund exposure, such as the constant-proportion portfolio insurance (CPPI) fund of hedge funds, and products for creating “portable” Alpha, i.e. Excess returns derived from an active fixed income strategy to a benchmark index that is replicated by means of swaps, options, futures, or other derivatives.
Finally, we present and explain the mechanics and uses of inflation-linked bonds and “CAT bonds”.
13.00 - 16.30 Multi-Underlying Products
- Basket Options
- Equity, Interest Rate, FX and Commodity Basket Options
- Pricing and Practical Applications
- Rainbow Structures
- Structures that Pay Min/Max of N Assets
- Structures that Pay Best of Equity / Interest Rate
- Structures with Two-Asset Correlation Options
- Structures with Spread Options
- Pricing and Practical Applications
- Debt Products with FX Components
- Dual Currency and Reverse Dual Currency Notes
- Currency Hedged Foreign Bonds
- Quanto Credit Products
- Pricing and Practical Applications
- Case Studies and Exercises
Day Two
09.00 - 09.15 Brief recap
09.15 - 12.00 Volatility Products
- The Traditional Way of Volatility Investing
- CBOE VIX Futures
- OTC Variance Swaps
- Gamma Swaps
- Corridor Variance Swaps
- Options on Realized Variance
- Case Studies and Exercises
Hedge Fund Structured Products
- Overview of Hedge Fund Investment Strategies
- How Hedge Fund Returns Can be Replicated
- Principal Protected Funds of Hedge Funds
- Structures using embedded call options
- Collateralized fund obligation (CFO)
- Constant Proportion Portfolio Insurance (CPPI)
- Products for Creating “Portable” Alpha
- Case Studies and Exercises
12.00 - 13.00 Lunch
13.00 - 16.30 Inflation-Linked Bonds and Inflation-Indexed Derivatives
- Introduction to Inflation-Linked Products
- Treasury Inflation-Linked Securities (TIPS)
- Inflation-Indexed Swaps
- Inflation-Indexed Caps, Floors and Swaptions
- Pricing of Inflation-Linked Products
- Applications of Inflation-Linked Products (Case Studies)
CAT Insurance-Linked Products
- Contingent Surplus Notes
- “Act of God” Bonds
- CatEPuts
- Exchange Traded Catastrophe Options
- Case Studies
Evaluation and Termination of the Seminar
