Financial Derivatives - Applications Workshop

2 days
Prague, NH Hotel Prague
  • Introduction to Applications of Financial Derivatives
  • Session 1:
    Trading with Futures and Options
  • Session 2:
    Managing Interest Rate Risk and FX Risk
  • Session 3:
    Using Derivatives for Synthetic Investments
  • Session 4:
    Using Derivatives for Financial Engineering
  • Session 5:
    Trading and Hedging Credit Risk with Credit Derivatives
The purpose of this highly practical workshop is to give you hands-on experience with the use of financial derivatives for trading and risk management. We assume that you have already gained a good understanding of the mechanics of financial derivatives, e.g. by participating in our seminar "Financial Derivatives Instruments and Mechanics". The workshop is divided into a number of sessions with a mix of theory and practice.

We first present, discuss and try out a number of trading strategies with futures and options. These include "open position" strategies, "spread" strategies, "bull" and "bear" strategies, and different volatility strategies with options. We also explain how to use "VIX" futures and other volatility contracts to trade volatility. These strategies will be illustrated in depth using real-life data and computer simulations.

Next, we explain how futures and options can be effectively used to hedge interest rate, FX, equity, commodity and energy risk. We give examples of simple hedges of single positions, but we shall also look into some complex portfolio hedging and ratio hedging strategies . We then proceed to working with FRAs, forwards, swaps and interest rate options. You will learn how to use these instruments to manage interest rate risk, foreign exchange risk, prepayment risk, contingent cash flow risk and other types of risk.

In the following sessions, we explain, demonstrate and practice how to use derivatives to create "synthetic cash flows" and how derivatives are used in "financial engineering" to create structured products. Finally, you will learn how to use credit default swaps and other types of credit derivatives to hedge against or take positions in credit risk. Applications will include the hedging of single-name credits as well as more complex hedging strategies such as delta-hedging of single-tranche CDO's.

13.00 - 16.00 Workshop Session 5: Trading and Hedging Credit Risk with Credit Derivatives

  • Long and short Positions in Credit Risk Using Credit Default Swaps (CDS)
  • Hedging Stand-Alone Credit Risk Using CDS
  • Hedging Counterparty Risk with Dynamic Credit Default Swaps
  • Arbitrage between Asset Swaps and CDS
  • Trading/Hedging Credit Spread Risk using Total Return Swaps and Credit Options
  • Locking in Spreads on Planned Debt Issues
  • Correlation Trades with Basket Default Swaps and Synthetic CDO Tranches
  • Negative Basis Trades between ABS and CDS
  • Practical Hands-On Exercises

Evaluation and Termination of the Seminar

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