Financial Derivatives

Applications Workshop

Agenda Program
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Prague, NH Hotel Prague
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Introduction to Applications of Financial Derivatives
Session 1:<br>Trading with Futures and Options
Session 2:<br>Managing Interest Rate Risk and FX Risk
Session 3:<br>Using Derivatives for Synthetic Investments
Session 4:<br>Using Derivatives for Financial Engineering
Session 5:<br>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.

Program of the seminar: Financial Derivatives

The seminar timetable follows Central European Time (CET).

09.00 - 09.15 Welcome and Introduction

09.15 - 12.00 Brief Review of Financial Derivatives

  • Instruments, Markets, Mechanics
  • Pricing and Risk Assessment

Workshop Session 1: Trading with Futures and Options

  • The Trading Process
  • Bull strategies
    • Long future, long call, bull spread, long semi-future,�
  • Bear strategies
    • Short future, long puts, short calls, bear-spreads,�
  • Volatility Strategies
    • Straddles, Strangles, Butterflies, �Twin Peaks�
    • Trading with Volatility Futures
  • Spread Strategies
    • Intermarket Spreads, Calendar Spreads, �TED-Spreads� etc.
  • Practical Hands-On Exercises

12.00 - 13.00 Lunch

13.00 - 16.30 Workshop Session 2: Managing Interest Rate and FX Risk

  • The Hedging Process
  • Hedging with Futures and Options
    • Hedging Interest Rate Risk with ED Futures and Options
    • Hedging Interest Rate Risk with Bond Futures and Options
    • Hedging Currency Positions with futures and Options
    • Hedging Uncertain and/or Contingent Cash Flows
    • Dynamic Hedging
  • Hedging with FRAs and Swaps
    • Hedging Repricing Risk with FRA (Strips)
    • Hedging Interest Rate Risk of Bonds with Swaps
    • Hedging FX Risk with Swaps
  • Hedging with Interest Rate Options
    • Hedging with IRG�s, Caps, Floors and Collars
    • Hedging Call Risk with Swaptions
    • Hedging Two-Dimensional Interest Rate Risk with Swaptions
  • Practical Hands-On Exercises

09.00 - 09.15 Brief recap

09.15 - 12.00 Workshop Session 3: Using Derivatives for Synthetic Investments

  • Synthetic Fixed Rate Investments
  • Synthetic Floating Rate Investments
  • Synthetic Equity Investments with Index Futures
  • Synthetic Corporate Bond Investments
  • Hands-On Exercises

Workshop Session 4: Using Derivatives for Financial Engineering

  • Leveraged Investments
    • Reverse Floaters
    • Bear Notes
    • Superfloaters
    • CMS Floaters
  • Guaranteed Investments
    • Principal Protected Equity Investments
  • Practical Hands-On Exercises

12.00 - 13.00 Lunch

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

Training catalogue in PDF
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