Certified course on Derivatives

Learn to understand and apply derivatives, including their pricing, trading strategies, and risk management techniques, through practical and theoretical insights.

Who should attend?

Junior traders

Sales staff employed by banks selling treasury products to corporate clients

Asset managers

Treasury managers in banks and non-financial institutions non-financial institutions

Support staff, including those involved in back and middle office functions

Internal and external auditors

Risk managers/analysts

Finance directors

Finance managers

Legal staff

Accountants and auditors

Exchange Trade Derivatives

Life Cycle of a Financial Futures Contracts

Contract Calculations

Tick values

STIRs (Short Term Interest Rates)

Long Term Interest Rates

Equity Index Contracts

Examples of how Traders use futures for

Life Cycle of an ETD trade

Macro Trading with Futures

Short Term Interest Rate Trades

GDP

CPI

Non-Farm Payrolls (Unempl0yment)

Other Top Economic Indicators

Index Futures

Trading Indices and Economic News

Commodity Trading

RiskOn – Off Strategies

Trading Supply and Demand

Spread Trades

We consider what impacts these markets. We look at historical data to and analyse how profits can be made from these moves.

Interest Rate Swaps (IRS) and Counterparty Credit Risk

Interest Rate Swaps Structure and Pricing

Structure of a Vanilla IRS

IRS Pricing

Pricing an IRS from the Yield Curve

Par Curve

Bootstrapping

Zero Curves

Forward Curve

Exercise: Participants will price a vanilla swap on excel. Delegates price a swap from Zero rates, calculate the Swap Price and discover pricing short cuts.

Understanding the move from LIBOR to SOFR

How Traders use IRSs and Manage the Risk

Portfolio Hedging

Duration and Convexity

PV01 and DV01

Exercise: Participants calculate the Duration and hedge a bond with an IRS using Dynamaic the portfolio

Pricing a Swap from Futures

Exercise: Participants create an IRS from futures prices, allowing them to understand how IRS are priced and hedged in the real world.

IRS Markets

Dealing Quotes

Bid / Offer Spreads

Making a Profit

Understanding the move from LIBOR to SOFR

Pricing More Complex Swaps

Basis Swaps

Amortising

Roller Coaster

Forward Starting

Swaptions

Zero Coupon

Others

Macro Trading for Rates – Case study

Trading the yield curve

CPI and Inflation expectations

Participants practice creating trades to take advantage of these moves. E.g. 2 v 10s spread trades.

Trading Bull Flatteners / Steepeners

Trading Bear Flatteners / Steepeners

Credit Counterparty Risk, Equity Swaps and CFDs,

Trading on SEFs and OFTS

CCP and the Clearing House

Margining and the role of the Broker

Collateral Swaps

ISDA Master Agreements

CSA ( Credit Support Annex)

Collateral Management

Exercise: Calculating a margin call. Delegates need to consider, Haircuts, Minimum Transfer Amounts (Nuisance Amounts), Rounding and Independent Amounts

CCR (Counterparty Credit Risk)

CVA adjustments

Basic CVA calculations

What is CVX?

Case Study: We look at how the CVA adjustments impacts the price of an IRS throughout its life.

Equity Swaps

Structure of an Equity Swap

TRR Index Swaps

Manufactured Dividends Arbitrage

Use of Equity Swaps by Fund Managers

Case Study; Euro investment in East European Index. We examine how this Equity Swap is constructed, the pricing and the risks involved.

CFDs

OTC vs ETD Markets

Asset Managers Trading Equity CFDs

Long and Short Positions

Hedging

Trading on Leverage

Deposit Margins

Mark to Market (MTM)

Daily Variation Margins

Commission

Interest Payments (The Overnight Rate )

Scenario Based Case Study: A Portfolio Manager wants to take long and short positions in stocks and Indices. Taking long and short positions in CFDs.

Delegates are asked in teams to buy CFDs, calculating the cash flow over a week holding period. The position is then closed, calculating the Profit and Loss and the overall cost of the position including funding and commissions.

Foreign Exchange Derivatives and Options

FX Forwards

FX Swaps…the Formula

Basic Pricing of a Swap and Forward Outright

Example of corporate uses

Trading FX Swaps

Exercise: Quoting swaps. We look at swap quotes from O/N to 1 year and see what happens when a client trades on the price!

Case study: Pricing FX swaps and then taking position based on expected change on the interest differential. Profits are then calculated. We also consider trading the short term yield curve with short term O/N funding

Risk … things to look out for!

Accidentally Creating Exposure

Managing Exposure

Rounding

NDFs _ Non Deliverable Forwards

Calculating the P/L from an NDF trade

Client NDF hedge trade

Option Basics

Calls, Puts, Exercise, Expiry, Premium etc.

ATM, OTM, ITM … Intrinsic and Time Value

European v American

Option Pricing

Scenario Based Case Study: Delegates in their teams, compare the P/L of an Exchange Traded Equity Option, versus the underlying Equity. They will learn how Equity options are priced and how to calculate their value. They will also learn how leverage impacts the returns and the cost/benefit analysis of owning options v the underlying equity.

Warrants and Convertibles

History of Warrants and Convertibles – warrants originally attached to Bonds

Exchange Traded Warrants

Case study on Convertibles: we look at a convertible bond and examine its value. Pricing it from a Binomial Model. We then consider the Conversion ratio, Floor, Parity, Call features, Conversion premium etc.

Option Strategies

Trading Options; Case Studies and Exercises:

Long and Short Call Positions

Long and Short Put Positions

Buying OTM calls and Puts

Caps, Floors and Collars

Selling Puts Options to “Buy cheap”

Writing “Covered” Calls

Trading Volatility (Straddles and Strangles)

Pricing Options

Options Pricing Black Scholes

The Greeks

Case study: Delta Hedging in Practice. Hedging a short Equity option position over a period of days, staying delta neutral, while identifying the changes in Vega, Gamma and Theta.

The Volatility Curve….Smile and Smirk

Currency Swaps, Credit Derivatives and Securitised Assets

Cross Currency Swaps

X Currency Swap Trade Structure

Priced of Floating Rate Swaps

Types of X Currency Swaps

XCS uses eg; Bond Issues

Credit Derivatives

Credit Default Swaps (CDSs)

Mechanics and Settlement of CDS contract

Exercise Trading Vanilla CDS : Excel pricing and Valuation

Big Bang

CDS Indices

Trading CDS in the Market

CDS Arbitrage

Exercise: Participants examime a Bloomberg screen and answer questions about the CDS. What’s the risk? What is CDS fee? Upfront Points etc

Case Study: Participants look at market prices and decide if there is an arbitrage opportunity in the CDS market? How much profit can they make?

Securitisation Markets - MBS, CLOs and CDOs

Concept of Securitisation and Securitisable Assets

True Sale v Synthetic Structure

Pool of Assets

Origins of Securitisation

Tranching, Subordination & Payment Waterfall

Collateralised Loan Obligations (CLOs)

Leveraged loans