Derivatives in Risk Management and Trading
In-company
Description
This comprehensive 2 day course run by a former senior City banker is designed to provide delegates with a thorough insight into the most important financial derivative instruments, demonstrating how these different products are used in risk management and trading.
Through lectures, case studies, exercises and discussions you will learn about the characteristics of the main types of derivatives, how to value them and price and hedge risk management as well as spread trade.
You will learn about:
- Different types of derivatives traded on the OTC markets and exchanges, how they are priced and used by risk managers and traders
- Margining and clearing process
- Use of bond futures for managing bond portfolios and trading purposes
- How individual equity futures and index futures are constructed and used by fund managers and traders alike.
- Design of an options contract and the theory of options pricing
- Significance of the Greeks in options risk management
and how option sensitivities are applied to manage risk
- Volatility and directional trades
and simple option trades versus spreads in options
This programme is designed for banking professionals, fund managers, treasurers and traders and those who want to understand how to use derivatives in risk management and trading.
Course Level: General to Intermediate
Who Should Attend
From Investment Banks, Corporates and other financial institutions - Managers and Professionals from the following departments:
- Risk Management
- Interest Rate Analysts, Sales and Traders
- Currency Analysts, Sales and Traders
- Auditors
- Financial Analysts
- Portfolio Managers
- Treasury Managers
And anyone who has an exposure to derivatives and want to learn more about them.
Teaching Method
This is a very interactive course with many exercises, classroom discussions and case studies. You will benefit from comprehensive take away course documentation.
In order to help us establish your individual and business concerns, you will be asked to fill pre-course questionnaire.
Because of the nature of the course the number of places is limited and will be filled on first come, first accepted basis. We advise to book in advance in order to avoid disappointment.
Course Level: General. No previous derivatives knowledge is required.
Derivatives in Risk Management and Trading - A 2 Day Programme
Derivative Products Overview
This section provides an insight into the different types of derivatives that are traded on the OTC markets and exchanges.
- Listed derivatives versus OTC instruments
, standardisation versus bespoke products
- Central clearing for derivatives
- Margining process and the role of the clearing house
Money Market Derivatives – Interest Rate products
This section explains the different types of interest rate derivatives, how they are valued and used by risk managers and traders.
- STIR futures and FRAs and Interest rate swaps
contract design and terminology
- Working out the appropriate hedge ratio
- Understanding basis and basis risk in a hedge
- Working out a forward interest rate
- Calculating the value of a swap
- Examples of managing interest rate exposure
banks, corporations, fund uses
- Spread trading and arbitrage with STIR futures
Case study 1: Corporate treasurer using futures versus FRAs to manage forward borrowing/lending exposure.
Case study 2: Corporate treasurer and bank using an asset swap for alternative funding
Bond Futures
This section explains the design and use of bond futures for managing bond portfolios and trading purposes.
- Bond futures contract design
the deliverable list
- The concept of the price factor and working out the cheapest to deliver
the implied repo rate, net basis calculation
- Calculating the simple hedge ratio
- Working out the bpv hedge
- Bond futures and portfolio management
- adjusting the duration of a portfolio
- Bond spread trading and basis trading using futures
Case study 3: Portfolio manager using bond futures to hedge a bond portfolio
Case study 4: Using bond futures to spread trade – basis trade
Case study 5: Calculating the cheapest to deliver
Equity Futures
This section explains how individual equity futures and index futures are constructed and used by fund managers and traders alike.
- Contract design for individual and index futures
cash settlement
- Equity swaps v futures
- Using index futures for asset allocation
- Synthetic portfolio replication
- Working out the futures price and arbitrage
Case study 6: Using equity index futures to alter the assets of a portfolio
Case study 7: Calculating the theoretical price of the index future
Pricing Options
This section looks at the basic design of an options contract and the theory of options pricing.
- Intrinsic and time value
option premium and the impact of time
- Calculating expected loss
- Review of probability theory
normal distribution and standard deviation
- Volatility types
implied, forecast , historic
- Types of option pricing models
advantages and disadvantages
- Use of models
Case study 8: Combining option payoffs
Case study 9: Simple hedging concepts with options contracts, applied to corporate treasures, banks and fund managers
Option Sensitivities
This section explains the significance of the Greeks in options risk management.
Explaining the sensitivities
- delta, gamma, theta, vega and rho
- Applying the sensitivities
trading and hedging purposes
- Position analysis
Case study 10: Demonstrate how option sensitivities are applied to manage risk
Option Strategies
There are many strategies that can be created by using options and the underlying product, this section explains the main strategies and other synthetic relationships.
Distinguishing between volatility and directional trades
and simple option trades versus spreads
- Main strategies explored
- Call/put spreads e.g. straddles, strangles, butterflies
- Synthetic relationships
- Hedging applications
using options to hedge with greater flexibility
- Options as insurance or enhancement
- Caps/floors/collars
- Exchange v OTC options
Case study 11: Creating synthetic option strategies
Case study 12: Comparing the main strategies for hedging purposes
Case study 13: Managing a volatility trade
Paul North
Paul has over 20 years experience of working and teaching in the financial and derivatives industry. Paul joined the London International Financial Futures and Options Exchange (LIFFE) in 1988, spending several years on the exchange trading floor before transferring to LIFFE’s Business Development Department.
During his time at LIFFE, Paul worked in the fields of broker relations, product research and development, marketing, market automation and education. Paul was Head of Education at LIFFE, before leaving in December 1998 to pursue a freelance career in financial education and consultancy.
Paul is also a qualified teacher and has extensive speaking experience both in the UK and abroad, covering all the major aspects of financial markets. Paul has taught delegates from virtually all of the worlds leading investment banks, funds and trading houses. His list of clients includes JP Morgan, Goldman Sachs, Credit Suisse, Societe Generale, Deutsche Bank, Merrill Lynch, Morgan Stanley, Barclays Capital among others.
In-Company Training
If you have a team of 4 or more this course can be customised and organised in-house at your convenience in any of your offices worldwide. Contact one of our advisors to find out more.
Call us now on +44 (0) 207 993 8597 or
send a message to enquiry@eurekafinancial.com
