Derivatives Pricing

Course Overview

This course has been available as a public training programme in many countries around the world in particular in London, Frankfurt and Singapore.  It has also been available as an in-house programme in emerging markets.

Bond Markets and Swaps are playing ever greater role in capital markets. Questions about how to weather the current turmoil, correctly price a new bond issue and then properly value the positions over time has become an essential requirement. 

Financial Derivates have played an increasingly important role since their introduction.  In some markets, they actually have become the driving force behind the movements in cash markets.  Obviously a foundation in this area is mandatory.

Overall course aim:

To provide market participants with the necessary building blocks to understand the different products in financial markets leaving them with an excellent foundation and a comprehensive overview in order to understand and develop new structures.  Participants will understand the spirit of Trading and Investment Banking.  At the end of the programme, participants will have an advanced view on financial markets that can only be achieved by attending this programme.

The speaker shares with great clarity and charisma the concepts that have lead market participants from tears to success.

Course Content

Day 1

Introduction:

• Overview over Financial Markets
• Cash Flows: the Underlying of any Financial Instrument
• Risk and Return Characteristics
• Current developments

Financial Markets:

• Money Markets
• Capital Markets

Banking Regulations:

• Capital Adequacy Requirement
• Basel I
• Basel II
• The need for derivatives

Pricing Forward Markets:

• Developing a Forward Market from Deposits
• Forward Rate Agreements (FRA’s)
• Interest Rate Futures

Interest Rate and Currency Swaps:

• The Swaps Mechanism
• Types of Swaps

The Principle of Swap Pricing:

• The Need for Forward Rates
• The Need for Zero-coupon Rates

Generic Swap Pricing:

• Finding the Forward Amounts
• Discounting the Floating Leg
• Equalise the Floating Leg with the Fixed Leg
• Discounting the Fixed Leg
• Finding the Swap Rate
• Creating a Swap Curve

Swap Valuation:

• Swap Rates
• Zero-coupon Rates
• Forward Rates
• Discount Factors
• PV of fixed and floating Leg
• Net Present Value

Short-term Swap Pricing:

• Pricing and Valuation of EONIA Swaps

Day 2

Introduction to Futures and Options:

• The History and Development of the Market
• Definitions
• Over-the Counter (OTC) versus Exchange Traded Products
• The Role of The Clearing House

Pricing and Valuing Futures:

• Basic Futures Mechanism
• Pricing Futures through Cash and Carry Arbitrage
• The Value Basis
• The Carry Basis
• The Importance of Credit

Specialities with Futures Contracts:

• Cash Settlement
• Physical Delivery

Introduction to Options:

• Definitions
• Calls and Puts

A Simple Approach to Option Pricing:

• Volatility
• The Binomial Model
• The Black & Scholes Model
• The Greeks (Risk measures)

Case Study: Managing the Risks

• Delta-hedging your Option Positions

Exotic Options:

• Barrier Options
• Knock-in and Knock out Options
• Lookback Options
• Best of two (Digital)

The principal of Structured Products:

• Participation and Tracking
• Guaranteed Return Products
• Yield enhancement

Course Summary:

• Putting Financial Instruments Into Context
• Risk Management

Delivering this course in-house for you to a number of participants could be very cost effective. Please call us on 020 7387 4484 to discuss this further.

If you have any questions about this seminar please write to us at post@redcliffetraining.co.uk.