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CONTENTS |
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Derivatives Fundamentals |
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LENGTH 3 days (2 days without
trading simulation) WORKSHOP OVERVIEW This workshop is
designed to introduce participants to the basic concepts of derivatives
instruments and market risks in an integrative manner.
The fundamental relationships between risks to spot markets and the
ways to manage these risks through forwards, options, and combinations of
derivatives are explored. The key concepts of derivatives products are
de-mystified and applications for the bank’s derivatives products are
illustrated. SUBJECT FOCUS AND CONTENT ·
An overview of derivatives
products and markets, including the bank’s present and historical role
in these areas relative to competitors. ·
Basic concepts and frameworks
used to identify and measure market risks, including generally accepted
statistical techniques and the bank’s methodologies, such as factor
sensitivities and value at risk (VaR). · Defining value in finance and its relationship to derivative products. · Defining risk and return in finance and how derivatives manage risks. ·
Forward markets:
definitions and payoffs ·
No-arbitrage pricing and
suspected biases in forward pricing. ·
Examples and applications of
forwards for managing financial risks. ·
Banks’ market and credit
risk management of forward transactions. ·
Option markets: definitions,
payoffs, and payoff combinations. ·
Analysis of put – call
parity and other fundamental derivatives relationships. ·
Pricing options:
intuitive understanding of the Black – Scholes model and various
numerical procedures (such as binomial trees) ·
Dynamic (delta, gamma, vega)
hedging |
SUBJECT FOCUS AND CONTENT (CONT'D) ·
Banks’ market and credit
risk management of option transactions. ·
Examples and applications of
options for managing financial risks. ·
Review and practice of
derivatives trading strategies through a computer simulation game. TARGET AUDIENCE Bankers, product
specialists, risk managers, audit, operations, financial control, and
other professionals that need a basic introduction to derivatives.
PARTICIPANT REQUIREMENTS AND LIMITATIONS Participants are
required to own a Hewlett Packard financial calculator (or equivalent
brand) and to be familiar with basic calculations, including present value
concepts. Because of the
computer-based simulation derivatives trading game, the workshop is
limited to a maximum of 20 participants. INSTRUCTION METHODOLOGY The workshop utilises
a combination of lectures, case studies, and short problems over the first
two days. The third day utilises
a computer-based proprietary derivatives trading simulation.
It is recommended that no more than three participants share each
computer. |
