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This course will provide learners with an introduction to the varied world of derivatives markets.
Participants will be introduced to futures and options markets, followed by the interest rate swap and credit default swap markets. Each learning unit will begin with a description of the chosen derivative and why it may be appropriate to trade a derivative. Learners will be introduced to the concepts of derivatives pricing and risk management techniques.
Suitability
This course is suitable for anyone new to Derivatives.
Learning Outcomes
- Explain the use of futures
- Calculate the cost of carry forward
- Analyse arbitage free forward and futures prices
- Describe the causes and impact of contango and backwardation
- Explain trading and settlement of futures position
- Describe the features and applications of interest rate swaps
- Analyse the relationship between swaps, bonds and forwards
- Build a swap curve, price and value swaps,
- Explain how to curve trade using swaps and calculate swap DV01
- Analyse cross currency swaps
- Explain the use of CDS and the characteristics of CDS
- Understand the fixed coupon CDS
- Describe a credit event and subsequent actions in the CDS market
- Discuss CDS impact on bond pricing
- Calculate EL implied default probabilities and CDS premiums
- Explain the fundamentals of Options
- Explain moneyness and market terminology
- Price options using Black Scholes
- Understand option payoffs
- Compare call and put options and futures position
- Understand appropriate option structures used in trading and risk management
- Construct and analyse straddles, strangles and spreads
- Construct and analyse risk reversals
- Explain protection strategies which use options
- Explain and differentiate Black Scholes, Binomial and Monte carlo pricing models
- Practice intuitive pricing of options
- Analyse volatility
- Analyse impact of market derived inputs to options pricing models
- Understand the impact of Vol skew and smile on options pricing
Analyse the use of option Greeks in hedging and trading including, Delta, Gamma, Vega and Theta - Create and analyse option delta and delta hedges
Course Content
Introduction to Derivatives
Unit 1 – What are Derivatives?
Forwards and Futures
Unit 2 – Practical futures trading
Unit 3 – Futures pricing
Unit 4 – Futures contracts specifications
Unit 5 – Equity index futures
Unit 6 – Interest rate futures
Interest Rate Swaps
Unit 7 – Interest rate swap basics
Unit 8 – Interest rate swap applications
Unit 9 – Interest rate swap pricing I
Unit 10 – Interest rate swap pricing II
Unit 11 – Trading interest rate swaps
Cross Currency Swaps
Unit 12 – Cross currency swaps basic
Unit 13 – Cross currency swaps applications
Credit Default Swaps
Unit 14 – The CDS contract
Unit 15 – CDSW screen
Unit 16 – Credit events
Unit 17 – CDS pricing
Options Fundamentals
Unit 18 – Option features 1
Unit 19 – Option features 2
Unit 20 – Call options
Unit 21 – Put options
Unit 22 – Protective option strategies
Option Combinations
Unit 23 – Overwrite strategies
Unit 24 – Call spreads
Unit 25 – Put spreads
Unit 26 – Risk reversals
Unit 27 – Straddles
Option Pricing
Unit 28 – Intro to option pricing
Unit 29 – Binomial trees and Monte Carlo simulation
Unit 30 – Black-Scholes
Unit 31 – Volatility
Option Risk Management
Unit 32 – The Greeks
Unit 33 – Delta
Unit 34 – Gamma
Unit 35 – Theta and Vega
Unit 36 – P&L attribution using The Greeks
This Course Includes
- Learn: 36 micro-learning on-demand videos
- Check: 36 knowledge checks to validate understanding
- Apply: 36 hands-on practical exercises and projects
- Requirements: Access to a computer with an internet connection
- Accessibility: Access on PC, mobile or TV
- Certification: Certificate of completion with CPD record
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