This programme has been designed to provide a thorough overview of equity derivatives products, pricing, risk management and applications. We will use real life case study examples to illustrate the techniques and strategies that are used by both “buy side” and “sell side”.
Participants will require laptops with MS Excel for the exercises and case studies.
The broad objectives of the programme are:
Exercise for Module 1
Participants will be asked to explain the properties and risk reward profiles of a series of equity derivative products.
Exercise for Module 2
Participants will be provided with a series of market expectations and trade criteria and be asked to choose an equity derivative product to use, giving their reasons and expected outcomes over a range of asset prices at maturity.
Exercise for Module 3
Participants will be provided with a set of market asset prices, interest rates, volatilities and dividend expectations and will be asked to price various products. For this exercise participants will be given a pricing model for options but will be expected to build their own pricing model for the Delta 1 products.
Exercise for Module 4
Participants will be provided with a set of market asset prices, interest rates, volatilities and dividend expectations and will be asked to project the expected profit or loss (risk) for various products as a result of changes in market conditions. For this exercise participants will be given a risk analytics programme for options. For Delta 1 products they will expand the model that they built in Module 3 to incorporate “what if” scenario analysis.
Exercise for Module 5
Participants will be provided with a series of market expectations and trade criteria and be asked to choose a strategy to use, giving their reasons and expected outcomes over a range of asset prices at maturity.
Exercise for Module 6
Participants will choose one of the strategies from Module 5 and calculate the VaR and initial collateral requirement and haircut and then execute the strategy. They will then mark the strategy to market and manage the collateral over these two marks. One of the marks will be for a profitable market movement and the other for a losing market movement. They will then close the trade out and calculate the final profit or loss and manage the close out of the strategy and the return of the collateral.
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