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 Derivatives 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.
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.
This course starts with a review of the financial markets and the impact that the financial crash has had on markets, banks ability to trade and hedge positions and the pricing of financial instruments. It will also look at current regulatory issues such as Basel III and the Volcker Rule.
No course on pricing of financial instruments could be undertaken without reference to a robust yield curve, this course shows how curves are built using instrument that the institution uses to value and hedge positions. Discussions of the future of riskless interest rates and credit value adjustments will be undertaken.
The afternoon of the first day will be taken up by demonstrating how an interest rate swap is priced in the primary and secondary markets and how the correct use of an ISDA Master Agreement, CSA and collateral can mitigate use of banks own capital for credit risk purposes.
Day two commences with a short summary of the futures markets and their relationship with the interest rate swap markets.
Option pricing can at first seem complex and difficult to understand, the morning of day two will be used to explore how options are priced and risk managed using the Greek letters. This session will use enough mathematics to ensure that solutions are robust, but will also explain concepts in a practical manner so participants can take their newfound knowledge and apply it to their everyday trading and risk management tasks.
Exotic (path dependant) options will be explained, in particular where the pricing and risk management is similar and where it is different to conventional options.
Finally, a small number of structured products will be constructed from their building blocks to show how they are priced and risk managed. The products that will be demonstrated will include capital protected notes and yield enhancing structures.
The trainer for this course has developed a number of Excel Spreadsheet pricing and risk management tools which will be used on the course.
Where appropriate Bloomberg functionality will be referenced and explained.
Case Study: Managing the Risks