Investment Operations

Derivatives Fundamentals

Course Instructor

Course Level

Beginner

Certification

Certificate

Delivery

Via Zoom

Hours (EST)

9:00 am - 1:00 pm​

Description

*This course can be offered upon request and can be customized to fit your team’s needs.

Throughout the virtual Derivatives Fundamentals 4 half-day course, you will gain a solid understanding of the fundamentals of options, futures, forward contracts, credit default swaps, and forward commitment swaps. Designed for individuals with varying levels of exposure to derivatives-related businesses, this class will take you on a journey from the basic terminology and definitions to the intricacies of trading and risk management applications.

No prerequisites are required, making this course accessible to individuals in diverse roles, such as those working in trading, sales, clearance, settlement, compliance, financial control, information technology, portfolio administration, or marketing.

Join us to unlock the world of derivatives and expand your knowledge of these important financial instruments.

Day 1

Introduction to Options

  1. Terminology and definition
  2. Types of options: calls, puts and exotics
  3. Long versus short option positions
  4. Option pricing basics: intrinsic (exercise) value, time value and premium

Option Pricing and Valuation (beyond the basics)

  1. Detailed investigation of long call positions
  2. Value at expiration given contract is in or out of the money
  3. Value before expiration and early exercise versus closing sale
  4. Put values under similar conditions

Speculative Outright Long or Short Option Trades

  1. Buying calls or puts compared to buying or short selling underlying stock
  2. Uncovered short calls and puts

Basic Option Strategies

  1. Covered call writing: selling a call against stock owned
  2. Covered put writing: selling a put against cash
  3. Protective (long) put strategies: buying a put on stock owned

Other Option Trading Strategies

  1. Basic spread trades: bull, bear and butterfly spreads
  2. Ratio and reverse-ratio (back) spreads
  3. Straddles and strangles

Day 2

Introduction to Futures and Forwards

  1. Terminology and definitions
  2. Characteristics shared by futures and forwards
  3. Counterparties
  4. Contractual obligations
  5. Expiration: deliverable versus cash settlement only contracts

Distinguishing Characteristics of Futures and Forward

  1. Over-the-counter (OTC) versus exchange-traded (listed) contracts
  2. Bilateral versus third-party contracts
  3. Negotiated versus standardized contracts

Introduction to Forward Pricing

  1. Cost of carry arbitrage pricing
  2. Positive versus negative carry
  3. Contango and backwardation

Overview of Types of Futures Contracts

  1. Interest rate and debt futures
  2. Equity index futures
  3. Energy futures
  4. Other types of futures

Overview of Types of Forward Contracts

  1. Currency forwards
  2. Forward rate agreements (FRAs)
  3. Other types of forwards

Day 3

Introduction to Credit Default Swaps (CDS)

  1. Contracts providing protection against adverse credit events
  2. Contract terms: reference issuer(s), notional amount, maturity and credit events
  3. Contract settlement given a credit event: cash settlement versus delivery
  4. Credit protection buyer (long CDS) and credit protection seller (short CDS)
  5. CDS spread

CDS Pricing and Valuation Basics

  1. CDS spread versus bond market credit spreads
  2. CDS basis and basis trades
  3. CDS spread as the present value of expected payoff
  4. Cash flow in survival and default, probabilities of default and survival

Standardized CDS

  1. Contacts terms: standardized coupon, common quarterly payment/expiration dates
  2. Upfront payment: CDS spread relative to standardized coupon
  3. Accrued coupon owed by seller
  4. Quotes: upfront payment or percent of par/notional

Index CDS

  1. Markit and Itraxx indexes
  2. Investment grade and high yield indexes
  3. Sector and industry indexes
  4. Settlement in event of single name default

Trading Strategies

  1. Hedging credit risk of single issuer or sectors
  2. Shorting credit risk (naked CDS buying)
  3. Going long credit risk (naked short CDS)
  4. Credit spreads: long/short single-name or index CDS
  5. Credit curve trades: long/short different maturity single-name or index CDS

Day 4

Introduction to Forward Commitment Swaps

  1. Swap terminology and definitions
  2. Bilateral versus third-party contracts
  3. Negotiated versus standardized contracts
  4. Settlements on payment dates

Interest Rate Swap

  1. Fixed-for-floating swaps
  2. Capital market equivalents
  3. Pricing and valuation
  4. Risk management strategies
  5. Floating-for-floating (basis) swaps
  6. Standardized contracts: roll dates, market agreed coupons

Currency Swap

  1. Interest rate swaps with legs based on rates in two currencies
  2. Possible exchange of notional amounts
  3. Pricing and valuation
  4. Risk management strategies

Equity Swaps

  1. Terminology and definitions
  2. Equity return versus floating rate, fixed rate or equity return
  3. Pricing and valuation
  4. Trading and risk management applications

Commodity Swaps

  1. Terminology and definitions
  2. Commodity leg versus fixed rate or floating rate
  3. Trading and risk management applications

Summary & Questions

$1,795.00

In-House Training

Custom Training can help you achieve your corporate training goals while staying on budget and focusing the content on the needs of your group. Email your questions regarding corporate training to training@investmentoperations.net.

2023 Training Calendar

Training Catalogue

Course Instructor

Course Level

Beginner

Certification

Certificate

Delivery

Via Zoom

Hours (EST)

9:00 am - 1:00 pm​

$1,795.00

Description

*This course can be offered upon request and can be customized to fit your team’s needs.

Throughout the virtual Derivatives Fundamentals 4 half-day course, you will gain a solid understanding of the fundamentals of options, futures, forward contracts, credit default swaps, and forward commitment swaps. Designed for individuals with varying levels of exposure to derivatives-related businesses, this class will take you on a journey from the basic terminology and definitions to the intricacies of trading and risk management applications.

No prerequisites are required, making this course accessible to individuals in diverse roles, such as those working in trading, sales, clearance, settlement, compliance, financial control, information technology, portfolio administration, or marketing.

Join us to unlock the world of derivatives and expand your knowledge of these important financial instruments.

Day 1

Introduction to Options

  1. Terminology and definition
  2. Types of options: calls, puts and exotics
  3. Long versus short option positions
  4. Option pricing basics: intrinsic (exercise) value, time value and premium

Option Pricing and Valuation (beyond the basics)

  1. Detailed investigation of long call positions
  2. Value at expiration given contract is in or out of the money
  3. Value before expiration and early exercise versus closing sale
  4. Put values under similar conditions

Speculative Outright Long or Short Option Trades

  1. Buying calls or puts compared to buying or short selling underlying stock
  2. Uncovered short calls and puts

Basic Option Strategies

  1. Covered call writing: selling a call against stock owned
  2. Covered put writing: selling a put against cash
  3. Protective (long) put strategies: buying a put on stock owned

Other Option Trading Strategies

  1. Basic spread trades: bull, bear and butterfly spreads
  2. Ratio and reverse-ratio (back) spreads
  3. Straddles and strangles

Day 2

Introduction to Futures and Forwards

  1. Terminology and definitions
  2. Characteristics shared by futures and forwards
  3. Counterparties
  4. Contractual obligations
  5. Expiration: deliverable versus cash settlement only contracts

Distinguishing Characteristics of Futures and Forward

  1. Over-the-counter (OTC) versus exchange-traded (listed) contracts
  2. Bilateral versus third-party contracts
  3. Negotiated versus standardized contracts

Introduction to Forward Pricing

  1. Cost of carry arbitrage pricing
  2. Positive versus negative carry
  3. Contango and backwardation

Overview of Types of Futures Contracts

  1. Interest rate and debt futures
  2. Equity index futures
  3. Energy futures
  4. Other types of futures

Overview of Types of Forward Contracts

  1. Currency forwards
  2. Forward rate agreements (FRAs)
  3. Other types of forwards

Day 3

Introduction to Credit Default Swaps (CDS)

  1. Contracts providing protection against adverse credit events
  2. Contract terms: reference issuer(s), notional amount, maturity and credit events
  3. Contract settlement given a credit event: cash settlement versus delivery
  4. Credit protection buyer (long CDS) and credit protection seller (short CDS)
  5. CDS spread

CDS Pricing and Valuation Basics

  1. CDS spread versus bond market credit spreads
  2. CDS basis and basis trades
  3. CDS spread as the present value of expected payoff
  4. Cash flow in survival and default, probabilities of default and survival

Standardized CDS

  1. Contacts terms: standardized coupon, common quarterly payment/expiration dates
  2. Upfront payment: CDS spread relative to standardized coupon
  3. Accrued coupon owed by seller
  4. Quotes: upfront payment or percent of par/notional

Index CDS

  1. Markit and Itraxx indexes
  2. Investment grade and high yield indexes
  3. Sector and industry indexes
  4. Settlement in event of single name default

Trading Strategies

  1. Hedging credit risk of single issuer or sectors
  2. Shorting credit risk (naked CDS buying)
  3. Going long credit risk (naked short CDS)
  4. Credit spreads: long/short single-name or index CDS
  5. Credit curve trades: long/short different maturity single-name or index CDS

Day 4

Introduction to Forward Commitment Swaps

  1. Swap terminology and definitions
  2. Bilateral versus third-party contracts
  3. Negotiated versus standardized contracts
  4. Settlements on payment dates

Interest Rate Swap

  1. Fixed-for-floating swaps
  2. Capital market equivalents
  3. Pricing and valuation
  4. Risk management strategies
  5. Floating-for-floating (basis) swaps
  6. Standardized contracts: roll dates, market agreed coupons

Currency Swap

  1. Interest rate swaps with legs based on rates in two currencies
  2. Possible exchange of notional amounts
  3. Pricing and valuation
  4. Risk management strategies

Equity Swaps

  1. Terminology and definitions
  2. Equity return versus floating rate, fixed rate or equity return
  3. Pricing and valuation
  4. Trading and risk management applications

Commodity Swaps

  1. Terminology and definitions
  2. Commodity leg versus fixed rate or floating rate
  3. Trading and risk management applications

Summary & Questions

In-House Training

Custom Training can help you achieve your corporate training goals while staying on budget and focusing the content on the needs of your group. Email your questions regarding corporate training to training@investmentoperations.net.

2023 Training Calendar

Training Catalogue

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