DERIVATIVES, FUTURES, FORWARDS AND OPTIONS

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COURSE OVERVIEW

With the recent economic turmoil spreading globally through the use of non-traditional instruments, it has become imperative for professionals to gain a fundamental understanding behind the dynamics of the market. This course builds the conceptual framework for understanding the fundamentals of derivatives and of derivative markets. The essentials of forwards and swaps in addition to contingent claims in their various forms are introduced.

COURSE OBJECTIVES

By completely attending this course, participants will be able to:

Define a derivative and recognize its uses
Determine the differences between exchange-traded and over-the-counter derivative contracts
Distinguish between forward commitments and contingent claims
Differentiate between forwards, futures, options, and swaps
Discern the underlying components between types of derivatives
Explain the purposes and controversies related to the derivatives market
Identify the key principles behind derivatives pricing and valuation

principles of financial derivatives (photo1)

TARGET COMPETENCIES

Derivate Principles
Derivative Markets
Types of Derivatives
Benefits of Derivatives
Derivatives Pricing

Financial analysts, department heads, senior management team members, financial controllers, finance managers, chief and financial accountants, professionals in the field of finance and accounting who have any involvement in the financial markets

The course uses a mix of interactive techniques, such as brief presentations, application of theories presented, and demonstrations of real-life examples. It will also include many groups and individual exercises to exchange experience and apply the knowledge acquired throughout the course.

INTRODUCTION TO DERIVATIVES

What’s a derivative?
Derivatives markets and structure
- Preamble
- Exchange traded derivatives
- Over the counter derivatives

TYPES OF DERIVATIVES

Forward commitments

Forwards
- Payoff structure
- Delivery of forwards
Futures
- Standardized contracts
- Price characteristics
Swaps
- Fixed-rate swap
- Floating-rate swap

TYPES OF DERIVATIVES (Continued)

Contingent claims

Options
- Call option
- Put option
- American-style
- European-style
Credit derivatives
- Credit spread options
- Credit-linked note (CLN)
- Credit default swap (CDS)
Asset backed securities
- Collateralized mortgage obligation (CMOs)
- Collateralized bond obligation (CBOs)
- Collateralized loan obligation (CLOs)
- Collateralized debt obligation (CDOs)

Hybrid derivatives

Bonds
- Callable bonds
- Convertible bonds
Swaps
- Swap payments
Options
- Options on futures
- Swaptions

NATURE OF THE DERIVATIVES UNDERLYING COMPONENT

Equities
Fixed income
Currencies
Interest rates
Credit
- Credit default swaps (CDSs)
- Collateralized debt obligations (CDOs)

Commodities
Other

PURPOSE AND BENEFITS OF DERIVATIVES

Risk allocation
Information discovery
Operational advantages
Market efficiency

CRITICISMS AND MISUSES OF DERIVATIVES

Speculation
Hedging
Risk management

ELEMENTARY PRINCIPLES OF DERIVATIVE PRICING

Derivative values
Storage and associated costs
Arbitrage
- The law of one price
- Arbitrage opportunities and their application