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Financial Derivatives - Warm Up

Duration: 1 day
  • General Introduction to Derivatives
  • Mechanics and Applications of Derivatives
  • Futures and Options
  • FRAs, Swaps and Interest Rate Options
  • Credit Derivatives
  • Trading, Clearing and Settlement
  • Risk Management, Reporting and Regulatory Treatment
The primary objectives of this warm-up seminar is to give the participants a general introduction to financial derivatives and a general understanding of the mechanics and uses of these instruments for trading and risk management purposes. The seminar is targeted towards those who wish to extract maximum value from participation in the subsequent, more advanced course “Financial Derivatives – Instruments, Mechanics and Markets”.

We shall start with a general introduction to financial derivates, explaining what they are and discussing their advantages, disadvantages and possible applications. We will describe the basic “mechanics” of the instruments, illustrated by pay-off, P&L and time profile diagrams, and we present a “glossary” of important terms.

We will then look in more detail into the markets for listed and OTC instruments. We explain the general mechanics and uses of futures, options, FRAs, forwards, interest rate options and credit derivatives. We also describe how the instruments are traded and settled, and we give an overview and simple examples of their applications.

Finally, we give an overview of the risks of using financial derivatives. We briefly explain how these risks can be identified, measured and managed, and we discuss reporting and management requirements. We also give an overview of the regulatory treatment of derivative instruments under Basel II and other frameworks.

Day One

09.00 - 09.15 Welcome and Introduction

09.15 - 10.15 General Introduction to Financial Derivatives

  • What Is a “Derivative Instrument”?
  • A Brief History of Derivatives and Derivative Markets
  • Types of Derivative Instruments
    • Forwards vs. Options
    • Listed vs. OTC
  • Derivatives Glossary
  • Generic Pay-Off Profiles
  • What You Can Do with Derivatives

10.30 - 12.00 Derivatives Markets and How they Work

  • Futures and Options Markets
    • Futures and Options Definitions and Mechanics
    • Pay-Off and P&L Diagrams
    • Important Futures and Options Exchanges and Contracts
    • How Futures and Options are Traded
    • Clearing and Settlement of Futures and Options Trades
  • FRAs, Forwards and Swaps
    • Types, Mechanics, Trading and Settlement
  • Interest Rate Options
    • Types, Mechanics, Trading and Settlement
  • Credit Derivatives
    • Types, Mechanics, Trading and Settlement

12.00 - 13.00 Lunch

13.00 - 14.30 Derivatives Applications (Overview)

  • Using Futures and Options for Trading
  • Using Futures and Options for Hedging
  • Using FRAs and Swaps to Manage Interest Rate Risk
  • Using Currency Forwards, Swaps and Option to Manage FC Risk
  • Using Credit Derivatives to Manage Credit Risk

14.45 - 15.45 Risk Management, Reporting, Control and Regulatory Issues

  • Overview of Derivatives Risks
  • Overview of Methods and Tools for Risk Management
  • Internal and External Reporting Requirements
  • Sound Practices for Managing Derivatives Risks
  • Control Systems and Procedures
  • Regulatory Treatment of Derivatives

15.45 - 16.15 Small Quiz

Evaluation and Termination of the Seminar