Derivative Products

This two day course covers the various types of derivatives used in the market today for hedging and speculative purposes.

The program is normally offered by a bank to its employees, but we are now offering an open enrollment (public) seminar. Please visit http://www.snlcenter.com/derivatives/default.asp for details.

Each of the major types of derivatives (options, futures/forwards, swaps) is defined and discussed in the context of equity, interest rate, currency, index, credit and commodity products, and examples are given as to how they are used by market participants.

The program discusses option pricing, including the factors which affect an option’s price, the various Greeks and the Black-Scholes option pricing model. The model will be used to compute option prices and to examine how changes in the various parameters affect the price of an option.

The roles of futures exchanges (CME Group, LIFFE, DubaiMerc, etc.), and contract specifications (crude oil, Eurodollar, treasury note, etc.) are described, as well as how futures prices are determined and the relationship between futures and forward contracts.

The newest, fastest growing and most controversial piece of the market, credit default swaps, is described and examples are given.

At the end of this workshop participants will:

Understand the meaning of derivatives, the major products, their uses in trading and hedging, and their risk/reward profiles

See how these products impact a bank’s financial statements and risk profiles

Understand the basic types of options and option combinations, develop payoff profiles, and price options using the Black-Scholes model

Be able to access and interpret information from the major options and futures exchanges

Understand the relationships among the various derivatives

Topics:
 
Options
Calls, puts, spreads and combinations
Risk/reward payoff profiles
Option pricing, the Greeks
Hedging strategies
Convertible bonds, warrants, exotics
 
Futures and forwards
Exchanges
Contract specifications
Margin/performance bond
Hedging strategies
 
Swaps
Types of swaps
FRA’s
Constructing a swap
Credit default swaps
Hedging strategies

Structured products