Advanced Derivatives: Applications, Pricing & Hedging
Advanced Derivatives: Applications, Pricing & Hedging
Advanced Derivatives: Applications, Pricing & Hedging course aims to train delegates on interest rates, commodity and currency hedging using advanced derivative strategies. The course covers knowledge about variously advanced derivatives and their application in hedging using real-life case studies and hands-on exercises.
This highly applied and practical course is designed for energy risk practitioners interested in enhancing their knowledge of best practices in valuation, hedging and risk management of derivatives portfolios.
Delegates are introduced to the most commonly used derivatives pricing models in energy trading organizations such as closed-form solutions and Monte Carlo simulation. The primary price processes for energy risk analysis such as Geometric Brownian Motion and Mean-reverting models are illustrated with pricing and risk analysis examples.
The course builds on the concepts introduced in DPH1 and DPH2 and explores advanced strategies used to price, hedge and manage the risk of derivatives in leading energy trading organizations. Delegates learn about the practical applications of the models and approaches from users of those models, not the quantitative developers.
In this Advanced Derivatives: Applications, Pricing & Hedging course we will talk about advanced market risk management topics such as marginal VaR analysis, backtesting VaR models and Extreme Value Theory (EVT) as well as risk metrics such as Earnings at Risk (EaR), Cash Flow at Risk (CFaR) and Economic Capital are covered with practical examples. Several case studies illustrate how to set an efficient system of risk limits and risk-adjusted performance measurement.
DPH3 also covers best practices in counterparty risk management. Metrics such as Potential Future Exposure (PFE) and Credit Valuation Adjustments (CVA) are introduced in the context of contract valuation and risk charges.
This highly interactive Advanced Derivatives: Applications, Pricing & Hedging workshop uses current case studies, Excel exercises, and group discussions to reinforce the concepts presented in the lectures.
You might be interested in another Financial Training programs.
This course is endorsed by GARP: Global Association of Risk Professionals.
- COURSE TYPE Advanced
- COURSE NUMBER
- DURATION 5 days
- COURSE ACCREDITED BY GARP
YOU WILL LEARN HOW TO
This course reviews advanced topics in discrete and continuous time market theory and derivatives pricing. The emphasis is on valuation and hedging and provides a more in-depth view of interest rate derivative pricing. After reviewing some classic no-arbitrage models, a range of alternative pricing models and approaches will be presented: no-arbitrage models linked to market practice, multi-factor models, the forward measure approach, and market models.
This course focuses on numerical methods and calibration tools necessary for working in the industry.
This course with extensive case studies covering:
Derivative Instruments and Markets
Forwards and Futures Markets
Interest Rate Forwards and Futures
Yield Curve Modelling Techniques
Interest Rate and Currency Swaps
Applications of Swaps in Managing and Trading Interest Rate Risk
Non-Linear Derivatives – Vanilla and Exotic Options
Option Pricing and Valuation
Option Risks and Risk Management
Interest Rate Options
More Advanced Interest Rate Models – Stochastic Term Structure Models
Mismatch Swaps and other more Complex Swap Structures
Structured Applications of Derivatives in Trading, Hedging, and Structured Products
Overview of the Credit Derivatives Market – Trends and Developments
Credit Default Swaps; Operational Practices and Market Conventions
Credit Risk Modelling and Pricing of Credit Derivatives
Credit Portfolio Risk Management – Practical Applications of Credit Derivatives
Second Generation Credit Derivatives and Structured Credit Products
IMPORTANT COURSE INFORMATION
Participants who fully attend this course and complete the test on the last day will receive a Strategic Axis Professional Certificate (SAPC). SAPC certificates are regionally recognized and can be quite valuable when applying for more senior roles within the organization or outside.
Strategic Axis is registered with GARP as an Approved Provider of Continuing Professional Development (CPD) credits. Strategic Axis has determined that this program qualifies for 16 GARP CPD credit hours.
COURSE OUTLINE
Modules:
Module 1: Overview of the derivative market
Introduction to the derivatives market and instruments
Hedgers versus Arbitragers versus Speculators
Dealers versus Users
Exchange traded versus Over-the-Counter (OTC)
Risk management applications
Module 2: Understanding Currency markets
Introduction
Key factors affecting movement in major currency pairs (EUR-USD, USD-JPY, GPB-USD, CHF-USD)
Impact of monetary and fiscal policies on exchange rates
Dollar Index and its relevance in trading and hedging currency risk
Understanding and using Triangular arbitrage
Pricing of currency forwards & futures
Movement of currency forward/future and the underlying spot
Currency forward premium/discount and its role in hedging
Concept of carrying trade and its relevance
Case Study: Movement of major currency pairs over a period of time
Module 3: Understanding Commodity Markets
Key factors affecting movement in primary worldwide tradable commodities
Precious Metals
Energy (Oil, Natural Gas, and other essential energy products)
Base Metals
Impact of US macro-economic data releases on commodity pricing
Relation between commodity, currency and equity markets and its use in hedging strategies
Pricing of commodity future and forward contracts based on storage cost, roll-over yield, and convenience yield
Concept of contango and backwardation
Case Study: Movement of significant commodities over a period
Module 4: Forward Contracts and their application in Currency and Commodity Hedging
Characteristics, default risk, initiation, and settlement
Pricing and valuing forward contracts
Forward Rate Agreement (FRA) to hedge interest rate exposures
Case Study: Application and structuring FRA contract for hedging interest rate exposure
Module 5: Futures Contracts and their application in Currency and Commodity Hedging
Characteristics, default risk, Initiation, and settlement
Pricing of forward contracts
Futures vs Forwards
Major future indices and contracts in commodity and currency
Case Study: Application and structuring futures contract for hedging currency and commodity risk
Module 6: Swaps
Key characteristics
Payoff computation at initiation, during and termination of a swap
Currency swap and its use in hedging
Introduction to swap pricing
Interest rate swaps
Case Study: Application of swap contract to hedge interest rate risk
Module 6: Options
Characteristics of the Options market
Calls and puts
Option payoffs and value
Determinants of an option price
Understanding of what determines the price of an option
Understanding the “Greeks” using the Black-Scholes option pricing model
Implied volatility of options and its impact on options pricing
Collars
Module 7: Option Types and strategies used in currency and commodity hedging
Covered calls and Protective Puts
Bull and bear spread
Butterfly spread
Straddle and strangle
Case Study: Computing payoffs for different types of options hedging strategies
Module 8: Option strategies used in interest rate hedging
Caps & Floors
Collar
Case Study: Best applicable hedging strategies using options for a company with commodity price exposure
Module 9: Black Swan Events & Hedges
Definition of Black Swan Events
Hedging strategies for black swan events?
Case study: Various black swan events that have occurred in the past and critical takeaways
Module 10: Enterprise Risk Management and Key Risk Indicators (KRIs)
Enterprise Risk Management and Risk Metrics
Earnings at risk, Cash Flow at risk and Gross Margin at risk for multiple maturities
Margin-at-risk calculation and liquidity risk management
Excel Case study: Multi-step Earnings at Risk calculation for an energy producer
Economic capital and RAROC
Case Study: Calculation of economic capital and pre-trade risk charges
Module 11: Advanced Valuation topics and volumetric risk pricing and hedging
Pricing options with volatility surfaces
Step by step calculations with delta and moneyness surfaces
Skew-adjusted delta and gammas
Implied volatilities and implied price distributions
Stochastic volatility models in commodity markets
Valuation and hedging of exposures with volumetric risk: Understanding Gamma risk
Introduction to Least-squares Monte Carlo
Excel case study: Pricing an American option with the Longstaff-Schwartz method
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In The Classroom
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Live, Online
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Private Team Training
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Indiviual Private Session
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