Advanced Derivatives: Applications, Pricing & Hedging

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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.

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  • View Schedule
  • COURSE TYPE Advanced
  • DURATION 5 days


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


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.



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


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


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


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

  • In The Classroom

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  • Private Team Training

  • Indiviual Private Session

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