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Derivatives Advanced Module Syllabus

 

To have advanced knowledge of various derivative products underlying as equities interest rates credit and currencies and embedded debt instrument.  to understand the concept of cost of carry arbitrage contango and backwardation

 

Why should one take this course?

  • To have a comprehensive and in-depth knowledge of derivatives.
  • To learn to apply advanced techniques of valuation of securities and derivative products
  • To understand investment and hedging strategies.

Who will benefit from this course?

  • Students
  • Stock-brokers and sub-brokers dealing in derivatives
  • Security Market Professionals.
  • Finance Professionals
  • Portfolio Managers
  • Employees with banks and financial institutions.
  • Anybody having interest in this subject

Derivatives (Advanced) Module Syllabus

 

Derivatives & Quantitative Fundamentals – A Backgrounder

A. Derivative Types
B. Beta
C. R-Square
D. Continuous Compounding
E. Option Valuation
1. Historical Volatility (σ)
F. Normal Distribution
G. Share Prices – Lognormal Distribution
H. Volatility (σ)
1. ARCH(m) Model
2. Exponentially Weighted Moving Average (EWMA)
3. GARCH Model
4. Implied Volatility

Fundamentals of Equity Futures

A. Contracts
B. Selection Criteria
1. Stock Selection Criteria
2. Criteria for Continued Eligibility of Stock
3. Criteria for Re-inclusion of Excluded Stocks
4. Index Selection Criteria
C. Price Steps and Price Bands for Contracts
D. Quantity Freeze for Futures Contracts
E. Novation
F. Margins
G. Daily Mark-to-Market Settlement
H. Final Settlement
I. Cost of Carry
J. Determining Stock Futures Price (without Dividend)
K. Determining Stock Futures Price (with Dividend)
L. Determining Index Futures Price (without Dividend)
M. Determining Index Futures Price (with Dividend)
N. Cash & Carry Arbitrage
O. Reverse Cash & Carry Arbitrage
P. Convergence of Spot & Futures
Q. Contango & Backwardation
R. Cost of Carry – Commodities

Investment with Equity Futures

A. Relation between Futures and Spot Price
B. Payoff Matrix from Futures
1. Long Futures
2. Short Futures
C. Hedging with Futures
D. Basis Risk
E. Modifying the Portfolio Beta with Futures
F. Rolling Hedges
G. Investment Strategies Using Futures

Interest Rate Futures

A. Interest Risk Management through Futures
B. Contracts & Eligible Securities
C. Conversion Factor
D. Cheapest to Deliver (CTD)
E. Contract Structure & Mechanics of FUTIRD
F. Contract Structure & Mechanics of FUTIRT

Black-Scholes Option Pricing Model

A. European Call Option
B. European Put Option
C. Dividends
D. American Options

Option Greeks

A. Delta
1. European Call on non-dividend paying stock
2. European Put on non-dividend paying stock
3. European Call on asset paying a yield of q
4. European Put on asset paying a yield of q
B. Gamma
1. European Call / Put on non-dividend paying stock
2. European Call / Put on asset paying a yield of q
C. Theta
1. European Call on non-dividend paying stock
2. European Put on non-dividend paying stock
3. European Call on asset paying yield of q
4. European Put on asset paying yield of q
D. Vega
1. European Call / Put on non-dividend paying stock
2. European Call / Put on asset paying yield of q
E. Rho
1. European Call on non-dividend paying stock
2. European Put on non-dividend paying stock

Currency Futures & Options

A. Currency Futures Contracts
B. Calculation of Daily Settlement Price of Currency Futures
C. Transactions in Currency Futures
D. Currency Futures or Forward Rate Agreement
E. Currency Options Contracts
F. Valuation of Currency Options
1. European Call Option
2. European Put Option
G. Transactions in Currency Options

Swaps

A. OTC Products
B. Interest Rate Swap
C. Valuing Interest Rate Swaps
1. Valuation based on Bonds
2. Valuation based on Forward Rate Agreements (FRAs)
D. Currency Swap
E. Valuing Currency Swaps
F. Swaption

Embedded Options in Debt Instruments

A. Warrants
B. Convertible Bonds
C. Call Option in a Debt Security
D. Put Option in a Debt Security
E. Put & Call Option in a Debt Security
F. Caps
G. Floors
H. Collars

Credit Risk & Derivatives

A. Credit Risk & Rating
B. Default History & Recovery Rates
C. Calculation of Default Risk
1. Simple Approach
2. Present Value Approach
D. Mitigating Credit Risk
E. Credit Default Swaps
F. Collateralised Debt Obligation (CDO)