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A Trader’s guide to Derivatives


To provide a practical introduction to equity derivative products, including pricing, hedging and structuring equity derivatives. This courses covers both exchange traded and over the counter equity derivatives in addition to equity derivative securities such as warrants and convertible bonds. It covers structuring and hedging considerations from both buyer and seller perspectives.

Will learn:

·        Special features of equity underlying

·        Equity derivative structures designed to optimise risk / return profiles for both issuer and purchaser

·        Structuring, pricing and hedging of equity derivatives

·        Over the counter and structured securities

Audience:  market professionals with at least 1-year experience (some basic understanding of markets/products helpful)

·        Traders, sales, support, Internal Audit

·        Fund managers

·        Risk management

Table of Contents

1.   Funding and PV: review of the foundation of all trading : funding and present value, and  spot and forward curves.

2.   Forwards and Futures:  thorough treatment of forward and futures contracts illustrating all important considerations such as fair value methods, outright, difference, margining etc.

3.   Swaps: provides a strong foundation of generic and specific swaps for all important structures and asset classes.

4.   Options: introduction to traditional and vanilla options pay-out profiles, as well consideration of common (vanilla) options structures and uses/abuses, and coverage of contract issues and implications for different asset classes.

5.   Valuation Basics: pricing under uncertainty (uncertain) processes and the applications to finance expressed in clear down-to-earth terms and including a review of statistical and probabilistic concepts, culminating with a clear understanding of the fundamentals of pricing models and worked examples with Monte Carlo and Tree techniques.

6.   Market Convention Methods for Pricing: Black-Scholes Option Pricing case explained in detail (where it comes from and what it means, Risk neutral process, how Black-Scholes can FAIL for risk management.

7.   Market Convention Methods for Hedging: Sensitivity and the "Greeks", Black-Scholes Greeks, Sample “Bucket” Report, Dynamic vs. Static Hedges and Sensitivity vs. Profile Hedges (Delta hedging, Pyramid Hedging, Static Profile Matching, Dynamic Profile Matching, Rules of Thumb for Dynamic/Static vs. Sensitivity/Profile)

8.   Volatility Basics: Characterising Volatility, Implieds/Skews/Term structure of volatility, advanced volatility concepts (forecasting volatility, cheap/dear analyses, implied distributions), real world effects, Correlation and Covariance.

9.   Complex Products: qualitative review of each of the "usual suspects": Asian, Digital, Barrier, Lookback, Chooser, Compound, Spread, Quanto, etc as well examination of embedded (e.g. callable bond) and structured (convertible bond) products as well as a section introducing Credit Derivatives.

10. Advanced Valuation and Risk Management: introduction to simulation techniques for assessing trading strategies of a position/portfolio over a holding period, case study of a vanilla call option position hedging strategy analyses including both back-testing and forward-testing.  Also included are considerations of operational issues touching on capital, credit, and regulatory maters.


730 Pages of comprehensive and extensively illustrated Handout Notes (see samples here)

Plus copies of relevant TG2 Books/e-Books

Note: Seminars can be tailored to your trading, risk, client, and systems needs.  Submit your needs, and/or "cut/paste" from other Seminars (see entire "standard" list HERE)

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Last modified: July 25, 2011