Euromoney Audit Training

COURSE BACKGROUND:

Taught by an international equity derivatives expert, this practical training course has been developed to provide delegates with an in-depth understanding of equity derivative products and their applications in trading, hedging and portfolio management. Throughout the course delegates will be given an understanding of the most important aspects surrounding equity derivatives products. The operational mechanics as well as the pricing and risk characteristics will be examined. Delegates will be taken through the various equity derivative trading strategies and their application in a range of commonly used portfolio strategies.

COURSE OBJECTIVES:

A 3-day expert training program on equity derivative products and their applications in trading, hedging and portfolio management:

• Synthetic equity products and strategies: futures, forwards, swaps, ETFs and securitized products
• Equity volatility and structuring volatility trading strategies
• The operational mechanics, pricing, risk characteristics of equity options
• Option pricing models for American and European style options
• Single stock and index options and their application in a range of commonly used portfolio strategies
• Advanced option, volatility trading and risk management strategies
• Pricing and analysis of exotic option structures and their trading and risk management applications
• Reverse engineering of equity structured products, and the motivations for their use in different market evironments.
• Structuring and pricing equity linked structured notes: Reverse
  convertibles; bonus certificates; capital guaranteed structures

WHO SHOULD ATTEND?

• Heads of Training
• Derivative Product Structurers
• Derivative Trading & Sales Executives
• Treasury Managers
• Structured Finance Executives
• Fund & Investment Managers
• Financial Engineers
• Back Office and IT staff supporting the structured products group
• Product Controllers and Risk Managers

Day 1:

Synthetic Equity

This section provides participants with an introduction to equity derivative products and their applications in trading, hedging and portfolio management. The focus of this session will be on synthetic equity or Delta 1.0 products – futures, forwards, swaps, ETFs and securitized products

Content:

• Key drivers of synthetic equity usage

         - Industry trends

         - Regulatory environment

• Attractions of synthetic equity in portfolio management

        - Access

        - Enhanced yield and return

        - Increased alpha availability

• Pricing: cash vs. futures fair value
• Risks: delta & basis risks
• Products

        - Futures & forwards

        - Swaps

        - ETFs

        - Securitized products

CASE STUDY

Synthetic equity strategies; pricing a securitized discount certificate

Equity Volatility

The section provides an in-depth examination of the most important aspects surrounding equity volatility. The session will explain why volatility is relevant, will look at the major interpretations of volatility, and will examine various volatility trading strategies.

Content:

• Estimating and forecasting volatility
• Interpretation of historic, realised and implied volatility
• Measuring volatility exposure
• Volatility (Vega, Gamma) trading strategies
• Volatility skew patterns

        - Model limitations

        - Leverage and balance sheet risk

        - Supply & demand

• Term structure effects
• Trading volatility via options
• Volatility and variance swaps

CASE STUDY

Estimation of volatility; structuring volatility trading strategies

Day 2:

Option Basics

This section provides participants with a thorough examination of equity options, both listed and OTC, for index and single stock names. The session will focus on their operational mechanics, pricing, risk characteristics, and application in a range of commonly used portfolio strategies.

Content:

• Option terminologies, styles and markets
• Pay-off profiles and their interpretations
• Intrinsic value and time value
• Practical considerations

        - Liquidity constraints

        - Client orders

• Put-Call parity: option combinations and synthetic forwards
• Option valuation

       - Black-Scholes

       - Binomial modelling

• Option risks

       - Spot/Forward risk

       - Delta

       - Gamma

       - Theta

       - Vega

• Practical considerations & liquidity constraints

CASE STUDY:

Constructing simple option pricing models for European and American style options; Option combinations and put-call parity

Common Option Strategies

This section discusses the application of single stock and index options in a range of commonly used portfolio strategies. Key objectives are to equip participants with a solid basis of understanding of costs and benefits in the use of options, simple option strategies and how options may be used by both traditional ‘long only’ funds and hedge funds to tailor risk profiles to more closely fit market views and expectations.

Content:

• Yield enhancement strategies

        - Covered calls

        - Under-writing via puts

• Creation of leverage

        - ATM and OTM options

        - Cash extraction

• Option spreads and combinations

        - Vertical & calendar spreads

        - Risk reversals

•  Portfolio hedging techniques

        - Puts and put spreads

        - Collars

CASE STUDY:

Implementing a range of simple option trading and risk management strategies

Day 3:

Advanced Option Strategies

This section examines some of the more advanced option and volatility strategies used by both long-only funds and hedge funds in the recent past. These strategies are typically customised to suit a combination of different trading ideas or requirements, and as such they include a variety of risk factors.

Content:

• Correlation embedded strategies

        - Spread and out-performance options

        - Best-of & worst-of structures

        - Correlation swaps

        - Dispersion trades

• Advanced volatility strategies

        - Conditional variance swaps

        - Options on variance

        - Gamma swaps

• Exotic options

       - Knock-in and knock-out options

       - Quanto options

       - Asian averaging

CASE STUDY:

Pricing and analysis of exotic option structures; trading and risk management applications

Equity Structured Products:

This section provides participants with an analysis of equity structured products. Content will focus on the creation and reverse engineering of equity structured products, and the motivations for their use in different market environments.

Content:

• Rationale for investors & issuers
• Building blocks

        - Structure design and creation

• Pricing and valuation (reverse engineering)
• Risk and return characteristics
• Main product types

       - Delta 1 structures

       - Discount certificates and reverse convertibles

       - Bonus certificates

       - Capital guaranteed products

       - Basket options

       - Structures on non-optionable assets

       - CPPI

       - Volatility and correlation products

       - TARN structures

       - Hybrid products

CASE STUDY:

Structuring & pricing a range of equity linked structured notes: Reverse convertibles; bonus certificates; capital guaranteed structures

• Adriano Pace

  Adriano's career boasts a wealth of practical experience gathered over 10 years within the derivative and capital markets, holding senior positions in a number of major financial institutions including Deutsche Bank, Credit Suisse and UBS.
  
  Adriano worked within the Futures & Options department of UBS, serving an institutional client base in the UK and Europe.
  
  As a director at Credit Suisse, Adriano continued to offer flow trading ideas to a broad base of institutional and hedge fund clients.
  
  As a Director within Deutsche Bank's Global Equity Derivatives division, Adriano was responsible for sales to UK based institutional clients. The position focused on equity-based options and volatility flow ideas while becoming increasingly integrated with other product areas, notably credit and fixed income markets. Adriano lectures internationally on equity and fixed income markets as well as many aspects of derivatives markets, including recent industry trends.
  
  With his longstanding practical experience, he brings an invaluable background and perspective into financial training in the areas of Derivative Markets, Derivative & Volatility Products, Fund Management Trends and Portfolio Management Strategy and techniques.
  
  Adriano holds a B.A. in Economics from Kent University and an MsC in Economics with Finance from Bristol University.

Interested in holding this course in-house? Please fill out your details and a member of our team will be in touch with more information.

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