Featuring:
- Basic to intermediate instruction on a wide range of treasury products in markets
- Identifying client needs for Treasury products
- Money market and bond products
- Government and spread (corporate) bonds
- Marking to fair value using market quotes and models
- FX delta one forwards, futures, and swaps products
- Basic options products pricing and risk management
- Summary of some important exotic and structured options as solutions to specific client needs
- Interest rate forwards, futures, swaps and options
- Counterparty and credit risks in Treasury Markets Products
- Investment management use of standard and structured products
Course Content:
This 3-day comprehensive, “hands-on” workshop introduces a broad range of treasury products related to markets activities, including money markets, bonds, and foreign exchange in the cash markets as well as derivatives in FX, interest rates, and related counterparty credit exposures. Classroom instruction, including lectures, discussions, short cases, internet illustrations, and computer exercises, builds from basic to intermediate levels for all products.
A key theme in this workshop is to illustrate opportunities to identify client needs for Treasury products as well as to de-mystify technical aspects of how these tools work in the context of less-developed markets. The workshop is designed to use numerous Excel exercises, as well as various internet, Bloomberg and Reuters screens, in order to teach a mastery of the different products.
Delegates will be provided with a complete file folder on a CD of treasury product models that run on Excel. Delegates should bring a laptop equipped with a CD read drive. The laptop should have a full installation of Microsoft Office’s Word and Excel. The Excel version is preferably the 2007 or later, and should include a “full” install, including the special add-ins, such as those named Data Analysis and Solver.
Day 1 Topics
Overview of Treasury Products
- The role of treasury in modern organizations
- Treasury focus on liquidity and risk
- Framework for understanding financial markets products
- Recent developments in markets and impact on treasury
- Challenges in the management of liquidity and risk
- Regulations impacting treasury products
- Expectations for the future for treasury products
Money Market and Bond Products
- Characteristics of short-term government bills and commercial paper
- Conventions for interbank and central bank deposits
- Identification of client needs for money market and bond products
- Other money market products, including repurchase agreements
- Modeling cash flows in money-market products
- Liquidity and risk characteristics
- Money market rates, discounts, and yields
- Bid and offer for money market products
- Recent trends and drivers of rates
- The role of central banks in short term markets
- Trading and positioning money market products
- Gapping strategies for money market positions
- Excel exercises and short cases
- Definitions and characteristics of bonds
- Modeling bond cash flows
- Risk and returns in bond positions
- Coupon frequency and yield conventions
- Calculating yields, prices, and accrued interest
- Yield compounding conventions and conversions
- Current central bank actions impacting the yield curve
- Government bonds, deficits, and debt levels
- Sovereign risk and liquidity for government bonds
- Bond duration, PV01, and convexity
- Constructing instantaneous long-short bond hedges
- Value at Risk for bond positions
- Use of repurchase agreements in bond positions
- Correlated risks in bond portfolios
- Pricing bonds with bootstrapped zero discount factors
- Interpolation of yields and discount factors
- Secondary markets for bonds
- Embedded options in bonds
Excel exercises and short case studies
Day 2
Delta One Foreign Exchange Products
- Overview of foreign exchange markets
- Evolution of floating, fixed, and other variations of exchange rates
- Recent trends and likely future in foreign exchange
- Relation of foreign exchange to other markets
- Understanding quotations in the foreign exchange market
- Review of cross and reciprocal rates
- Liquidity and risk considerations in pricing
- Foreign exchange positioning
- Efficient use of bid and offer trade quotes and trading skills
- Calculation of no-arbitrage FX forward rates
- Real market FX outright forward and FX swaps quotes
- Risk management & control
- Value at Risk (VaR) for FX positions
- Hedging FX delta one positions
- Relationship between risk and return for FX book
- Analytical and parametric risk models
- Counterparty concerns arising from FX positions
Excel exercises and short case studies
Foreign Exchange Options
- Review of foreign exchange options products and markets
- Identification of client needs for FX options
- Options combinations strategies
- Hedging versus trading activities
- Analytical and numerical options pricing techniques
- Mark-to-market and mark-to-model techniques
- Market risk management
- Optimal hedging of the “Greeks”
- Market liquidity constraints and risks
- Applications for some exotic and structured FX options for solving client needs Risks in trading FX derivatives
- Position limits and risk budgets
- Accounting, liquidity, and counterparty concerns arising from FX derivatives
Excel exercises and short case studies
Interest Rate Derivatives Products
- Identifying client needs for interest rate derivatives
- Investors’ and borrowers’ prospectives
- Review of interest rate derivatives products and markets
- Hedging versus trading activities for derivatives
- Pricing interest rate forwards and futures
- Interest rate swaps as portfolios of forwards
- Swaps as long-short trade positions
- Short-rate options applications and pricing
- Bond options and swap options applications
- Hedging strategies and effectiveness accounting requirements
- Position limits and risk budgets
- Accounting, liquidity, and counterparty concerns arising from interest rate derivatives
Excel exercises and short case studies
Day 3
Interest Rate Derivatives Products (continued)
Counterparty Concerns and Credit Risks
- Understanding and measuring counterparty risks in client trades
- Managing counterparty credit risks through collateral and/or margining
- Applications for credit derivatives products for counterparty risk management
- Conventions and structures for single name and index credit default swaps (CDS)
- Relationship of CDS to bonds, interest rate swaps, and money market instruments
- Probabilities of default and survival & loss given default and recovery
- Exposure at default for treasury products
- Excel exercises and short case studies
Structured Treasury Investment Products
- Investment needs and strategies at clients
- Investment risks and rewards
- Structured investment instruments for treasury portfolios
- Classification of commonly used structured investment products
- Market-linked notes and deposits
- Capital-guaranteed products
- Participation notes
- Accrual notes
- Exotic and advanced products
- Excel exercises and short case studies
Workshop Summary
- Evolving role of treasury and treasury products
- Developing and adopting new products for client needs
- Changing regulations and requirements: Impact of Basel III on treasury products
- Best practices and ethical use of treasury products with clients
- Measuring and rewarding treasury performance
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William Allen
William Allen was previously a senior associate consultant with Seabrook Associates in Boston, Massachusetts. Prior to that he worked with J.P. Morgan in various securities and derivatives trading, arbitrage, hedging, and marketing activities in London and New York.
He pursued MBA and doctoral studies in international banking and capital markets at the Harvard Business School.
William received the Elijah Watts Sells Award and the John S. Glenn Gold Medal for outstanding performance on the Certified Public Accountants (CPA) examination while he was with Ernst and Whinney, an international accounting firm.
At the same time, he was awarded the Robert Beyer Bronze Medal for outstanding performance on the Certified Management Accounting (CMA) examination. Mr. Allen also earned the professional designation of Chartered Financial Analyst (CFA) while serving as the chief financial and investments officer of Rhodes College.
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