Day 1: FINANCIAL MARKET PRODUCTS
Financial products: mechanisms and market practices
- Different types of investors; AOAs
- Characteristics of hedging instruments
Financial market organisation
- Overview of key markets (fixed income, forex, equities and credit)
- Financial market professions: sales, structurers, traders, middle office, back office, risk, quant, etc.
Exercises: Hedging a portfolio of structured securities
Day 2: STRUCTURED PRODUCTS
Vanilla products
- Delta strategies (linear arbitrage)
- Volatility strategies (straddle, VarSwap, etc.)
Exotic products
- Correlation strategies (call vs. call)
- Managing products with barriers
Exercises: Drawing up a schedule of fixing dates for an autocallable structured product
Day 3: RISKS AND HEDGING
Key risk indicators
- Value at Risk: models and limitations
- Stress tests: models and limitations
Sensitivity: calculations, approximations and limitations
- Delta, gamma, vega, rho and theta
- Calculating directional and cross greeks on complex products
Exercises: Calculating the cash delta on a basket call
Day 4: IMPACT OF THE CRISIS ON RISK MEASUREMENT
Impact on estimating market parameters
- We are seeing new risk factors
- Increased rigour, frequency and industrialisation
Impact on risk analysis
- Beyond VaR: new simulations (worst case)
- Changes in risk provision calculations (bid/offer, new Basel II regulations, etc.)
