A Masterclass in Derivatives

IFF Training

IFF Training


Coursalytics is an independent platform to find, compare, and book executive courses. Coursalytics is not endorsed by, sponsored by, or otherwise affiliated with any business school or university.

Full disclaimer.

Read more about Finance

Finance is an integral and most important component of any business, so everyone needs to improve their competence in this area. Finance courses will ...

Read more about Marketing

Marketing courses will plunge you into the vast field of marketing. In these courses, you will learn a variety of topics that cover each stage of runn...

About the course

Expert TS Ho will teach you that the key to understanding derivatives is that all products, no matter how complex, are portfolios of just two fundamental building blocks: a swap (forward) and an option.

You’ll study the principles, methods and mathematical tools for understanding the analytics of derivatives structuring, plus the use, valuation and risk management. You’ll discuss the economic intuition behind each important aspect of derivatives, in order to show how they can be understood in a more sophisticated way.

The concepts and mathematics are illustrated by detailed examples from the market place and you’ll participate in extensive modelling and computations using Excel spreadsheets.

What You Will Learn

  • Valuation and modelling of fixed income and equity-linked derivatives
  • The practicalities behind options; their trading, structuring and risk mechanics
  • Recent developments behind integrated stochastic yield curve models
  • Securitisation and hybrid corporate credit-risky securities
  • Credit derivatives and an introduction to credit risk models

Case studies and practical

The many computer-based exercises include

  • FRAs cash flows
  • Swap fixed leg cash flows
  • Constructing semi-annual swap
  • Bootstrapping futures strip zeros
  • Valuing existing off-market swaps
  • Black–Scholes option pricing model
  • Long volatility (Gamma) trading
  • Pricing interest rate caps and floors
  • Yield curve model & convexity adjustment
  • Valuing Bermudan options, interest rate swaps
  • Pricing single-named CDSs
  • Jarrow–Turnbull reduced form model


Module 1

Yield Curve Derivatives: Hedging/Arbitraging Taxonomy, Markets Linkage & Overview

  • Risk measures, concept of volatility & modelspecific valuations
  • Decomposition into simpler (fixed, floating, contingent) cash flows

Forward Rate Agreements (FRAs)

  • FRAs, swaps & futures: convexity bias adjustment
  • Computer Workshop: FRAs cash flows

Fundamentals of Yield Curve Construction, Interest Rate Swaps & Micro-Structure

  • Computer Workshop: Swap fixed leg cash flows

  • Stochastic Floating Cash Flow Valuation (Some Key Results)

  • Valuing unknown LIBOR cash flows

  • Key strategic (static) replicating portfolio & exit strategies

  • Forward rate method & spot-forward parity

  • Principal (FRN, Synthetic Bond) Method

Swap Yield Curves & Zero-Coupon Valuation

  • Par money market (spot LIBOR) and swaps (forward LIBOR) rates
  • “Stripping” par-rates curve
  • “Bootstrapping” zero-coupon bond price curve
  • Audit checks: profit & loss: principal & forward rate methods
  • Effective yield-to-maturity, zero-coupon bond yield curve
  • Computer Workshop: Constructing annual swap
  • Stripping “special” one-year semi-annual equivalent par rate
  • Computer Workshop: Constructing semi-annual swap

Off-Market Swap Points

  • Linear, geometric (log-linear), exponential & spline interpolations
  • Computer Workshop: Exponential interpolation

Interest Rate Futures

  • Forward rate, futures price/rate, convexity adjustment
  • First futures stub rate, futures strip zero-coupon bond prices
  • Computer Workshop: Bootstrapping futures strip zeros
  • Integrating money, swap & futures curves
  • Computer Workshop: Incorporating futures strip prices

Principal Component Analysis (PCA) & Swap Pricing

  • Yield curves dynamics: Shifts, tilts & turns
  • Correlation, factor components & volatility (cone) surface

FX Currency Swaps

  • Equivalent bond positions
  • Equivalent forward exchange positions
  • Computer Workshop: Valuing FX currency swaps

Non-Standard & Off-Market Swaps

  • Amortising swaps, accreting swaps & rollercoaster swaps
  • Computer Workshop: Valuing existing off-market swaps
  • Pricing LIBOR-in-arrears (DRS) interest rate swaps
  • Limitations of forward rate method & volatility mode

Module 2

Derivatives Contracts: Fundamental Building Blocks, Arbitrage Boundaries, Synthetics & Strategies

  • Arbitrage boundaries & properties of option pricing
  • Determinants of an option’s value
  • Option strategies & payoffs
  • Covered call writing – PERCS, DECS
    • M-KMV structural model of credit risk
    • Mertonian structural model of credit risk
  • Protective puts: Portfolio insurance
  • Put-call parity
    • accounting, tax and regulatory arbitrage
    • locking in unrealised speculative profits
    • zero-cost collars
    • capital structure arbitrage
    • securitisation & CDOs

Computational Workshop Exercises: Structured Product Solutions, Embedding & Embedded Options

  • Bank loan decisions (embedding options)
  • Real estate and credit risk analysis (embedded options)
  • Zero-cost collar
  • Creative Security design embedded options
    • explore creation of hybrid securities and contingent forms of payment & embedded optionalities
    • tax, accounting & regulatory arbitrage

Derivatives Valuation: Concepts & Insights

  • Overview of valuation models
  • Intuitive concepts: Binomial option pricing model
    • portfolio duplication (replication) approach
    • self-financing strategy approach
    • risk-neutral (martingale) probability approach
  • Computer Workshop: Binomial option pricing model
  • Black–Scholes option pricing model
  • Options insights of valuation and risk management
  • Computer Workshop: Black–Scholes option pricing model

Understanding Options Risk: Stock Exposure (Delta)

  • Delta hedging/replication as cost of option
  • Monte-Carlo simulation: Delta-neutral hedging strategy
  • Computer Workshop: Delta-neutral exit strategy cost

Volatility (Convexity) Risk Mechanics

  • Delta-neutral long volatility trade and hedged portfolio
  • Mechanics and essence of buying volatilities (long gamma)
  • Time-decay (Theta) effects of delta and gamma
  • Computer Workshop: Long volatility (Gamma) trading

FX Currency Options

  • Arbitrage bounds, zero-cost collars, risk reversals, butterflies
  • Structured products and implications for corporate treasurers
  • Binomial and Black–Scholes (Garman-Kolhagen) valuation
  • Exotic currency options
  • Computer Workshop: Pricing FX options

Interest Rate, Yield Curve Volatilities & Options: Portfolio of Options on FRAs

  • Interest rate options: Caps/floors
    • valuation of caps: Black’s (1976) market model
    • valuation of interest rate floors: Cap/floor-swap parity
  • Computer Workshop: Pricing interest rate caps and floors
    • using flat brokers’ (market’s) volatilities
    • using term-structure of volatilities (volatility surface)

Option on Portfolio of FRAs (Swaps)

  • Options on interest rate swaps: Swaptions
    • Black (1976) market model valuation of payers/receiver swaptions
  • Computer Workshop: Pricing swaptions
    • Hedging cap with swaptions

Volatility Surface Asymptotics

  • Volatility skews, volatility smile effects
  • Stochastic Alpha Beta Rho (SABR) Black (1976) model

Yield Curve Models: Motivation

  • Inconsistencies in applying Black–Scholes/Black (1976) models
  • Black (1976) cap/floor pricing bias & convexity adjustment
  • Effects of interest rate volatility on bond prices
  • Computer Workshop: Yield curve model & convexity adjustment

Derivatives Pricing Tools: Fundamental Theorem

  • Applied to interest rates & fixed-income options
  • Arrow–debreu state primitive prices (stochastic discount function)
  • State prices, risk-neutral & martingale probabilities

Yield Curves Models

  • Equilibrium and fitting no-arbitrage models
    • Vasicek, Cox–Ingersoll–Ross (CIR), Ho–Lee, Hull–White, Black–Derman – Toy (BDT) & HJM BGM LIBOR Market Model (LMM)

Implementing & Calibrating Yield Curve Models: One-Factor Models

Black-Derman-Toy (BDT) Model: Implementation

  • Main features of BDT model
  • Term structures of interest rates and volatilities

Black-Derman-Toy (BDT) Model: Applications

  • Valuing interest rate options: Caps/floors
  • Valuing European coupon bond options
  • Valuing Bermudan coupon bond options
  • Valuing payer/receiver swaptions
  • Valuing swaps and bonds with BDT model

Computer Workshops

  • Constructing Black-Derman–Toy (BDT) yield curve model
  • Valuing interest rate caps, bond options, swaptions, futures
  • Valuing Bermudan options, interest rate swaps
  • Comparison of BDT & Black (market) Comparison of BDT & Black (market) models – Convexity adjustment

Module 3

Credit Default Swaps (CDS): Structure, Pricing & Hedging

  • Decomposing defaultable risky bond
  • Isolating underlying default (credit) risk using swap/CDS
  • Adding swap floating LIBOR-based payments
  • Pricing the CDS premium leg & protection leg
  • Computer Workshop: Pricing Single-Named CDSs

Mertonian/KMV Structural Model (Firm Assets) Approach

  • Embedded complexities of interim cash flows
    • Effects of dividends on default risk
    • Effects of capital structure on default risk
    • Effects of investments on default risk
  • Recapitalisation effect

Computer Workshop: Mertonian/KMV Binomial Models

  • Credit (default) risk measurement spreadsheet based on the mertonian option pricing methodology, and study the effects of dividend, capital structure and investment policies on default risk

Jarrow–Turnbull (JT) Reduced-Form (IntensityBased) Model: Applying Term Structure Models

  • Stochastic term structure of default–free interest rates
  • The Markov process for credit ratings
  • Stochastic maturity specific credit-risk spread
  • Implementing a discrete-time Markov model
    • pricing credit risky bonds
    • pricing options on credit risky bonds
    • pricing vulnerable derivatives
    • Credit Default Swaps (CDS)
  • Computer Workshop: Jarrow–Turnbull ReducedForm Model


Anthony TS Ho

Professor Anthony T.S. Ho (何东旋教授) was born in Hong Kong. He joined the Department of Computer Science, Faculty of Engineering and Physical Sciences, University of Surrey, UK in 2006. He is Chair Professor of Multimedia Security and was Head of Department of Computer Science from 2010 to 2015. Pri...

Videos and materials

A Masterclass in Derivatives at IFF Training

This course has no confirmed dates in the future. Subscribe to be notified when it is offered.

Something went wrong. We're trying to fix this error.

Thank you

Someone from the Coursalytics team will be in touch with you soon.


Coursalytics is an independent platform to find, compare, and book executive courses. Coursalytics is not endorsed by, sponsored by, or otherwise affiliated with any business school or university.

Full disclaimer.

Read more about Finance

During Finance courses, you will get acquainted with a huge number of financial analyst tools and learn how to work with them. So, you will learn how to make and analyze financial reporting, calculate the main financial indicators of the company and ...

Read more about Marketing

During Marketing courses, you will learn how to develop a business idea and create the right website to promote your product. You will gain the skills to analyze your business performance and make key decisions that improve the efficiency of your bus...

Because of COVID-19, many providers are cancelling or postponing in-person programs or providing online participation options.

We are happy to help you find a suitable online alternative.