Derivatives

John Molson School of Business

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John Molson School of Business

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About the course

This course explains basic derivatives securities, derivatives markets and the use of options in risk management.

This course explains basic derivatives securities, derivatives markets and the use of options in risk management. Each module teaches concepts through real-life examples so you can understand the role that derivatives plays in managing financial risk and creating synthetic exposures to asset classes. Interactive quizzes have been designed to help you reflect on what you learned and put in practice your knowledge.

Modules

Expert advice and in-depth features NOTE: The modular nature of this program allows different learners to tailor their courses to their needs. You may choose to take one course (for interest, or for a personal need), a series of courses (for career advancement, for example), or a series of modules (for professional certification preparedness in a particular field).

Module 1: Derivative Markets and Instruments Credit Hours: 3

This module offers a big picture overview of the derivatives markets along with the main purposes and criticisms of this evolving market which gives birth to innovative structures and where financial engineering finds its expression. The basic characteristics of forward contracts, futures contracts, options (calls and puts), and swaps are discussed and the distinction between exchange-traded and over-the-counter derivatives is explained.

Module 2: Forward Markets and Contracts Credit Hours: 3

This module discusses the basic features of over-the-counter forwards (delivery-settlement and termination alternatives) and their use from dealers and end-users. The most common types of forward structures are described: equity forwards, currency forwards, and bond forwards. Lessons also cover Forward Rate Agreement (FRAs) characteristics and calculations.

Module 3: Futures Markets and Contracts Credit Hours: 3

This module discusses the basic features of exchange-traded futures and their main differences with over-the-counter forwards. The most common underlying assets of futures are described: Treasury bills, Eurodollars, Treasury bonds, stock indices, and currencies. Lessons also cover the role of initial margin, maintenance margin, variation margin, and settlement in futures trading.

Module 4: Option Markets and Contracts Credit Hours: 5

This module covers basic concepts of call and puts. Distinguishing between American and European options and exchange-traded and over-the-counter options. Understanding the concept of the moneyness of an option, its intrinsic value and option payoff diagrams. Determining the boundaries of various option values and understanding qualitatively how option prices are affected by the exercise price, the time to maturity, interest rates, and volatility. Put-Call parity is discussed thoroughly and its application in identifying trading opportunities.

Module 5: Swap Markets and Contracts Credit Hours: 3

The swap market is one the largest over the counter derivative products that can be linked to a variety of indices, financial instruments or benchmark rates. This module describes the characteristics of swap contracts, their settlement and termination procedures. Payment calculations are described for the most common types of swaps (plain vanilla interest rate swaps, currency swaps, and equity swaps).

Module 6: Measures of Leverage Credit Hours: 3

This module discusses quantitative and graphic coverage of value at expiration and P/L (profit and loss) of buying or selling calls and/or puts thoroughly. Calculations of the maximum profit, maximum loss, and break-even underlying price at expiration are covered. The same graphs and boundaries are derived from a covered call strategy and a protective put strategy. Lessons explain the use of these option strategies and reveal the embedded investment view when implementing these strategies.

Experts

Efi Pylarinou

Efi (Efstathia) Pylarinou is a founding partner of Daily Fintech Advisers (DFA), a niche advisory practice specializing in the digitization of financial services. Clients are global corporations, Fintech ScaleUps and Financial Institutions. The business leverages Daily Fintech, an open source res...

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Derivatives at John Molson School of Business

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