Understanding and Pricing Derivatives: Applications in Derivative Trading

Euromoney Learning Solutions

How long?

  • 2 days
  • online

Euromoney Learning Solutions


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Who should attend

  • Finance and Accounting staff
  • Corporate Risk managers
  • Traders
  • Brokers & Dealers
  • Fund Managers
  • Compliance
  • Sales Managers
  • Portfolio Managers
  • Audit

About the course

Overview Derivative contracts can be very powerful risk management tools for market participants. Used improperly, they can subject a company to increased risk. Additionally, the use of derivatives as an additional asset class has increased. These instruments provide users with access to markets, such energy or metals, as an investable asset class, without the issues of physically holding the goods. This program is designed to provide a solid understanding of these products beginning with the simplest, forwards and futures and then continuing on to more complex option products. This course is key to your understanding of the basic instruments of derivative marketplaces and their uses. Options and futures allow the bank to provide unique solutions for clients due to the non-linear payouts associated with these contracts. In addition, options allow for a wide range of trading methods from outrights to spreads and combinations.

Objectives After this course participants will be able to:

  • Understand the role of hedging and risk management in relation to derivative products
  • Price futures and forwards using time value of money concepts
  • Construct basic option payoff profiles
  • Intuitively understand basic no-arbitrage pricing methods
  • Understand the pricing, hedging, and other issues associated with derivative products


Day One

Risk: Using an Intuitive View of Probability Theory

  • What does risk look like?
  • What is the nature of the economic system that causes volatility?
  • A little math to clear things up

Sources of Volatility and Risk

  • Economic modelling of risk
  • Drivers of risk
  • A historic perspective of risk
  • Developing expectations for the future

Understanding the True Nature of Risk

  • Is risk stochastic or non-stochastic?
  • The role of correlation
  • The fallacy of non-stochastic correlation
  • The faults in the major models
  • Financial market blow-ups and comparisons

Case Study: Analysing and Interpreting Volatility Data

Futures and Forwards

  • Example contract specifications
  • Principles of forward pricing
    • Income vs. interest
    • Understanding carry
    • Calculating the forward price
  • Contract specifications
  • Role of the central counterparty
  • Initial and variation margins
  • Future settlement at the spot price
  • Physical and cash settlement
  • Understanding Basis

Case Study: Using the no-arbitrage model to price futures

Interest Futures

  • Yield Curves and Forward Rates
    • Definition of the yield curve
    • Yield curve shapes
    • How traders use the yield curve
  • Calculating implied forward rates
  • STIR Futures
  • Basics of Using Treasury Futures
    • DV01 and MDuration
    • Hedging Principles

Case Study: Constructing an interest rate hedge

Day Two

Vanilla Options

Introduction to Option products * Understanding the basics of put and call features Option pricing approaches Intuitive Option Valuation Option pricing models Tree approaches Discrete vs continuous models

Option Trading

  • Expressing a view with trading
  • Option combination trades – A LEGO approach
    • Collars, Caps, Floors, Straddles, Strangles
    • Butterflies and Condors
    • Hedge trades
  • Identifying exposure from trades
  • P&L analysis

Using options for hedging portfolios

Case Study: Identifying risks from Option Trades


Mark Holder

Dr. Holder has designed and carried out an extensive array of training programs for a wide range of clients, from Global IBs, hedge funds, asset managers to exchanges and private wealth managers. His experience in derivative product design, structured product pricing, economics, and business deve...

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Understanding and Pricing Derivatives: Applications in Derivative Trading at Euromoney Learning Solutions

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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 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...

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