Understanding & Using Options
The practicalities of valuation, hedging and structuring
Course Highlights
Attend this comprehensive training course and:
- Understand the mechanics of option pricing and valuation
- Create trading strategies using single and multiple options
- Learn how to exploit arbitrage opportunities using leverage
- Develop efficient hedging strategies and understand when they can fail
- Understand how to manage the risks inherent when using options
- Learn practical techniques for building and pricing sophisticated structured products
For details of the course trainer, please download the course brochure
Booking Information
| Dates | Prices | Book This Course | Discount |
|---|---|---|---|
| 10 - 12 Nov 2010 |
£ 2199 |
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| 04 - 06 Apr 2011 |
£ 2199 |
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Course Programme
Day 1
Introduction
- Current financial markets
- Classifying financial products: cash vs. derivatives
- How derivatives fit in
A Brief Review of Option Markets
- Listed products
- Futures
- Options
- OTC markets
- Equity options and warrants
- Commodity derivatives
- FX and interest rate derivatives
- Convertible bonds
Introducing the Mathematics of Derivatives
- Yield curves and present value theory
- Volatility and distributions
- Basic probability
Terminology and Basics
- Calls and puts
- European, Asian, American and Bermudan options
- In, at and out of the money
- What makes an option valuable?
Getting to Grips with Derivatives
- Forwards and futures
- Dividends
- Interest rates
- Stock borrow
- Arbitrage arguments
- Valuation and mark to market
Basic Option Structures
- Call spreads and put spreads
- Straddles and strangles
- Butterflies
- Risk reversals
- Covered calls
- Synthetic forwards
Option Workshop: A first look at Black Scholes
Day 2
Practical Pricing Considerations
- Volatility and Black Scholes
- Historic volatility
- The Lognormal model
- The Black Scholes formula
- Black Scholes assumptions
- Price sensitivities and the Greeks
- Delta, Gamma, Vega, Rho
- Implied volatility
Demystifying Black Scholes
- The Black Scholes equation
- Hedging
Option Workshop: Pricing and the Greeks in Excel
Excel Demonstration: The Black Scholes formula as the cost of hedging
Getting to Grips with Volatility
- Understanding volatility
- The key role of volatility in pricing
- The volatility smile
- Understanding Vega
Basic Interest Rate Derivatives
- Libor rates and forward Libors
- Caps and floors
- Interest rate swaps
- Cross currency swaps
- Basis swaps
- Swaptions
Structured Products
- Capital guaranteed products
- CBs and reverse CBs
Day 3
Option Workshop: Portfolio hedging simulation
Exotic Options
- Asian options
- Forward starting options and cliquets
- Quanto and other currency protected structures
- Digital options and range accrual structures
- Barrier options
- Spread options
- Autocallables
The Volatility Information in Structure Prices
- Volatility and straddles
- Volatility and butterflies
- Volatility and risk reversals
Tree Pricing
- Binomial trees
- American option pricing on trees
- Discrete dividends
- Convertible bonds on trees
- Callable CBs
More on Volatility
- Volatility estimation
- Autocorrelation
- GARCH methods
- Stochastic volatility models
Option Workshop: Hedging in uncertain volatility regimes
Currency Options
- FX options
- The Garman Kohlhagen model
- Structured products with FX options
Case Study: Dual currency bonds
New Generation Structures and Model Risk
- Volatility and variance swaps
- Dispersion trading
- Basket options
- Types of model risk in derivatives pricing and hedging
- Model risk mitigation
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