Mastering Equity Derivatives Training Course

This course has been designed to equip delegates with a superb practical knowledge of structuring, pricing and hedging equity derivatives.  Taught by a highly experienced trader and structurer of equity derivatives, the course marries practical examples with the necessary theory and workshops based on real-world products.

It covers the wide range of derivatives from exchange-traded to over-the-counter and includes securitised equity derivatives and bespoke products such as CPPI (Constant Proportion Portfolio Insurance) and fund derivatives.  Many hands-on examples are used and the delegates are encouraged to "get stuck in" with the practical workshops.

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DAY 1

Introduction: What are Equity Derivatives?

• Broad range of products from simple exchanged traded to complex bespoke OTC, structured products and securities such as convertible bonds
• Equity derivatives on single equities, baskets of equity and indices
• Why are equity derivatives used?
• Who are the major users of equity derivatives?
• Impact of the credit crunch on equity derivatives

Equity Forwards, Futures and Swaps

• Structure of the basic "delta equals one" contracts
• The exchange-traded and OTC markets
• Credit implications including ISDA documentation and the credit support annex
• Use for risk transfer (hedging), leverage and dividend optimisation
• Review of pricing considerations – cost of carry, forward prices, stock lending and the impact of taxes
• Pricing and risk characteristics

Case Study: Pricing an equity swap

Equity Options

• Structure of option contracts
• Vanilla and exotic options
• The exchange and OTC markets
• Use of equity options for risk transfer, leverage and arbitrage
• Pricing equity options – Black-Scholes model and its limitations
• The roles of volatility – historic and implied, smile and skew

Equity Option Pricing and Risk

• Review of basic arbitrage pricing model
• The binomial model
• Input to the model
• Outputs from the model
• The risk sensitivities or Greeks
• Simple delta hedging

Workshop: Hedging an equity option

DAY 2

Equity Structured Products for Retail Customers

• The market for structured products
• Equity derivatives as securities
• Equity warrants
• Benchmark units – Opals,Webs, ETFs
• Capital guaranteed products – GEBs, cliquets…
• Analysing the structure of products
• Defining participation and floor values
• Customising structures - examples

Case Study: Pricing a guaranteed equity bond (GEB)

Workshop: Structuring capital guaranteed equity products

Using Equity Derivatives To Provide Solutions for Fund Managers / Hedge Funds / Insurance Companies

• What kind of issues do fund managers face?
• How can equity derivatives assist them?
  - Customising exposure / risk management / hedging
  - Tracking indices / benchmarking
  - Enhancing dividend flows
  - Protecting returns
  - Leverage
  - Yield enhancement

Case Study: Using equity derivatives for asset allocation

More Exotic Equity Derivatives and their Uses

• What does exotic really mean?
• Why use exotics?
• Path dependents – Barriers / knock-outs / knockins / corridors / ladders
  - Currency protected 
  - Quantos / compos
• Multi asset
• Fund derivatives
• CPPI
• Volatility swaps

 
Case Study: Pricing a quanto option

Summary session with Q&A

Attend this intensive two-day course and you will:

• Understand the role of equity derivatives and their advantages to the issuer, the investor and the investment bank
• Gain hands on experience of varying the parameters of equity structured products to meet client needs
• Understand the derivative hedging process and how it can go wrong
• Explore the practical limits of derivative models and their  reliability
• Be able to guide clients to better solutions for their equity risk management requirements
• Have a much better understanding of the front offices approach to pricing and trading these products