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FINANCIAL MARKET COURSES

Derivatives – An Introduction

This course focuses on the basic types of derivatives – forward-type instruments (forwards, futures, and swaps) and options.

 

The key differences between these instruments are described, along with the basics of their pricing. The course also discusses some of the risks that arise from the use of derivatives in general, particularly in light of global financial crisis and other events in recent times.

  • OBJECTIVES

    On completion of this course, you will be able to:

    Describe the broad categories of derivatives

    Outline how derivatives pricing is based on the idea that relative prices should be "arbitrage-free"

    Recognize why there is considerable apprehension regarding the risks specific to derivatives

  • COURSE OUTLINE

    Topic 1: Derivatives Basics

    Basic Categories of Derivatives

    o Forward Transactions

    • Cash versus Physical Settlement

    • From Forward Contracts to Swaps

    o Options

    Topic 2: Derivatives Pricing

    Forward Pricing

    o Arbitrage-Free Pricing

    o Future Expectations

    Option Pricing

    o Modern Option Pricing Theory

    Value Before Maturity

    Topic 3: Derivatives Risks

    Overview of Derivatives Risks

    Counterparty Credit Risk (CCR)

    o Managing CCR

    Complexity

    o Pricing & Model Risk

    o Operational Risk

    o Transparency

    Market Benchmarks

  • PREREQUISITE KNOWLEDGE

  • ESTIMATED COMPLETED TIME

    50 Minutes

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